Global Consumers paying Too Much For Gold Bullion and/or not having access to purchase it at all
Are Gold and Silver bars and coins really a good investment? Well, yes providing you buy them right. Silver bars and coins are not such a good investment due to VAT being charged...
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Consumers don’t just sell high value precious metal items, they also buy them, not only in the form of jewellery to wear but in precious metals bars & coins to invest in. The bullion market for gold coins and bars alone is worth many billions of dollars worldwide (no actual estimate available)
There is a very high demand all over the world to buy gold silver and platinum i.e. bullion. You can go to a wide variety of bullion dealers and buy physical gold or “storage” gold in a vault at a percentage over spot i.e. around 5-10% from a reputable dealer for a 100gram bar BUT this margin increases dramatically if you buy very small bars or coins e.g. 1 gram, 5 gram and 10 gram bars and the small purchaser can pay anything up to 75% over the spot price. This means they get penalized. A quick check of this issue by examining various bullion dealers pricing structures will confirm this problem. In their defence it could be argued that efficiencies of scale come into play BUT nowhere near to the extent of a 70% + price hike
A bigger issue however is that many millions of dollars are invested in gold bars and bullion at far above the rate that could and should be paid due to lack of education and knowledge in the gold investment market. Over-charging by reputable-looking companies is a trap to snare unwary first time gold buyers. Mail-shots, websites and radio advertisements are now selling gold to US & UK purchasers at 15-40% above the true "spot market" value, aided by reports of a gold-coin shortage. Overpricing is also very common on auction sites. These dealers need to offset selling fees while still making enough of a profit to justify their business. As a result, the customer will not find any precious metals for spot price on eBay. If the customer does its only because some dealers try to lure in members with low priced bullion, only to charge extortionate shipping fees. This is a problem worldwide and not just on the Internet. Consider that standard bullion coins such as maples, eagles, Krugerrands and sovereigns are being offered for sale, in pawnbroking and jewellers shops and also online at up to twice the bullion price. The purchaser that stands the greatest chance of losing money is the smallest of purchasers.
Even the Coin Mints offer for sale gold & silver coins, often special edition coins, that are poor investments. These can cost two to three times the value of the actual gold and represent a poor investment as the Daily Telegraph reported in the UK
“The "2015 Royal Birth Celebration Sovereign Struck on Day" coin, priced at £500, contains 7.988g of 22 carat gold. At today's price of £784 per ounce (£25.21 per gram) that would put the value of the gold in the coin at £184.66. That calculation includes reducing the value of the gold by just under 10pc to account for the fact that it is 22 carat, and not the purer 24 carat, metal. In other words the gold value of the coin is 37pc of its price. …” Source Daily Telegraph
Also many consumers throughout the world who have no access to an online or physical bullion vault. The reasons for this can be
· Insufficient funds to meet minimum purchase requirements
· Insufficient funds to make it worthwhile purchasing due to storage/commission costs
· Inability to meet rigorous ID requirements
This forces customers to try and buy bullion from other sources e.g. jewellers and pawnbrokers where they pay a heavy premium.
Fake Gold bars, coins & Scams
The problem with fake gold bars and coins is a huge world-wide issue with millions every year being lost to either the purchase of fake gold bars and coins or in one of the many fake gold buying schemes that pervade the Internet.
There are many other types of gold scams at the moment for example
Up Front Fees
A common fraud is to ask for a large up-front fee i.e. for shipping or for customs clearance or even to personally deliver the gold. Any gold received if at all is worth far less than the up-front amount paid.
Proofs
A lot of the larger deals will ask the buyer to send proofs, to prove ability to complete on the deal. This is normally names of buyers, proof of funds, passport copies etc. These proofs are then used to run scams in the buyer’s name, especially passports with proof of funds and other legal documents these can be used for blackmail or scams & no gold will be received,
The Flip
More detailed scams will have enough proof within them to get past the preliminary checks but will ask for a buyer to create a payment / financial instrument. Some form of bank MT103, SBLC, BG or escrowed funds. These funds are not to be paid out until completion of the deal, giving the buyer security. Unfortunately, these can be monetised or used as proof of funds to then go out and purchase Gold to sell the buyer. A rapidly growing scam. This can even be done with an MT799 which is only a swift message of proof of funds between banks but can be used to flip a deal once the scammer has proof of a willing buyer with funds.
The inheritance scam
This seems to be becoming more popular. Example: My father, my uncle died and left me 40 kilos and I just need so many dollars to release it. These are often backed up by equally corrupt lawyers or advocates in Africa. A variation on this theme is the girlfriend or boyfriend befriending the customer and then promising to come visit / marry and just needs a few thousand dollars to release gold to sell to cover their trip. Then a bit more and a bit more, etc.
Fake Gold Scams: Overpricing
One of the most common fake gold scams is committed by high-street dealers looking to take advantage of customer naivety. They rely on the fact that the customer may not have access to up to the minute market information, that the customer may not understand spot price or the value of a particular metal. This is especially true with numismatics, when new purchasers may not have a firm grasp of the market and are more likely to be taken in by exaggerations on behalf of the dealer.
To convince the customer to pay these prices they may also tell them that there is a gold shortage. This is common during times of economic distress, when the demand does increase, but never enough to cause an actual “shortage”.
A good website for information on this issue is schiffgold.com
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We estimate over $1 billion is lost to purchasers this way, with the aforementioned detrimental effects to personal well-being and spending power.
https://www.birminghamgoldcompany.co.uk