It is increasingly becoming apparent that there are dozens of companies out there telling lies, overcharging and generally misleading buyers of gold and rare coins. Using Exchange Traded Funds (ETF) and other "paper proxies" have their own risks including fees charged, if they actually have and own the physical metal, and any exit fees if you want to collect the metals. Some of these are extortionately high, so be very careful who you trust and read the prospectus carefully.
Our clients know that buying gold is a high risk venture, and they know that owning gold has costs beyond our commissions. Furthermore, anybody that is buying rare coins as an investment should be aware that they will need to hold the coins for years, maybe even decades.
The coin and bullion markets are not like stock markets. One cannot buy an item today, and turn around and flip it tomorrow, next week or even next month, and if anybody tells you that they can they are lying.
One of the most common scams we see are people being fooled into buying limited edition rarities with the promise that demand will make prices rise dramatically. These are generally totally bogus items, ones that are quite often struck on some tiny volcanic rock in some distant ocean.
I am choosing my words well here, because these companies have budgets that allows them to advertise night and day on national TV and print publications. For this reason, we know they are raking millions of pounds and can easily afford the best lawyers to write the best terms, conditions and disclaimers in the tiniest print possible. These same lawyers can also be sued to out legitimate businesses like us out of business.
However, be simply doing some research, you can protect yourself against losing out. Below we identify a few of the pitfalls in buying physical metal.
1) Read the small print. These con artists get away with legalised robbery by knowing most people do not read the small print.
2) Use the internet to learn about your coins. Just because an item has the queens head on it, does not make it legal tender, or issued by the Royal Mint.
3) Do not be fooled by claims of rarity and limited editions. As a rule of thumb we would consider rare coins to be one that has less than 100 known to exist, and often deal in coins 200 years old with 1,000 for more known for not much more than melt value. Old does not mean rare.
4) Remember, if a company has prestigious London address in the City or West End, glossy brochures and slick TV advertising featuring some minor celebrity, it is your money that is paying for it.
5) Understand the language of precious metals. Gold and silver are traded by the Troy Ounce which is equal to just over 31 grams. This is not the same as 31 Milligrams', with each milligram being equal to one thousandth of a gram.
6) Do not be pressured into making a hasty decision. Truly rare coins do not need selling, they sell themselves.
7) Know your dealer. What is his or her background, how long have they been involved, do they have independent references, or publications of their research?
8) Know your objective and exactly why and how long you intend to own your collection and ask yourself can you really afford it.
9) Find out how they price the items, and do not be afraid to ask about how the price was set, or how much they would pay you for the item. In the stock market, this is called "the bid and ask spread". In numismatics, this could be as much as 100%, even more.
10) Do not believe the hype. It is true that CERTAIN coins have made good investments, but 90% of them have not. Remember, if it is such a good investment, why are they selling it?
