Why gold buyers are so susceptible to fraud
Why gold buyers are so susceptible to fraud from Market Watch
TDC Note – All the more reason to acquire gold and silver from trusted sources, like SDBullion, and never, ever support a coin dealer on TV.
Strong beliefs about the intrinsic value of gold can block our more skeptical impulses
In the early 1980s, not long after it had again become legal for Americans to own gold as an investment, a remarkable offer began cropping up in newspaper and television advertisements: you can buy gold at below today’s market price. This irresistible sales pitch catapulted the International Gold Bullion Exchange—which had begun life as a humble jewelry store—to $100 million in annual precious metals sales.
But the deal was short-lived. Customers complained that gold shipments took months, or never arrived. Various authorities began investigating, and discovered a massive Ponzi scheme; when a court-appointed attorney opened the vault in the company’s Fort Lauderdale office, he found wooden blocks that had been painted to look like gold. In all some 25,000 would-be buyers of gold and silver were defrauded, including vulnerable customers like retirees and churches.
This was far from an isolated incident. During the same period, another company, Bullion Reserve of North America, also claimed to have some $60 million in gold for sale that, after it declared bankruptcy, proved to be fictitious.
More recently, both Congress and various state authorities have pursued a Santa Monica-based company called Goldline — whose ads are still longtime staples on cable news programs — and claimed it used bait-and-switch tactics, fraud, and overcharging. A Congressional investigation found that the average markup on coins sold by Goldline was 90% above the coin’s value if melted, and in one case 208% higher. While the markup itself isn’t illegal, it noted that by “selling gold at twice the melt value, the price of gold would need to double for consumers to break even on their ‘investment.’”