With the economy in decline, and the price of gold above $960 per ounce on February 25, demand for gold
is on the rise. It's a big topic these days and one I'm focusing on more
and more on Mad Money. So I’m going to spend the next few days here
talking about the gold market; how to buy gold, where your best options
lie, and how to avoid scams when trading in gold.
Gold has been around for centuries, ever since the first gold coins were
made by King Croesus of Lydia around 560 B.C.
I wonder how old King Croesus would have felt about selling his precious
currency to an outfit like “Cash4Gold.com.”
These guys are priceless and I certainly don’t want to give them any
publicity – at least any publicity that helps them fleece consumers.
Cash4Gold should be given a wide berth. Someone who claims to be a former
employee, writing on the consumer activism board
ComplaintsBoard.com, has
penned a vicious screed against Cash4Gold, claiming that the company taught
him from day one how to
scam customers looking to sell their gold.
While the
entire letter makes for fascinating reading, some of the insider’s
comments are both frightening and damning. Worse, there are plenty of
potential gold scammers out on the marketplace, and we need to weed them
out.
Here's what I'm talking about. A recent expose by
Channel 10 News in San Diego unveiled the ridiculously low prices people
can expect to get from “cash for gold” companies. In the sting, the news
station purchased four gold rings for $58 apiece, and then shipped them off
to three popular gold and jewelry buyers: www.GoldKit.com, www.Cash4Gold.com
and www.GetGoldCash.com. Channel 10 then sold the last ring to a San Diego
pawnshop.
Here is how it shook out:
* GoldKit.com sent the Channel 10 News I-Team a check for $2.80. *
Cash4Gold.com sent two checks -- one for $2.92 and another for $4.99
(presumably an “upgrade” from the first offer). * GetGoldCash.com paid $7.63
for the ring. * The pawnshop did the best, paying out $18.50 for the ring on
an afternoon where gold was trading at about $9 per gram.
The local buyback had the best payout. The pawnshop paid out $18.50 for the
ring on an afternoon when gold was valued at over $9 a gram.
Another consumer watchdog organization, Cockeyed.com ran a bit of a reverse
scam on Cash4Gold.com, rounding up some gold jewelry and hauling to down to
a pawn shop, where it was appraised for $198. But when Cockeyed.com shipped
off the goods to Cash4Gold.com, the check came back for the princely sum of
$60.
I’d stay away from these guys. The scary thing is that they’re not alone.
Plenty of unscrupulous scam artists are popping up on the precious metals
landscape, peddling "can’t miss” deals and promising quick and easy money by
buying and selling gold.
How can you tell the scammers from the reputable gold dealers? Use these
tips before you deal:
Know who you’re dealing with. There are a lot of fly-by-night gold dealers
out there, but there are a lot of good guys, too. So if you’re looking to
buy or sell gold, you’ve got to do your homework. So check out a company you
like, ask how long has it been in existence, how long the owner has been at
the helm, and see if he or she belongs to any professional organizations (a
very good sign as professional groups usually adhere to uniform, higher
standards).
Know what gold buyers are expecting. Companies like Cash4Gold are in the
scrap gold market. Basically, they take your scrap gold, melt it down, and
sell it to dealers and other institutional buyers. So if you want to sell
your gold and jewelry, know what the “spot price” is for your gold. You’ll
have to weigh your gold first, measure it in grams, and
calculate the expected
value.
Don’t expect to get full price. Buying new gold is a lot like buying a new
car. The value goes down when you take it out of the store parking lot.
Buy direct from Uncle Sam. Buy from eBay (Stock Quote:
EBAY) if you like, or from a reputable dealer, but it’s best to buy gold
coins directly from the U.S. Mint. They offer a pretty good deal on
American Eagle gold bullion coins.
Buying gold on eBay? No doubt about it, eBay is one of the easiest and most
popular ways to buy and sell gold. If you’re a buyer, make sure to check out
the seller’s feedback rating. Aim to only do business with gold sellers that
have more than 1,000 positive ratings – that’s a pretty fair track record.
Also, look for repeat sales – always the sign of a happy customer.
If you feel like you’ve been burned on a gold deal, don’t get mad – get
even. Start by contacting the dealer right away with your complaint, and
then register your complaint with the Federal
Trade Commission. The FTC also has a good primer on
trading in rare coins.
On Monday, I’ll follow up with Part II of Heavy Metal, with an emphasis on
how to invest in gold in today’s volatile markets.
Brian O'Connell contributed to this article.
posted: 61 DAYS 20 HOURS AGO
comments:
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filed under: Fraud
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