Beware Of Promises Of Easy Profits From
Buying Precious Metals And Other Commodities

Consumers should be alert to companies that sell investments in precious metals and other commodities based on sales pitches claiming that customers can make a lot of money, with little risk, by purchasing metal through a financing agreement. Sometimes these companies offer opportunities to speculate on the price movement of precious metals, or other commodities such as heating oil, without actually taking delivery of the commodity.

The United States Commodity Futures Trading Commission (CFTC) is the federal agency that regulates the trading of commodity futures and options contracts in the United States and takes action against firms suspected of illegally or fraudulently selling commodity futures and options. Over the past several years, the CFTC has taken enforcement action against wrongdoers who lured customers to purchase purported interests in precious metals without taking delivery, through various misrepresentations including claims that they would earn large profits with little risk.

Certain companies advertise on radio, television or internet websites, or make telephone "cold calls," to promote the purchase of precious metals such as gold, silver and platinum. In the CFTC's experience, the advertisements, infomercials and telephone solicitations often promise quick riches - such as the ability to double or triple the customer's initial investment in just two or three months - all with low risk. Companies making such statements typically ask that customers pay only a small percentage of the total purchase price, and also claim that they (or another company) will purchase and store the metal. These companies also pretend to arrange financing for the customer's metal purchase so the customer can obtain a larger profit by controlling a larger amount of metal with their relatively small downpayment. Companies often discourage customers from taking delivery of the metal. These companies often charge a commission for the purchase transaction, a loan origination fee, an interest charge on the remaining balance (which accrues over time), and fees relating to storage and shipping of the metal they pretend to purchase for the customer. Sometimes, not all of these fees are disclosed up front.

What's Wrong With Such Sales Pitches?

The CFTC's experience has been that companies making such pitches often:

Warning Signs Of Commodity "Come-Ons"

If you are solicited by a company to purchase commodities, watch for the warning signs listed below:

Use Extra Care When Dealing with Foreign Companies

For More Information and Contacts

Questions concerning this advisory may be addressed to the CFTC's Office of Public Affairs at (202) 418-5080, or write to:

Commodity Futures Trading Commission
Office of Public Affairs
Three Lafayette Centre
1155 21st Street, N.W.
Washington, D.C. 20581