Treachery, Fraud, Scams, Cons, Rackets, Swindles, Hoodwinking, Chicanery, Flimflammery and Bamboozlement!
In the precious metals sector most of the dealers are honest, hardworking people. However, there are a lot of cons and scams to watch out for. I have condensed a few of the best, most creative cons, to give you an idea of what to look for. But, be warned, it’s going to be different each time, and though these examples are creative, there will always be some cunning individual who comes along and shatter the old record of corruption, and take double dealings to a new level.
Phone Scams
One of the largest rare coin scams came to light when, on 24 May 2001, the New York attorney general announced the indictment of six New York residents and five corporations for running a rare coin scam that defrauded investors out of $25 million.
It appears that six people who jointly owned five corporations, and opened five separate high-pressure telephone boiler room operations, were marketing rare numismatic coins nationwide.
They would pressure customers into buying these rare numismatic coins. Of course, the salespeople would lie about the rarity and condition of the coins, but if a customer had any doubts, the salesperson would give the customer the phone numbers of several of their competitors so that the customer could get an “independent” appraisal. Little did the customer know that the company the coins were purchased from and all the competing coin shops were not actually competing….they all shared the same owners.
TV and Magazine ADS
Avoid TV and Magazine ads like the plague. There is just not enough profit in the precious metals field to support this type of advertising. Wait a minute, let me rephrase that. There is not enough profit for a dealer who is offering fairly priced precious metals to support this type of advertising.
Commemorative Coins
Another popular precious metals scam is the commemorative coin. When you see them offered on TV or in magazine ads, something is fishy. It’s most certainly a scam.
Counterfeits
This is another shady scam that revolves almost exclusively around numismatics.
Almost 99 percent of all counterfeit coins are counterfeit numismatics, not bullion coins. This makes perfect sense because a bullion coin’s value is derived solely from its metal content, and a counterfeiter must therefore counterfeit the metal (substitute a far less expensive metal for the precious metal) to make a profit on the coin. This makes a counterfeiter’s job incredibly difficult because he must duplicate the colour, density (weight per volume) and sound (ring) of the specific metal he is trying to duplicate in order to pass it off as authentic to the unsuspecting buyer.
Numismatic coins, on the other hand, derive their value from qualities that are far easier to replicate, like the specific design, rarity, age and condition. Therefore they can be made of the same metal as the original coin, making it far easier to duplicate the original look, sound, and feel.
Do Your Due Diligence
So now I am going to say it one more time. If you are going to buy collector coins, please do your due diligence and develop a relationship with a dealer you have researched. If you buy from a reputable dealer there should be nothing to worry about, other than the buy/sell spread (aka bid/ask spread)
From the book: “Guide to Investing in Gold and Silver” by Michael Maloney
