There’s an old expression that can make or save you a lot of money when you’re buying or selling gold: If you don’t know gold, you’d better know your gold dealer. It’s that simple.
KFDM-TV Channel 6 in my hometown of Beaumont,Texas recently did a Crime Stoppers story about a Texas dealer who reportedly paid only $16,000 for nearly $250,000 of coins sent to him by an 82-year old California woman. The interviewer asked me for consumer protection advice so other people can avoid encountering this kind of problem. My suggestion was simply to remember: “It’s important to do your homework before selling or buying gold and silver coins.”
There are easy-to-do precautions you can and should take before you make a purchase or sell to someone you’re not familiar with. Too often I hear horror stories about people who grossly overpaid for what they purchased, never received the merchandise they ordered, or were grossly underpaid — or never paid — for what they sold. In one case I personally helped the news media investigate and expose a traveling “hotel buyer” who claimed in his big advertisements he would “Pay the Highest Prices” but offered only $60 for a gold coin actually worth $10,000.
When you sell, sell to a specialist. If you have gold coins, sell them to a gold coin dealer, perhaps in your own community. Specialists usually will pay far more than a pawn broker, jeweler or hotel buyer who is in town for a day or two and then gone.
Before you buy or sell gold or rare coins, follow these simple steps.
Check the dealer’s rating with the Better Business Bureau. I know an investor who wired $20,000 to a company to buy gold and didn’t receive anything. Had he checked first with the BBB online, he’d have seen the company had an “F” rating.
How long has the dealer been in business? Many “boiler room” operations frequently change names, and sometimes locations. Also check to see if the dealer is a member in good standing of such organizations as the Professional Numismatists Guild (whose members must adhere to a strict Code of Ethics), the Industry Council for Tangible Assets and/or the American Numismatic Association. If you are buying rare coins, is the seller an Authorized Dealer with either the Numismatic Guaranty Corporation (NGC) or Professional Coin Grading Service (PCGS)?
Know the price of gold when you buy or sell. If you are buying “common” one-ounce bullion coins, such as the American Gold Eagle, typically you should not pay more than 5 to 6 percent over the current spot price of gold. Reputable dealers offer a 15-day return privilege on rare coin purchases; however, because of the potential for frequent precious metals spot price fluctuations, that kind of return privilege window usually is not available for bullion purchases.
Always get an itemized receipt from the dealer when you buy or sell. If the dealer declines to provide a detailed, written receipt, that’s a red flag. Don’t do the deal. Take your business somewhere else.
Even among major, reputable dealers, there are significant differences you may want to consider. For example, has the dealer received industry awards and recognition? (I’m delighted that my writings and consumer protection work have earned awards from the Press Club of Southeast Texas and from the Numismatic Literary Guild.) Is the dealer involved in community service, or does the dealer assist law enforcement agencies or regulatory agencies with expert advice on issues related to coins or bullion? Experience combined with leadership and recognition are important when choosing a dealer. To quote the long-time motto of the Better Business Bureau, “Investigate before you invest.”
A video of the KFDM-TV report mentioned above can be seen online at www.kfdm.com/shared/news/top-stories/stories/kfdm_vid_1175.shtml. My earlier advice to AMAC members about protecting gold and other valuable assets from thieves is available at http://amac.us/how-to-protect-your-gold-from-thieves.