According to a survey of 1500 people by PR Newswire in 2020, only around 10% of American’s own gold or silver bullion. Many of these people inherited their bullion from a family member therefore, most American’s have never bought any physical gold or silver bullion in their life. Predatory gold dealers and shady late-night infomercials,“rare” coin pushers know this and take advantage of uneducated first-time buyers. Our precious metal’s experts at New Orleans Silver and Gold want to help educate first-time precious metals buyers to help them avoid getting ripped off or mislead. We have outlined a list of classic scams to help people identify when second-rate companies are trying to rip them off.

Bait and switch scams are the oldest gold scams in the book, and predatory gold companies have been using it for decades. This scam occurs when a first-time gold buyer calls to invest in gold for the first time. They usually call after seeing a late-night infomercial featuring a celebrity promoting the credibility of a particular gold company. The new investor is typically wanting to buy gold bullion for all the right reasons–as a portfolio diversifier and inflation hedge. However, when the broker gets them on the phone, he starts to switch them from investing in bullion to investing in numismatics. This is a terrible decision for most investors since the commissions on numismatic coins are many multiples of the standard commission on bullion. Furthermore, most numismatic coins are not very liquid and may take months or years to sell. What’s worse is that oftentimes numismatic coins trade inversely to the spot price of precious metals. When gold and silver go up, numismatic coins often lose their premium above the coin or bar’s intrinsic value. This means that even if the price of gold and silver goes up, the value of your numismatic coins may not. Most investors want to avoid numismatic coins and stick with bullion only! You should buy gold and silver as an investor and not a collector.

The old gold numismatic coin scam is another classic gold scam that usually targets new or inexperienced gold investors. This scam involves selling older gold bullion coins to investors as numismatics. Unethical companies take advantage of inexperienced investors by convincing them that these coins are rare because they are old. It is important for gold investors to understand that age does not constitute rarity. Just because something is hundreds of years old, that does not mean that it is rare. Rarity is determined by scarcity and condition. In the coin world if something is rare, usually it is already graded by NGC or PCGS and not sold circulated. Two coins to watch out for in the scam are British Sovereigns and French Roosters. Although these coins are old and seem rare to many people, they are widely circulated and abundant. Reputable dealers know this and sell these products as bullion and not numismatics. 

Most first-time coin investors don’t even know what a proof coin is and can easily fall victim to this scam when they see how beautiful proof coins are. A proof coin is simply a coin that has a shiny finish and often they are very beautiful. Often proof coin sets are exotically packaged and sold in fancy boxes that create the appearance of an object that is very valuable.  Although these coins may look extra-valuable, oftentimes they are not more valuable than their matte counterparts. Furthermore, many proof sets sold by third-rate coin dealers contain little to no precious metal content at all! Predatory coin companies often push proof coins onto their customers at unjustified crazy high premiums that do not reflect the coins actual value and only serve to line the pockets of the brokers that sell them.

The confiscation gold scam is perhaps the worst gold scam that exists in our industry today. This scam relies on using fear to fraudulently sell investors numismatic or semi-numismatic gold coins instead of the bullion they want. Unethical brokers employ this scam by selling the idea that the U.S government could confiscate your gold in the future like they did in the past when President Roosevelt confiscated American’s gold in 1934. These brokers use this fear, along with some loose language that exempted the confiscation of rare coins under the Gold Reserve Act of 1934, to convince investors to buy rare coins instead of bullion. They argue that these rare coins will be exempt from confiscation if the government tries to take the gold out of circulation again. Although it is impossible to know the future, we can be pretty certain that the same gold confiscation that occurred in 1934 will probably not happen today. First, the physical gold market is far more liquid and international than it was in 1934 and the likelihood of executing a mass confiscation again is very low. Furthermore, when this happened in 1934 the government never went door to door to confiscate gold nor did they convict a single person for not turning in their gold. The truth is that all the gold collected by the government at that time was willfully turned in by citizens under the guise of patriotism.

This scam involves brokers selling clients commemorative coin sets as bullion investments. Unethical gold companies advertise these commemorative coin sets as being superior to traditional bullion coins claiming that they have semi-numismatic qualities since their production is often limited. The truth is that while these commemorative sets may be limited in production, it does not make them desirable or numismatic. Most traditional rare coin investors are not interested in newly minted commemorative sets, but rather older graded coins that are truly rare. Commemorative sets are made for infomercial watchers who believe that they just stumbled on a great opportunity to get rich at 2 am.