Gold buyers and sellers should beware of shady dealers
Howard Wolfe watched gold prices soar for several years before he finally decided to jump.
Last year, the Mississippi retiree answered an advertisement for a company selling gold bullion. He wired $20,000 when the metal was retailing for $1,100. As of last week, gold was selling for more than $1,300.
But Wolfe was not celebrating. The gold he bought was never delivered and he can’t get the company to answer his calls.
“I liked the company because they seemed kind of low-key,” Wolfe said. “They’re still low-key. Really low-key. I’m trying to find the rock they’re hiding under.”
As the price of gold surpassed one record after another over the last two years, all too many investors discovered the dark underbelly of gold sales. Scams proliferated as unsophisticated buyers poured into the market to take advantage of rising prices.
The phones at Wolfe’s gold dealer, Superior Gold Group in Santa Monica, have been disconnected. The company has an “F” rating with the Better Business Bureau, largely as the result of 44 unanswered complaints. A precious metals trade group said it received complaints from individuals who invested more than $170,000 in bullion that Superior never delivered.
The chance of getting the investors’ money back? Negligible.
Gold buyers are not the only ones who should beware. Those seeking to sell their gold are also at risk.
Jerry Jordan, managing editor of the Examiner, a weekly newspaper in Beaumont, Texas, spent the last eight months conducting sting operations on traveling gold buyers. These itinerant pitchmen and -women, who set up shop in local hotel ballrooms, advertise that they’ll pay “top dollar” for jewelry and coins.
Jordan noticed that the traveling purchasers often targeted areas hit hardest by the sour economy. It was where consumers were likely to be the most desperate.
He borrowed a pocketful of rare coins when one of these road shows passed through town and went to see what he’d be offered. Jordan was told that a coin worth $13,000 would fetch $250. Another worth $10,000 got a bid of $60 — not exactly the “top dollar” that was promised.
Jordan has since attended traveling gold-buying shows in four states and written a series of award-winning exposes. The short version:
“They routinely offer pennies on the dollar,” he said. “They have an internal motto: If the customer is not educated, do not educate them.”
Mike Fuljenz, president of Universal Coin and Bullion in Beaumont, says most dealers are honest. But shady dealers can take in millions overnight. It’s a classic case of buyer beware.
“Just because you see an advertisement on your favorite network doesn’t mean that the company has been vetted,” Fuljenz said. “It doesn’t mean that the company is legitimate or that they’ll give you a good deal. You have to do your homework.”
What must you know before you buy gold?
•Spot price. The best way to buy gold is to buy common coins, such as the American Gold Eagle, which sell for 3% to 5% over the spot price of gold. A recent spot price was $1,334, so consumers should not have paid more than about $1,400 an ounce at that point.
•Better Business Bureau rating. Wolfe would have saved himself a world of hurt had he checked out his dealer’s rating before he invested. You can find a rating on a company, if it’s available, by going to the organization’s national site at https://www.bbb.org. Click on “check out a business or charity.”
•Dealer affiliations. Is the dealer a member of the Professional Numismatists Guild or the American Numismatic Assn? If so, the dealer must abide by a code of ethics and can be kicked out of the group if it fails to resolve consumer disputes.
•History. How long has your gold dealer been in business? Many of the fly-by-night operators launched their businesses in the last couple of years as interest in buying gold soared. You could have problems with any company, but dealers with long histories are at least likely to have a trail of complaints if they operate unethically.
“If you don’t know a lot about gold,” Fuljenz said, “you should at least know a lot about your gold dealer.”
