As the price of gold continues to rise, so do the number of gold scams being perpetrated against unsuspecting consumers. Max Warren Barber, CEO of SION Trading Fze says it’s important to be aware of these scams and how to avoid them and protecting yourself from fraudsters preying on those looking to invest in gold.
How to spot a gold scam
According to Max with the current economic climate, more and more people are investing in gold. While this is a smart investment choice, it’s important to be aware of the many gold scams out there. If you’re buying gold, only buy from reputable dealers. Be sure to get a written estimate and receipt of your purchase. On the other While if you’re selling gold, be sure to get a fair price and only deal with reputable buyers. Don’t let anyone pressure you into making a sale before you’re ready.
Be skeptical of any offer that seems too good to be true. If something sounds too good to be true, it probably is! Stay informed about the latest gold scams by checking out resources like the Better Business Bureau or the Federal Trade Commission. Educating yourself about these schemes will help keep you safe from fraudulent activities.
How to protect yourself from online gold scams
Since the pandemic began, gold scams have been making headlines. While there are many types of precious metals fraud, here are some representative cases according to SION Trading Fze:
- In March of 2020, San Patricio County Texas, Sheriff Oscar River took to Facebook to warn his community that a family claiming to have hungry children was trying to sell fake gold jewelry for cash.
- In Norwalk, California, an 80-year-old woman was conned into buying a fake gold brick for $4,000.
- In Austin, reports surfaced of fake gold jewelry, stamped with “18k,” being offered in exchange for “gas money.” Victims were targeted while pumping gas or doing yard work.
- Last May, the Washington State Patrol identified similar activity as “organized crime” and part of a “nationwide scam.” Some citizens who were targeted called 9-1-1 after “being stopped on freeway interchange ramps or followed into parking lots.”
While most lockdowns have been lifted, some are being reenacted in other countries, like China. Scammers targeting gold investors continue today.
Indeed, with uncetainty rising due to the Russia-Ukraine war, and inflation running hot, gold prices are rising again. This typically attracts more fraudsters.
It pays to be aware of the way scammers work their marks. Be on the lookout for these tip-offs.
- Often, the scammers are seen in upscale SUV rentals, (sometimes with out-of-state plates). They appear polite, well-dressed, and well-groomed.
- Children are typically present, and are sometimes crying.
- Often the scammer claims to have been robbed of their wallet. They claim to need gas money.
- At other times, a couple or family will claim they need to sell their gold because they are immigrants, broke, and need food.
- Citizens are usually targeted in high-traffic areas such as store parking lots or freeways.
Those targeted include people the scammers expect to be influenced by their false plight, including women, retirees, and the elderly.
What Law Enforcement Is Doing
- Law enforcement has been warning citizens to “Just walk away” from such encounters and to file a police report if approached.
- They have used Twitter and Facebook and local news to alert the community to specific scams and to share descriptions of suspects and vehicles.
- They are encouraging the public to report any suspicious activity and to be vigilant.
- Some departments have posted tips on their websites. (Here’s an example from Canada, where the scam has spread.)
Citizens who fall prey to the jewelry-for-cash scam, typically find out the gold is worthless after they take it to a jeweler for appraisal according to SION Trading Fze:
- The “18k” stamp is meaningless, as the jewelry itself is made of brass, or another common metal.
“Fast Cash For gold”
Given the widespread availability of “cash for gold” businesses throughout the U.S., there is no credible reason that an honest individual would have to sell their gold to a stranger in order to get “fast cash.”
- Nearly every city and town in the U.S. has “cash for gold” stores, pawn shops, or jewelry stores where sellers can get immediate cash for gold jewelry or bullion. These shops have the means to test the metals to determine whether they are genuine or fake. The business will require proof of identity and will document the transaction. The process is typically recorded by security cameras.
- There are also legitimate online services that provide convenient ways to sell jewelry made of precious metals, bars and coins. Typically, the shipping is free and paid for by the business. Once the buyer receives the items for sale, and assesses them, an offer is made. Sellers often receive funds within 24 hours of the assessment.
How Are Gold Scams Connected to the Pandemic?
In the wake of the pandemic, and the trillions in stimulus distributed by the U.S. government and some states, gold has soared in price, beating all major commodities, until it was surpassed by silver.
“The Fear Trade”
Gold investment is sometimes called “the fear trade.” This means when investors are concerned that massive ‘money-printing’ by the government will spark runaway inflation, or they believe a stock market crash is on the horizon, they often increase their gold holdings.
The traditional (and contested) view of gold is that it is a “safe haven” asset that will provide some protection against market catastrophes. Silver, which is much cheaper than gold, is also sometimes viewed as a safe haven.
Supply and Demand
Demand for gold was followed by a supply crunch: the U.S. Mint shut down part of its operations due to the coronavirus. Gold prices surged to a record price of over $2,000 an ounce. Some retailers ran out of silver coins and ran low on gold coins, sparking buying stampedes and more shortages.
Local scams surged in tandem. Such a trend may include an increase in scams involving sophisticated counterfeit bars and coins targeting retail buyers.
Consider these fake gold bars, fabricated and packaged to look as though they were produced by the Australian government’s Perth Mint.
These counterfeits are so sophisticated that it’s impossible for an average buyer to tell they are fake. The bars even include serial numbers.
- Buying from anonymous sources, either online or in-person, poses obvious risks.
- To protect against being defrauded by these types of counterfeits, citizens should seek out established, reputable precious metals dealers. These businesses provide online or in-store options.
The different types of gold scams
Gold scams have a lot in common with other investment, commodity, or property scams. They come in many forms but most will fall into five categories in sight of SION Trading Fze:
Bait and Switch: The fraudster offers to sell the victim gold, but it’s fake. In some cases they also make misleading claims about the value of a gold coin, under the assumption that the buyer can’t or won’t check. A variation of this scam includes sending gold with falsified documentation.
Partial Delivery Scam: These scams rely on building trust. The most common variant has the criminal selling the victim a sample of gold, which is legitimate, in order to create trust. The victim then sends money and either gets a delivery of fake gold or nothing at all.
Selling Gold and Storage Services That Don’t Exist: In this variation, the fraudster has hit the jackpot. They have typically convinced the victim to buy a large quantity of gold, and also convinced them that it is unsafe to store it at their home or office. They then upsell the victim on gold storage services, to keep the coins safe. Neither the gold nor the storage site exist.
The Business Partner Scam: This one will be well known to any deputies familiar with the Nigerian prince scam. Typically, the criminal sends an email claiming that they, or the victim, have an unclaimed inheritance. However, in order to access their inheritance, they need a “small favor.” They ask the victim to send money, promising to pay the victim back once they have the assets, which of course never happens.
Sleight of Hand: In contrast to other scams, these involve physical contact with the victim. Like a magician, the scammer distracts the target, placing an item of gold jewelry on their body while imperceptibly stealing real gold jewelry that the victim was wearing. (See this San Francisco Police Department report for an example.)
