Precious Metal Frauds

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Precious metals frauds are on the rise and scammers prey on fears related to the durability of the United States financial system. These frauds promise “safe” investments, but the reality is the fraudsters sell the metals at inflated prices and charge high commissions. The fraudsters target senior citizens and pre-retirement investors, convincing them to turn over their savings or retirement accounts, through self-directed IRAs, to invest in precious metals.

The Setup

Gold, silver, or other precious metals scams often begin with an unsolicited email, phone call, or brochure in the mail. Maybe you ran across an online advertisement, video, or message-board post that touted the benefits or safety of precious metals. If so, you’re not alone. Millions of Americans see these messages every day.

Unscrupulous, high-pressure salespeople have pressured thousands of unsuspecting investors into losing millions of dollars due to false claims, overpriced coins, or excessive or hidden fees.

The Fraud

Fraudsters target your retirement savings because, if you’re like most Americans, that’s where most of your investment money is held. Commonly, unscrupulous dealers pose as “IRA experts” or act as illegal investment advisors to convince customers to rollover their retirement savings into Self-Directed IRAs. They ask you to buy as much metal as possible, even if it exposes the investors to greater market risk, creates unnecessary taxes or penalties, or damages a portfolio’s long-term appreciation or income potential.

The truth is precious metals prices are just as volatile as those of other assets. They just don’t react to economic conditions the same way stocks or bonds do. But don’t confuse this lack of correlation with metals investments as being low-risk or “safe.”

As an investment, precious metals do not pay dividends, create earnings growth, or compound, like other assets. However, high transaction costs (commissions and fees when you buy and sell), ongoing storage costs, and insurance, may require you to earn well above the rate of inflation just to break even.

Most “Numismatic” coins—meaning rare or collectible—also come with significant risks. They typically carry higher markups than bullion and are much less liquid. If you can’t find another collector who values the coins as much as you do, then you may have to sell your rare coins at a significant loss.

Unlike financial professionals who have a fiduciary responsibility to you, precious metals salespeople typically are not qualified or legally allowed to provide investment advice, and are not obligated to help you make the best decisions for your financial future. Instead, commissions and profits often drive their recommendations. Self-Directed IRAs also come with complicated tax rules, monthly administrative fees, and handling and storage charges.

Often the costs are so high that buyers never see a profit from their metals “investments.” In one recent complaint, a gold dealer and IRA custodian charged nearly $150,000 in commissions and fees to a customer who rolled over a $300,000 retirement account into a gold IRA.

Other recent cases have also revealed some dealers:

  • Lied or omitted facts about the coins or products they sell.
  • Charged customers extra to store bullion in far-away vaults that didn’t exist.
  • Sold financing and insurance to collect payments, but no metal was purchased and the policies weren’t real.
  • Didn’t purchase actual metals, instead they used customer money to make risky, highly leveraged futures trades — and lost everything.
Do's and Don'ts
The Do's The Don'ts
  • Do talk to a qualified financial planner, investment advisor, or accountant before making significant changes to your tax-advantaged retirement plan. See the “More Information” links below to help you find registered or qualified financial professionals.
  • Do compare costs and insist on getting all fees in writing. Share the information with qualified advisors and ask for their input.
  • Do shop for a reputable dealer. Retail coin dealers generally are not regulated by state or federal authorities, so you’ll need to do significant research on your own.
    • Check credentials and disciplinary histories if a dealer or someone associated with a dealer claims to be a financial advisor or “IRA expert.” You can use the registration links below.
    • Know where your dealer is headquartered. Also search online for independent third-party reviews, complaints, and ratings for customer service
    • Check with the attorney general in the dealer’s home state to see if the dealer has a history of complaints.
  • Don't respond to unsolicited email, mail, cold calls, advertisements, videos, or social media posts about investing in precious metals or starting a gold IRA. Better yet, delete unsolicited emails without opening them, and don’t answer calls from numbers, people, or businesses you don’t recognize
  • Don't buy from individuals selling metal on social media sites or discussion boards. Also, don’t do business with traveling or pop-up precious metal dealers who might do business out of a hotel room, their car, insist on coming to your home, or meeting you in another public place.
  • Don’t agree to purchase precious metals using equity-based financing or leverage. For example, you might be told that you could buy a large amount of metal by investing just a percentage of the metal’s total value. You might be told if the spot price of the metal increases, the gains would be added to your equity and help you pay off the purchase faster. What’s often overlooked is that prices could fall, reducing your equity too. And, if your equity falls below a specific minimum, your account will be closed leaving you with nothing. It is illegal for dealers to offer leveraged or financed purchases unless your metal is delivered within 28 days.


For More Information

Use the links below to find registered or other legitimate financial professionals:

Lies Versus Facts: The Truth Behind Gold and Silver IRA Scams

Customer Advisory: 10 Things to Ask Before Buying Physical Gold, Silver, or Other Metals

Customer Advisory: Beware of Gold and Silver Schemes Designed to Drain Your Retirement Savings

Article: Gold Is No Safe Investment

Fraud Advisory: Precious Metals Fraud

Video: True Fraud Stories: Hunter Wise's Silvery Slope

Investor Alert: Self-Directed IRAs and the Risk of Fraud,

Find state attorneys general, National Association of Attorneys General

Golden Rules for Investors: What to Know Before Buying Physical Precious Metals, FINRA

Approved Nonbank Trustees and Custodians—to administer self-directed IRAs,