I literally grew up in the rare-coin and precious-metals industry. I stated collecting at around age 6 and became a professional dealer at 15. Then at the ripe old age of 16, I opened my first precious-metals and rare-coin brokerage firm.
I’ve just turned 54 so, when it comes to buying and selling rare coins and physical precious metals, I have 48 years of seeing every trick and scam in the business.
Throughout the years, I’ve encountered plenty of dishonest, and some outright-criminal, precious-metals brokers. I can share quite a few stories about rare-coin dealers going nuts when I would expose their scams in one of my publications.
A few went away. But as long as there are investors eager to buy bullion, there’s always the danger that someone out there is cooking up ways to take advantage of them.
And so today, I’d like to share with you six rules for buying and selling precious metals like gold, silver and palladium the right way.
Several rare-coin and precious-metals companies run ads promising a 1% markup. Not such a good deal.
In today’s volatile metals market, there are many companies advertising on television, radio and the Internet — boasting that the prices they charge are just 1% over their cost.
This is a serious misrepresentation.
What they are not telling you is that 1% does not actually mean 1%.
Remember, their real cost includes overhead, such as the salaries of their administrative staff and shipping department, rent and utilities. Therefore, when these companies sell metals at 1% over their cost, they are pricing them based on the cost of running their business.
The actual cost of precious metals that a legitimate dealer pays is only the actual cost of the metal itself — without adding any other overhead costs to it.
It’s SHOCKING how few dealers and brokers make actual daily buy-sell price spreads based on the actual spot market prices for the physical gold, silver and platinum bullion bars and coins.
Here’s a short guide to not only getting the best-possible prices, but also how to feel good about the quality of your purchase!
Rule #1: When buying physical bars and coins, really check out the firm.
Never rely on the fancy TV ads or color brochures. If the firm doesn’t have a solid Better Business Bureau rating, don’t walk. RUN!
Amazingly you’ll find many firms in the industry have horrible BBB ratings.
Look online and make sure that the company doesn’t have pending lawsuits. You’d be shocked how many firms in the precious-metals and rare-coin industry have been bilking clients by not delivering or not paying for product when clients have sent it to them.
Rule #2: Make sure you’re not cheated on the fill price.
When you purchase gold, silver and platinum bullion, only pay a price that is based on the up-to-the-minute spread that is calculated from the actual up-to-the-minute spot price of the metal.
Forget 1% over cost. Too many times, it is nonsense. Many brokers and dealers are charging between 5% and 7% over the 1% their advertising leads investors to believe they are being charged.
Rule #3: Make sure the bars and coins you receive when buying are FRESH.
Many dealers sell scratched bars and bullion coins that should be in pristine condition. These coins can trade for as little as 3% under spot.
When buying bullion coins and bars, don’t accept them with even moderate scuffing or nicks. Dealers can refuse to buy them when you try to sell them, or will discount as much as 15%.
Many dealers love to buy impaired-quality bars and coins. They often pay spot or less, dealer-to-dealer, and max out their profit by dumping them on retail buyers who don’t know about this deceptive business practice.
Rule #4: Be prepared to wire or deposit funds with a broker or dealer before they lock in your buy price.
Dealers who take credit cards for bullion purchases mark up their coins and bars as much as 25% to cover the 3% to 4% merchant charges. If you have to use a credit card to buy precious metals, you should NOT be buying.
That isn’t just on the buy side. When you sell rare coins and precious metals, ALWAYS ask for immediate payment when you deliver.
It shouldn’t take more than three days for your check to be mailed. Allow a $15 Federal Express charge, and have the check sent for next-day delivery.
Rule #5: Do not expect a return privilege on bullion coins and bars.
There is no return privilege with bullion coins or bars. The price of gold, silver and platinum fluctuates quickly. In a wildly active precious-metals market, all sales and purchases are final from any dealer.
Rule #6: When paying for, or shipping, rare coins and precious metals, use the U.S. POST OFFICE ONLY.
I repeat …
When paying for, or shipping, rare coins and precious metals, use the U.S. POST OFFICE ONLY.
If there’s a problem and you have paid for or sent your property to a dealer and you used Federal Express, you will discover there is no Postmaster General at Federal Express.
More than a few dealers out there right now are using this loophole to steal from investors. Getting paid via Federal Express is 100% fine, but absolutely not when selling or paying.
But handing your bullion to someone in-person before their check has cleared isn’t a good idea, either.
Never allow the dealer to visit you and leave with the coins. Ship them by U.S. Mail. It is your right to ship them even if you are face-to-face with your buyer.
After all, as Ronald Reagan said, “Trust, but verify.”
Memorize these rules and use them with every future buy and sell transaction, and you’ll be able to protect yourself against getting ripped off from a less-than-trustworthy bullion broker or dealer.