4 Key Warnings to Avoid Scams When Investing in Gold
As global interest in gold grows, so do the fraudulent schemes related to It. Learn about the scams used by illegitimate companies that con investors by promising to sell physical gold, and the warning signs that should not be ignored.
Based on the video Common Gold Scams To Avoid, expert Andy Schectman, president of Miles Franklin Precious Metals, shares four key warnings to avoid falling for scams when investing in gold:
1. Be Wary of Prices that are “Too Good to Be True”
One of the most common mistakes new buyers make is being lured by listings with prices far below market value. These "hooks" often conceal disproportionate commissions, deceptive buyback conditions, or the sale of low-liquidity products.
Andy Schectman warns that “Price is what you pay, but value is what you get; sellers often sacrifice value for the illusion of a good deal”.
Buying gold below the international spot price without clear justification is a major red flag. Reputable dealers apply a reasonable margin (typically 3–5%) and explain their sales and buyback policies with complete transparency.
2. Verify the Purity and Authenticity of Gold
Not all that glitters is gold, literally. There are documented cases of coated ingots, altered coins, or pieces that, despite bearing official hallmarks, fall short of their stated gold purity.
A safe practice is to demand investment-grade (99.5% or higher gold purity) bars or coins produced by an accredited government mint or a refiner listed on the LBMA (London Bullion Market Association) Good Delivery List, such as the Royal Canadian Mint, the United States Mint, or the Perth Mint. Engraved logos and certificates can be forged; what matters most is having a reputable institution back the metal, verifying its authenticity and purity.
3. Review the Documentation with Critical Eyes
Some sellers provide documents that appear official but are invalid or designed to create a false sense of security. These include unsupported certificates of origin, incomplete invoices, or contracts that omit essential terms.
It is recommended to carefully review all documents before signing or making a payment. If anything is unclear, it's best to consult with a specialist or simply withdraw. Document transparency is a sign of the seller's professionalism.
4. Ask Before Buying: Will I Be Able to Resell It Easily?
Many scams don't occur at the time of purchase, but rather when the buyer attempts to sell the gold and faces unexpected obstacles: very low buyback prices, hidden fees, or even outright refusal to purchase the previously sold metal.
Before buying gold, it is essential to know the supplier's buyback policy in detail: At what price will they buy it back? Are there any penalties? Are there any restrictions by type of piece or quantity? Liquidity is a key factor for any investment, and physical gold is no exception.
Gold remains a valuable option for diversifying an investment portfolio and protecting your wealth from financial uncertainty. However, like any other investment, it requires information, caution, and a critical eye. Recognizing dishonest practices, thoroughly researching the seller, and demanding clear and fair terms are essential steps to avoid falling victim to a scam.
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