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Protecting Yourself from Precious Metals Scams

With the prices of gold, silver and platinum climbing, the threat of being taken advantage of when buying coins or bars for the purpose of precious metal investing increases – learn how to protect yourself from scams.

The use of precious metals investing as a hedge against market losses in other fields is gaining popularity among large- and small-scale investors, alike. However, as novice investors race to purchase precious metals, there are plenty of hucksters who will happily separate fools and their money. Learn some of the common types of scams and protect yourself from making an unsafe investment.

One term that is commonly heard is “gold filled” or “pure filled gold.” This usually pertains to a coin or piece of jewelery that is made from a base metal (such as copper, nickel, zinc or even lead) that is covered with a thin coating of precious metal. Silver is least likely to receive this treatment, with gold and platinum fakes being far more common. However, some shady coin dealers have been selling coins under these terms leaving less-educated buyers to suffer the consequences.

Other terms that often come up, especially in the case of gold, are “gold overlay” and “rolled gold plate.” These are also combinations of precious and base metals, differing only in the typical thickness of the precious metal layer. Plating, for instance, is most often described as a layer about 175 microns thick. Even thinner are the precious metal deposits left when piece is “washed” or “flashed.”

Though also a type of plating, “vermile” is a thickly applied layer of alloyed gold and silver, making it more durable than many of the other types of gold plating that exist. Still, these are still base metal items coated with a layer of precious metals – bullion should be nearly pure for investment purposes.

There are certainly good deals to be found online from reputable coin dealer, but many of the scams that have taken in folks new to precious metal investing and the elderly have been perpetrated over the Internet. Local shops with a long track record, on the other hand, have a reputation to maintain among other local businesses and tend to steer well clear of such coins.

According to the US Commodity Futures Trading Commission (CFTC), investments in physical precious metals, that promise quick and high returns are also signs that an investment isn't really what it seams. Such precious metals investing plans are carried out by telemarketers and late night infomercials. Such investments are very often scheme that underestimate the risks involved, overestimate the returns and sometimes even fail to actually purchase the precious metals that you're being charged a “storage” fee for safely keeping the “physical gold” for you.

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Linda Hess

March 19, 2009



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