Important Update: All High-Value dealers responsible for important FICA Compliance update
Dear Valued Clients, We trust this newsletter finds you well We are writing to bring your attention to a significant development that affects all high-value dealers within our sector. Recent changes in legislation have officially designated the precious metal investments industry as an accountable institution under the Financial Intelligence Centre Act (FICA). This move aims to enhance transparency and combat financial crimes related to high-value goods. On 19 December 2022, a new category was added to the list of accountable institutions in Schedule 1 of the FICA, 2001, as one of the steps to address gaps in South Africa’s anti-money laundering and combating the financing of terrorism policies. This law may apply to your business. A high-value goods dealer (HVGD) – Item 20 of Schedule 1 to FICA Item 20 in Schedule 1 to FICA provides as follows: A HVGD includes “a person who carries on the business of dealing in high-value goods in respect of any transaction where such a business receives payment in any form to the value of R100 000,00 or more, whether the payment is made in a single operation or in more than one operation that appears to be linked, where ‘high-value goods’ means any item that is valued in that business at R100 000,00 or more.” This definition is intended to cover a wide range of trading activity. Based on preliminary guidance from the Financial Intelligence Centre (FIC), this category of accountable institutions includes, among others, dealers in precious metals, precious stones and diamonds. A HVGD also includes dealers in antiques, collectibles, fine art, boats, aircraft and luxury motor vehicles where the value is equal to or more than R100 000. The following obligations are imposed on accountable institutions in terms of FICA. An accountable institution must: To register, click here : https://goweb.fic.gov.za/goAMLWeb_PRD/WebRegistration/NewEntityCR Directive 7 of 2023: Submission of a risk and compliance return to the FIC by specified accountable institutions Directive 7 was issued by the FIC on 31 March 2023 and applies to all accountable institutions listed in inter alia item 20 (this applies to high-value goods dealers). It instructs accountable institutions to submit information on their understanding of money laundering and related financial crimes, together with their assessment of compliance with obligations in terms of FICA, in a risk and compliance return. The submission date of the ‘risk and compliance return questionnaire’ is 31 July 2023 (reporting will be from 1 January 2023 to 30 June 2023). Here’s a link to the online portal: RISK COMPLIANCE RETURN QUESTIONNAIRE (office.com) Side note: This return is to see what your understanding is in terms of FICA and what processes and policies you have in place. If you have no / little understanding of FICA or processes in place, just be honest. Even if you answer no to everything. This is how FIC will be able to assess where more training, education and assistance are needed. They have given a lot of leeway for submission as the deadline has long passed. But if you submit your return now, the chances of being penalised are greatly diminished. As the precious metal investments industry embraces this new era of accountability, we encourage you to view FICA compliance not only as a regulatory obligation but also as an opportunity to strengthen your business practices and contribute to the integrity of our industry. Yours sincerely,CPM Compliance Team
Six Key Factors Influencing Precious Metal Prices: Current Trends and Future Outlook
The global market for precious metals, encompassing gold, silver, platinum and others, is a complex and dynamic arena influenced by a variety of factors. These metals hold significant value in various sectors, ranging from jewellery and industry to finance, often acting as a barometer for economic health as well as investor and collector sentiment. To be a successful investor, it is crucial to understand the factors that affect the prices of these metals and the broader market activity. This article explores the key elements that are currently shaping the precious metals market, providing important insights into what the future may hold. Factor 1: Economic Indicators Global Economic Health The price of precious metals is closely tied to the health of the global economy. This is because, in times of economic growth, people tend to invest more in stocks, shares and other assets which some may class as riskier, which can result in a decrease in precious metal investments. However, during economic downturns, precious metals are often seen as a safe-haven asset and their demand increases as a result. To predict the future trajectory of precious metal prices, it is helpful to monitor global economic indicators such as GDP growth rates and employment figures, as well as other measures such as consumer spending patterns. Interest Rates and Monetary Policies Central banks play a crucial role in shaping the prices of precious metals through their monetary policies and interest rate decisions. As a result, many investors closely monitor these policies as a benchmark for wider market activity. Low interest rates generally make bonds and savings accounts less attractive, which leads investors to turn to metals like gold and silver. Conversely, when interest rates rise, investors tend to move away from precious metals. Therefore, keeping track of the policies of major central banks, such as the Federal Reserve, the Bank of England and the European Central Bank is essential for predicting market movements in precious metals. Industry reports and publications from organisations like the World Gold Council often provide in-depth analysis of the purchasing and selling activities of central banks, which can be a useful resource for those interested in exploring this area further. Inflation Trends Precious metals are often seen as hedges against inflation because when fiat currencies lose value due to rising inflation, precious metals typically hold their value or even appreciate. Tracking inflation trends across major economies can be a strong indicator of where precious metal prices are headed in the months ahead. Factor 2: Political and Geopolitical Factors Political Stability The stability of major political powers, governments and regions around the world can have a significant impact on the prices of precious metals. Political uncertainties or upheavals in countries with significant influence on the global economy can lead to increased investment in precious metals as a safe-haven asset. Market analysts closely watch elections, policy shifts, and regulatory changes in these countries for their potential impact on the precious metal market. Geopolitical Tensions Geopolitical tensions, especially involving countries that are major players in the precious metal market, can also cause significant fluctuations in prices impacting supply, demand and price as a result. International conflicts, trade disputes, sanctions, or military conflicts can disrupt supply chains or create uncertainty, driving investors towards the perceived safety of precious metals as a result. Trade Policies and Sanctions Trade policies, including tariffs, trade agreements, and sanctions, can directly or indirectly impact the precious metal market, causing uncertainty or disruption to the wider market. Sanctions on a major producer or exporter of these metals can constrict supply, leading to price increases. Similarly, trade agreements that ease the movement of these commodities can lead to price adjustments based on altered supply dynamics. Factor 3: Supply and Demand Dynamics Mining and Production Rates The availability and pricing of precious metals are influenced by various factors such as mining and production rates, technological advancements in the industry, accessibility of resources, mining technologies and geopolitical stability in producing regions. These factors play a crucial role in determining the supply of these metals. Production rates can fluctuate due to operational challenges or geopolitical tensions in mining regions. This can lead to varying supply levels, where a decrease in production can cause shortages and price hikes, while an increase can lead to oversupply, potentially causing price drops. More recently, advancements in mining and metal refining technologies are changing the supply landscape of precious metals and innovations that enhance mining efficiency or facilitate the extraction of metals from previously nonviable sources can significantly boost supply. Keeping a close eye on the latest developments in mining technology is vital for understanding and predicting future supply trends. Market Demand Trends The demand for precious metals is influenced by various sectors, such as jewellery, industrial applications and investment. Changes in any of these sectors can affect the prices. For instance, an increase in demand for electronics, which often use silver and gold, can lead to a rise in prices. Similarly, shifts in fashion trends or economic conditions that impact the jewellery market can also influence the demand and prices. As mentioned earlier, The World Gold Council produces a ‘Gold Demand Trends’ report regularly, which outlines the key areas of supply, demand, and trends in the precious metals market. Factor 4: Investment Market Trends Investor Behaviour Investor sentiment and behaviour, such as market volatility, global economic outlook and currency strength can influence investors’ preference for precious metals and play a critical role in precious metal prices as a result. A trend towards risk aversion typically sees an increase in precious metal investments, while confidence in the economy might see a shift towards other asset classes. Role of ETFs and Other Investment Vehicles Investors who want to invest in precious metals have various options available to them. Exchange-traded funds (ETFs) and other investment vehicles that focus on precious metals offer an accessible way for investors to gain exposure to these commodities. These funds hold a certain amount of metal whose fluctuations can impact market supply and demand
Golden Rules for Investors: What to Know Before Buying Physical Precious Metals
It’s a fantasy that may resonate with people of a certain era: swimming in a vault piled nearly to the ceiling with glittering gold bullion. This was a regular pastime of the cartoon character Scrooge McDuck in the late 1980s animated classic “Duck Tales.” It’s a scene that has led some to consider Scrooge McDuck one of the richest fictional characters. Of course, for most real investors, amassing and storing swimming pool-size portions of gold is impossible. There are a lot of ways to gain exposure to metals such as silver, gold, palladium and platinum. There are commodities futures, mutual funds and exchange-traded funds (ETFs). But investing in the physical metal can carry a lot of allure for some investors looking to diversify their investment portfolios. Investing in gold and other precious metals, and particularly in physical precious metals, comes with risk, however, including the risk of loss. While gold is often considered a “safe haven” investment, gold and other metals are not impervious to price declines. Know the risks associated with trading of this type of product. These “golden rules” can help you avoid problems when it comes to investing in physical precious metals: 1. Say “no” to pushy salespeople. Investing in physical precious metals comes with the risk of encountering high-pressure sales tactics and even fraud. Remember: No reputable investment professional should push you into making an immediate investment decision or tell you to “act now.” Even if no fraud is taking place, this type of pressuring is inappropriate. Be particularly wary of unsolicited telephone calls. Persuasion tactics—such as dangling the prospect of large profits (the “phantom riches” tactic) or implying that there are limited quantities of an investment available (playing the “scarcity” card)—are often used. 2. Be on high alert when you hear “low risk.” Don’t fall for a pitch that investments in physical metals are “safe” or not risky. Storage charges, price fluctuations and the use of investor loans to finance the purchase of metal bars, bullion or coins are just a few of the risks associated with an investment in physical precious metals. Ask for a risk disclosure statement from the salesperson before you send any money and request the salesperson’s name, address and telephone number, as well as that of the firm. If the salesperson says no, end the conversation and find another seller. 3. Look out for leverage risk. Precious metals investments often involve the risky and expensive use of leverage, which is borrowed money. You may pay a portion of the cost to invest in the precious metal in cash but then pay for the rest of the investment “on margin.” In some cases, this margined portion may be up to 80 percent of the metal’s purchase price. This is a loan that carries interest and is subject to the risk of a margin call if the value of the investment declines. In the event of a margin call, you may be required to invest additional money to prevent your investment from being liquidated without your consent or prior notice. 4. Get a full accounting of fees. Between account opening fees, commissions that can reach 15 percent or more of your investment (including any leveraged portion, storage fees, management fees and ongoing interest on the loan for the leveraged portion of the precious metals purchase, it can be challenging to make money on investments in physical precious metals. Before you invest, make sure you understand all the costs and what level of return you’d need to earn to break even. Article courtesy of Finra
The Fuzzy Concept of Saving for Retirement
Saving for retirement is that fuzzy concept that exists in the back-corridors of your mind when you are young. You hear “older” people talk about it; some with fondness and excitement, while others with some fear and trepidation. As you start your professional career, maybe start a family, and even buy a home, the concept starts to become less fuzzy. But still, its realism and importance do not quite crystalise for years to come. But then, suddenly, after the “optimum retirement saving years” are in the review mirror, many find themselves with perfectly clear vision in which retirement is now in sharp focus. It’s alarming to realise suddenly that you are over 50, with no retirement savings, and only 144 monthly paychecks left to save or invest for 200 months of retirement. But beyond the fear and the maths, what about the camouflaged components; what about the things that you should budget for which may have never crossed your mind? For example, budgeting to visit your kids and grandkids overseas. There is a good chance that your grandchildren will not be living in South Africa by the time they grow up. How about the high cost of eating well? Food quality is decreasing, chronic diseases due to poor quality of food are on the increase, and eating well and nutritious foods will become out of reach for many. How about housing expenses, which don’t retire when you do? Having a fully paid-off property is only half of the victory. The point I want to make is this: it is an interesting exercise to think of buying silver and gold as a supplementary strategy for saving or investing for retirement. My clients have often expressed confidence and delight in the number of ounces of gold and silver they have relative to what they require to retire. So, how much gold do you need to retire? A sensible and unique way of looking at retirement would be in ounces of gold relative to total income. For example, a family with a monthly income of R38 000 earns around one 1 oz. gold Krugerrand per month. Since they live on this income, the cost of living for a month is the same as the cost of a gold Krugerrand. Someone earning R70 000 per month would thus be earning two gold Krugerrands, and someone who earns R130 000 per month four gold Krugerrands. What about silver? Currently, an ounce of gold calculated in rands can buy around 60 ounces of silver. If your monthly income is R38 000 per month, this would represent a one-month retirement package of 60 ounces of silver. Every time an investor acquires even a fractional amount of gold, they have (relative to their earnings and standard of living) bought a few day-unit of retirement. Every time an investor acquires a few ounces of silver, similarly, they have purchased a few days’ worth of retirement. What an interesting and more honest way of keeping track of your future retirement prospects by using sound money! Article courtesy of Silver-Sphere
Rand Review
Yesterday, my longest standing friend, from school days and investor in precious metals, Kurt Mälzer, asked me, Will the rand continue to strengthen? This was my reply. I don’t pretend to know what the rand can and will do. What I do know is that according to Dawie Roodt, the Efficient Group’s economist, who is on the RSG radio every weekday morning, (06h55) says the rand is 50% undervalued. He likes to use the Big Mac’s (hamburger) price as a way of comparing purchasing parity. A big Mac burger is very cheap in rand terms. He is optimistic about the rand. By the same token he will be quick to acknowledge there are many other structual factors in SA that keep it weak, such as Eskom’s lack of sufficient power provision. In addition, our incompetence in shipping (rail and shipment) of our commodities to the world. My best bench mark is against the Aussie dollar. We are both commodity based countries. The rand is strengthening against it of late. This tells me that other currencies may be experiencing weakness, but the rand is strengthening. The rand was almost R13 to AUSD now it is R 11,69. This is roughly 10% strengthening of the rand. Please see the one year chart. I do know we go through seasons when our exports exceed our imports, then the rand strengthens. We saw this when we had the commodity boom of late. Peter George, my dear economist friend, who is now decreased for 10 years, was a rand bull based on the rising price of gold. He said, “There is a high correlation between the rising price of gold and the rand’s value.” He has been corrrect many times in the past. I think he will be right again. As we begin to see a surge in the gold price, we can expect to see continued rand strength. I think we are getting closer there. Gold remains the world’s best currency. Therefore the purchase of Krugerrand’s is my best way of acquiring protection against ALL fiat currencies that are being debased and rapidly losing their value. Is a strong rand good for gold? No. But I am looking for a much higher gold price going forward. Not because gold is so good and rising in price, but rather because the fiat currencies are so weak. May you know much wisdom and understanding in determining your best way forward. Courtesy of David Melvill on 31 July
Precious Metals Market Expected to Top $400 Billion in Next Five Years
The global precious metals market is on pace to top $400 billion within the next five years. According to Fortune Business Insights, an India-based consultancy company, the precious metals market is on pace to hit $403.1 billion by 2028, driven primarily by the gold market. This is up from $275 billion in 2021. The projected compound annual growth rate (CAGR) for the precious metals market is 5.6%. The report specifically pointed out the relatively low risk in precious metals investments. The increasing investments in a commodity such as gold due to its low-risk factor compared to other investments such as equities, bonds, or real estate are fueling the market. Moreover, gold, silver, and platinum are the most preferred metals to produce jewellery due to their luster and malleability. Therefore, the increasing demand for jewellery from consumers is resulting in market growth.” Gold investment demand is expected to be the primary driver of market growth. According to the report, “The increasing investments in a commodity such as gold due to its low-risk factor compared to other investments are augmenting the segment growth.” We saw investment in physical gold drive overall gold demand to an 11-year high in 2022. Investment demand totalled 1,107 tons last year, a 10% increase year-on-year. Gold bar and gold coin demand grew by 2%, building on strong demand in 2021. In total, global investors bought 1, 217 tons of gold bars and coins, with the second half of the year particularly strong, charting two successive quarters of demand of around 340 tons for the first time since 2013. According to the WGC, “The need for wealth protection in the global inflationary environment remained a primary motive for gold investment purchases.” Investors in the West had a particularly strong appetite for gold and broke an annual record. Combined US and European purchases of gold bars and coins hit 427 tons. That exceeded the previous record of 416 tons set in 2011. The report also pointed out that the green energy drive will continue to push silver demand higher. The use of silver in the electrical & electronics industry, as stated by Silver Institute, accounted for 10.2% of the total silver demand in 2020 as silver is used in solar panels to conduct electricity with the highest efficiency. These factors are expected to drive the precious metals market growth.” In fact, the growing demand for silver in the solar power industry will likely put a significant squeeze on supply in the coming years, and the current price of silver does not reflect the likely shortages. According to a research paper by scientists at the University of New South Wales, solar manufacturers will likely require over 20% of the current annual silver supply by 2027. And by 2050, solar panel production will use approximately 85–98% of the current global silver reserves. The use of platinum and palladium in the automotive industry will also boost overall precious metals demand, according to the report. The platinum sector held the largest market share, making up 26.1% of the precious metals market in 2020. This is attributable to its increased demand in the auto-catalysts application. Moreover, platinum has the ability to capture carbon and other harmful emissions. Therefore, industries are increasingly using platinum group metals to curb pollution. … The growing demand for metals from end-users such as automotive and electrical & electronics is increasing the demand for valuable metals. The automotive industry uses platinum and palladium metals in catalytic converters. Additionally, governments worldwide have become more aware of the climate crisis, therefore to meet the substandard of carbon emissions, vehicles have boosted the demand for platinum.” Growing global demand for jewellery boosted by increasing economic prosperity will also help boost demand for gold, silver and platinum over the next five years, according to the report. Increasing disposable incomes and changing lifestyle choices are a few of the factors driving the market. The demand for these metals is estimated to propel globally for jewellery, and investment applications as gold and silver are of prime importance in wedding ceremonies of Southeast Asian countries. Therefore, the rising population and increasing spending capacity of consumers in the region will contribute to market growth.” Article courtesy of SchiffGold
Is Central Banks’ License to Print Money About to Expire?
One of the biggest reasons for people deciding to buy gold bars or to own silver coins is because of the folly of central banks and government. It seems bizarre to most people that we are all aware that money doesn’t grow on trees and yet those responsible for financial stability have forgotten this basic life-lesson. But, what has felt even more bizarre (and maddening) is for how long this foolishness has been allowed to continue. Well, it seems this won’t be the case for much longer. Below, we outline how central banks and governments are coming to the end of their experiment, not necessarily by choice and certainly not without consequence. Central banks have been printing money non-stop for the last 15 years – since the 2008-09 Great Financial Crisis. The central bank purchases assets in exchange for newly printed money. The main asset being government bonds. The European Central Bank (ECB), Bank of England (BoE), and the US Federal Reserve (Fed) are holding close to $12 trillion in government bonds on their balance sheets – more than half of these bonds purchased since the 2020 covid pandemic took hold. Central banks sucked up government bonds in order to keep yields from rising so governments could continue to issue bonds … and this circle worked for as long as bond prices continued to stay the same or rise. Central banks’ buying of government bonds was a win for the government too, as governments benefited through the low yields that central bank buying created. This allowed governments to continue spending well beyond their revenues, thereby increasing already large debt loads without the consequence of rising yields. However, the combination of supply chain issues, large supplements to household income from governments, and Russia’s invasion of Ukraine, has pushed inflation to 40-year highs and central banks, although slow to react, have started raising interest rates at a rapid pace. This in turn has sent bond prices lower – to the tune of 18% lower since the beginning of 2021. The Bank of England has already stepped in to help support UK Gilt prices and has delayed selling bonds off its balance sheet, to continue supporting the government. And now with the Fed not sucking up the excess US Treasury issuance – Janet Yellen, US Treasury Secretary, is discussing a buyback program to help with liquidity in the market – there is a problem. The problem is that since the Fed has been one of the main buyers of US Treasuries over the last 15-years that “the capacity of broker-dealers to intermediate in the market has not grown in line with the market’s size”. More details on the Treasury’s plans for the buyback and liquidity are scheduled to be released on November 2. Since the central bank bond buying spree started in earnest the Federal Reserve has made money on its investments – it earned more in interest and payments from banks than it paid out to banks for holding their excess reserves at the Fed. These earnings by the Federal Reserve were then turned over to the US Treasury to spend. However, the bond selloff has triggered paper losses for the Fed (and other central banks). The falling bond prices are becoming a huge issue for central banks – their assets are losing value. Last year the Fed remitted about $100 billion to the US Treasury – and in contrast estimates are that the potential Fed loss this year could be upwards of $75 billion. This ‘paper loss’ can sit on the balance sheet for some time but eventually the loss must be addressed. And guess who foots the bill …. That’s right it’s the governments that issued those bonds in the first place … or to be more precise the taxpayers to those governments. As losses mount and economies weaken further the large quantitative easing programs are likely to come under scrutiny, ironically the criticism will mostly come from the same governments that the large programs supported. Nonetheless, the losses could spur additional calls for central banks to not enjoy the high level of ‘independence’ and power that they currently have. Recall that central bank independence has always been a joke. No entity is independent of the political system which names its head banker, or sets the mission statement, and requires semi-annual visits to parliament or congress. Investors who hold physical silver and gold should take comfort in the fact that no central banker is needed to validate their wealth since central bankers are merely politicians with a penchant for helping other politicians before anyone else. Article courtesy of GoldCore, release date of article was 27 October 2022
Let’s Get Physical
A lot of people fall into the trap of thinking that they don’t have to physically own their precious metals. Either they think they can leverage their position better by buying mining stocks, or they think the futures contracts or ETFs they own are as good as gold. As I have mentioned, that’s just plain stinking thinking. First off, if you are reasoning “ Mining stocks give me leverage; I will just buy some stocks” then think again. First, if everyone just bought mining stocks, and no one bought physical gold and silver, then the price of gold and silver wouldn’t rise. In fact, it would fall because of a lack of demand, while all the extra funds available to the mining sector because everyone was buying their stock, would then spur increased supply. Second, mining stocks are stocks. They are not gold and silver. They are shares in a company that processes gold and silver. As such, they are subject to market conditions such as a currency crisis or stock market crash. Gold and silver, on the other hand, could rocket to the moon while the mining stocks fall. Go to the MattressesAs I have mentioned, the first thing you want to do to buy precious metals is to find a trustworthy dealer that will give you good services and advice. To purchase physical gold and silver there are basically two kinds of dealers to choose from online bullion dealers or coin shops. Form or FunctionOne of the most important decisions to make regarding gold and silver in your possession is, What form should I buy? Bars, old U>S> silver coins, Maple leaves or U.S. Eagles? To answer that you have to ask why you want to hold gold/or silver at home in the first place. For most people, the reason to have gold and silver at home is to have a private investment, and also as an emergency currency and portable wealth. Storing Your Gold and SilverOnce you have got your gold and silver you need to decide where you are going to keep your stash. This has always been a problem, and it is a good problem to have, but there is no easy answer. From the book: “Guide to Investing in Gold and Silver” by Michael Maloney
Who are you, and what’s your plan
You need a Plan!The more I study, the more I am absolutely convinced there is no better place to be for this portion of the cycle than in precious metals. I never doubt my choices anymore, and every question I come up with always has the same answer. Investing in precious metals is the safest and smartest investment for my plan. Develop a plan, write it down, and stick with it. Continuously refining and clarifying your plan is a good thing and if you discover that your plan is flawed, then modification is a must. Success or failure can hinge on not only the quality of your plan but also the continual refinement and execution of it. A plan should have a goal, a strategy (the big picture of how you are going to get from A to B) and a tactic (the specific methods to be employed to implement the strategy). Develop Your PlanTo develop an investment plan that is right for you, you first need to ask yourself, Who am I? Take a look at your own personality and determine what kind of an investor are you. Here are some good questions to ask yourself: As of the writing of this book, I am convinced that precious metals should offer huge gains and a good night’s sleep. A Good Team is part of a Good PlanAs Robert Kiyosaki says, “Investing is a team sport”. He also says, “Hire the best advisors and pay them well”. How do you hire a team to help you make investment choices in the precious metals sector? The simplest way to put together a great team is to subscribe to some great newsletters. However, you should get recommendations first, because some newsletters are not so great. You can get recommendations from the other parts of your team. And the other parts of your team don’t have to be people. They can be investment books such as this one, or any financial book that has a resources section in the back. Many good sources are listed in the resources section of this book. Start reading them to educate yourself, and you will slowly gravitate towards the better newsletter writers that fit your style. From the book: “Guide to Investing in Gold and Silver” by Michael Maloney
Beware the pitfalls
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 ScamsOne 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 ADSAvoid 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 CoinsAnother 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. CounterfeitsThis 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 DiligenceSo 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
