Beware of this Scam

The Flying Frisby - money, markets and more

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There are some unscrupulous bullion dealers out there who are taking advantage of rookie buyers who don’t entirely know what they are doing when buying gold.

I am not going to name names. But don’t fall the scam

If a dealer tries to flog you graded coins, in almost all cases they are trying to rip you off. Don’t pay a premium for graded coins.

You are not buying gold to try and be clever and hope that your coin gets some kind of rarity value. In most cases, that will not happen. There are clever people who know this market better than you already playing this game. Don’t get involved. Your priority is to get as much gold for your money as possible. You are buying gold to preserve purchasing power, not to lose it.

If a dealer tells you that some recent sovereign, for example, is extremely rare, that it was one of the last coins minted under Queen Elizabeth or some such, and that it has been graded and has a special certificate and blah blah, and it therefore carries a huge premium, they are trying to pull a sly one. The reality is that the extra premium paid is almost impossible to claw back when you come to sell.

It really annoys me that bullion dealers are doing this. When buying gold, trust is everything and they are breaching that. You are buying gold for safety, not to be ripped off.

Eventually, the FCA or the Office For Fair Trading or someone will eventually come after the dealers, but it will be too late. We all know how slow these organisations can be and by this point many more people will have been scammed.

Why do dealers do it?

A dealer might buy a large stock of coins from the Mint. Coins are often of a slightly different quality. Dealers then send them off and pay a small fee to get them graded according to their Mint State. The scale ranges from MS-60 to MS-70, with MS-70 being a perfect, flawless coin. They then charge a large premium for coins with high grades, even though they barely paid any premium when they bought the coins

The margins when dealing in gold are on the slim side - sometimes just a few percent. But if they get an additional premium for the rarity, that margin can rise to 100%. No wonder there are so many unscrupulous salesman trying to flog graded coins.

Fractional coins—¼ or 1/2 sovs for example—or older coins do trade at a higher (though not enormous) premium. These can trade for 15-20% above the spot value of the gold content. But you are likely to get that back when you sell. (Demand for fractional coins has increased this last year while it has fallen for 1oz coins).

But for graded coins you can end up paying 100% premium to the spot value of the gold, yet when you come to sell you get little more than the spot value. So when you come to sell, you can lose over 70% even if the spot price of gold has increased.

It’s like buying a painting by a modern artist and being told by the vendor he’s more famous than he is, only to find out later on that he isn’t.

Don’t fall for it. And spread the word. The more people that know about this the better.

If you are interested in buying gold in these uncertain times, then check out my recent report, and look no further than my recommended bullion dealer, the Pure Gold Company. Premiums are low, quality of service is high, and you get to deal with a human being who knows their stuff and won’t try and flog you graded coins at rip-off premiums.

IMPORTANT: somebody keeps impersonating me on various social media, including on here asking readers to message them on WhatsApp. It is not me. Don’t engage. Please report and DON’T send any money.

Finally, my Edinburgh Fringe show Shaping the Earth, a “lecture with funny bits” about the history of mining, is coming to London October 9th and 10th to the Museum of Comedy. Please come if you fancy a bit of “learning and laughter”. It’s a really interesting show, even though I say so myself.

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