Gold IRA Scams – Know Before You Buy
Gold investments have become increasingly popular over the years thanks to their extensive benefits. These benefits include serving as a hedge against both deflation and inflation. Gold investments are often made to diversify a savvy investor’s portfolio more fully. Unfortunately, as interest in gold and silver products as an investment vehicle has increased, the creativity of precious metals investment scams has also been on the rise.
One of the best steps that you can take as you prepare to make a gold investment is to educate yourself about some of the most common scams (for example, rare coin valuation scams) that are being used today. This article will teach you what you should know about the gold investment scams that are prevalent today.
Counterfeit Gold IRA Fraud
Scam = Counterfeit gold or no gold held in the vault
Solution = Make sure you’re allowed to visit your gold vault
When you open a gold investment retirement savings account, you will not have immediate physical access to the commodity. This is because the IRS requires gold investments to be held in a secure depository. With this in mind, the possibility of being duped into investing in counterfeit gold should be considered.
Therefore, it is good to research and choose a reputable company and become knowledgeable about gold and precious metal IRAs scams.
While it’s not a 100% solution to a gold Scam, choosing a company that offers you the option to visit your gold vault is good.
Our Pick
Augusta Precious Metals
We have researched and reviewed a lot of gold IRA firms over the years.
Luckily, most major companies are reputable. However, only one had virtually 0 complaints of any kind, and that’s Augusta Precious Metal. On top of that, they offer great education from a Harvard economist and some of the lowest fees in the game.
More Warnings on Counterfeit Gold Scams
Purchasing gold from a random person online via ebay, craigslist etc is strictly not recommended as they make give fake coins and you may lose money. Only do dealings with reputable companies to avoid common scams.
Commonly, counterfeit coins and bars are sold online. Some of these may be gold-plated products that appear to be solid gold on the exterior. Common filler metals include copper, tungsten, and lead. While experienced investors may be able to identify fakes by handling the products, this is not possible with an online transaction until after the sale is completed.
In other cases, the coins and bars are entirely made out of gold. However, they have fake markings that impact their actual value. In another related scam, the scammer may ship a coin that does not match the image shown online.
In many cases, investors who purchase counterfeit gold do not become aware of the situation until they attempt to convert that investment into cash.
Fake Gold Ira Coin Scam
Scam = Marketing rare coins at a great price but delivering more common coins.
Solution = Stick to gold bars, bullion, and common IRS-approved IRA coins. If you insist on investing in rare coins, employ 3rd party audits.
Gold investors understandably want to see the maximum return on their investments, and some scammers prey on this motivation. This “rare coin scam” could involve both buyers and sellers.
Buyer Beware = Coin Swapping Rare for Common
For example, some gold dealers may market a particular set of coins as being rare and offer an extraordinarily low price. However, once the sale is finalized, the dealer may ship a much less valuable coin to the investor. These are called valuation scams. Often, gold investors cannot spot the difference, and they may not realize that they have been tricked until they try to sell their investment.
Seller beware = Coin Swapping Rare for Common
Even if you make a solid investment, you could fall victim to a scam when you sell your coins.
For example, precious metals dealers may offer to pay you a specific amount of money initially by phone or online dependent on a physical inspection of the coins. Once the dealer has the coins in its possession, it may offer a much lower price.
If the investor accepts the price, he or she will leave money on the table. If the investor declines the offer, the coins that are returned to the investor may be swapped for lower-valued versions of the originals.
Rare Coin Solution
While rare, collectors’ and other similarly valuable coins may have a place in some investors’ portfolios, it makes sense for most investors to stick to bullion investments. This is because they are traded almost on par with the spot price, leaving little room for a scammer to take advantage of you.
You should also be aware that the IRS regulates which coins and bars can be invested in through a gold IRA account. Here is guidance on IRA-approved precious metals by the IRS.
Ponzi-Like Scams
Ponzi schemes are prevalent in many industries and have robbed many people of their hard-earned cash for decades. These schemes take on many forms, but the basic idea is that you are paying old investors with the money from new investors. This sort of pass-through pyramid cover-up scheme only compounds over time and eventually collapses entirely.
Ponzi schemes are varied and hard to spot. However, one warning sign of a gold Ponzi scheme in action involves delayed shipping times.
You should be aware that there is always a chance that a legitimate shipping delay may occur with any gold purchase. However, if a reasonable amount of time has passed and your shipment still has not arrived, you should consider requesting a refund as soon as possible.
While a Ponzi scheme is varied and hard to spot, one warning sign of a gold Ponzi scheme in action involves delayed shipping times.
One gold dealer was prosecuted for executing gold bullion coin orders that tallied in the millions of dollars. Rather than shipping the coins directly to investors within the agreed-upon shipping time, the dealer used the money for other nefarious purposes. Some of those funds were used to pay for the owners’ lavish purchases or to reimburse other customers.
Altogether, the actions resulted in $25 million in financial loss for thousands of investors. Variations of this type of Ponzi scheme have been used as well. For example, some scammers have only returned invested funds after legal action was taken or threatened.
If you choose to open an IRA gold account, your investment company will directly ship the gold to an approved depository to comply with IRS requirements. Because of this, you must be discerning when selecting your gold IRA company and confirm the arrival of the gold shipment in your IRA vault.
Further Reading: Birch Gold Group Lawsuit & Review
Affiliation Scams
Scammers may latch onto a specific group, such as a religious organization, and feign affiliation to earn their members’ trust.
For example, a military veteran may easily believe that an organization representing or working on behalf of veterans would be legitimate and trustworthy. Other similar types of affiliations are related to minorities, religious groups, and more. Unfortunately, scammers can exploit an affiliation-based trust for exploitation and fraud.
In some cases, these scammers may not even position themselves as being directly affiliated with a group, but they may target the group so heavily that the group members believe that there is an affiliation.
In one example, a scammer attended religious conferences, held seminars, advertised on religious radio stations, and took other steps to infiltrate a religious community. His spiel inspired investors to give his precious metals firm approximately $87 million over the course of six years. However, some of that money was siphoned into his bank account to cover his investments and lifestyle.
As you prepare to convert an IRA to gold, it is important to look beyond basic affiliations and do your best to conduct unbiased research.
Gold IRA Storage Scams
When you purchase precious metals ira, coins, and bullion independently outside of an IRA, the precious metals dealer will generally ship the assets directly to your home. At that point, your responsibility is to safeguard your assets, such as in a safety deposit box or a personal safe.
Buying gold on the spot market and safeguarding it yourself is completely ok. However, home storage will not qualify for the tax benefits of an IRA. Any company that claims they offer home storage IRAs (usually for a premium) is likely not telling the truth.
When you invest in gold through an IRS-approved gold retirement investment account, you cannot physically possess the asset. Instead, the IRS requires the coins or bars to be stored in an approved depository or vault.
A common scam is tied to the storage of IRA investments at home. Some gold IRA investors may prefer to keep their gold at home and be willing to pay a premium to do so. A scam company could take advantage of that desire.
However, the gold investment company offering a home storage IRA usually hasn’t set up an IRA at all
. Even if it established an IRA, it isn’t complying with IRS rules. Simply put, taking physical possession of IRA assets has been ruled non-compliant by the IRS.How To Choose the Best IRA Company
A quick online search will reveal a large variety of gold IRA companies that allow you to open an account. These precious metals market has their differences. They offer different products, fees, and states in which they offer depository vaults. All of these practical factors need to be considered.
However, most importantly, some of the gold IRA companies that you find online may not be legitimate. They may try to sell you products that are not allowed by the IRS or are IRA compliant.
IRS Compliant Precious Metals, Certificates of Authenticity & More
As you select your gold IRA company, you should be aware that only specific types of gold and silver coins and bars may be purchased for your gold IRA. Collectible coins, physical gold, jewelry, gemstones, and other physical assets are not permitted.
The IRS also establishes quality standards for gold. Whether you purchase bars, coins, or rounds, the gold must be certified to be 99.5% pure.
The IRS also requires that each asset be accompanied by a certificate of authenticity from its manufacturer. It also must be in its original packing and mint condition. The bullion bars must meet their established weight exactly. Bullion coins must be uncirculated and damage-free.
If you notice that a company offers “numismatic collectibles for IRA investments”, this should be a red flag warning. These types of collectible coins are not IRA compliant. Investors who fall for these gold IRA scams and make unapproved investments may find that their IRA contributions are entirely disallowed. There may be financial consequences, such as tax penalties and unplanned liability, as a result.
Other Research Factors with a gold IRA
In addition to focusing on the types of products that are offered for gold IRA investments, research the company itself carefully. Specifically, pay attention to how many years it has been established and how many positive reviews it has.
Pay attention to how transactions can be completed, such as online or by phone, and the level of customer service that is available to investors. Top gold IRA companies may be affiliated with the Better Business Bureau and other reputable, well-known organizations.
You can see that there are numerous gold scams and gold IRA scams that are being used to target today’s investors. When you are aware of common scam techniques and take steps to select your gold investment company with care, you can more easily avoid falling victim to a scam. Here are some videos to learn more about common scams: Gold IRA Lies
However, there are other important steps to take as well.
Gold Costs & Fees
Besides checking if the gold price is far too high, check to make sure the price isn’t far to low. If the deal is too good to be true… it likely isn’t true!
Whether you invest in physical assets or gold through an IRA, pay attention to the price the company charges as compared to the market price of gold.
Gold prices fluctuate frequently, but you should never pay too much higher or too much lower than the spot price.
Many perfectly honest gold dealers will earn their profit by either a markup on the spot price and/or associated fees. This is fine as long as the fees are reasonable. After all, gold IRA dealers are providing a service and running a business so they deserve to make some profit.
Simply be aware of the fees the gold dealer is charging and note any markup on the spot price of gold so that you can be sure you are getting a fair deal.
High-Pressure Limited Time Sales Tactics & Guaranteed Returns
Some scammers make many grandiose claims. Meet those claims with skepticism. For example, some scammers may use high-pressure sales tactics, such as saying that only a few coins are available. They may also guarantee a specific return on your investment or state that gold is a safe, risk-free investment.
Gold is a safer-than-normal asset to invest in, but no investment is risk-free. And if the deal is so good it will be gone tomorrow, why are they pushing you so hard for sale?
Gold IRA Sales Channels
You should also be wary about investing with gold IRA dealers that reach out to you directly, such as through an email or phone call.
Likewise, you should avoid being enticed by too-good-to-be-true marketing messages, such as on the internet, TV, and radio.
If you decide to purchase gold from a seller or dealer outside of the United States, be aware that U.S. authorities cannot pursue or prosecute scammers outside of the country’s borders.
Gold IRA Scam Conclusion
Converting funds in a traditional IRA into a gold IRA yields notable advantages, but as with any major decision, do your research and beware of scams.
When you are aware of common scam techniques and take steps to select your gold IRA company with care, you can more easily avoid falling victim to a scam.
We hope this guide on Gold IRA scams was helpful. If you’re looking for some of the best education in the business, be sure to check out Augusta Precious Metal’s Gold Buyer Education packet:
Gold IRA Scams FAQ
Gold has historically been a store of value that offers investors the ability to diversify their retirement accounts. Typically, gold and other precious metals act as a hedge against stocks, and other financial instruments, as financial markets tend to favor gold during market downturns. Gold may not be a home run investment, but it is safe, and many financial professionals recommend that you keep 5 to 10% of your investment portfolio in gold.
When using an individual retirement account (IRA) to invest in gold, you must store the gold in an IRS-approved depository. The IRS has withdrawal restrictions on IRAs, including penalties for those who wish to withdraw before the tax advantageous disbursement age of 59.5 years old.
A reputable, real Gold IRA dealer will have various facilities and guaranteed profits you can choose from to store your gold and even visit your gold vault.
The IRS does not allow individuals to hold gold and other precious metal IRA assets at home. While individuals are free to purchase gold on the spot market and keep it at home, if they are looking for the tax advantages of investing in gold through an individual retirement account, they must store the gold in an IRS, IRA-approved facility in order to comply with the withdrawal rules associated with IRAs.
Gold bars are easier to price than gold coins as they are determined by weight and spot price. Gold coins, however, may have certain rarity and collector factors that add a premium to their price that is above just the weight of the coin multiplied by the spot price.
Gold IRAs are not tax-free but they do have tax advantages. The two most popular types of IRAs are Traditional IRAs and Roth IRAs.
Traditional IRAs are funded with pre-tax money and, therefore, tax-deferred. Meaning contributions to the IRA can be written off in the current tax year, and then the taxes are paid upon withdrawal.
Roth IRAs are funded with post-tax money and therefore will not be double taxed. Meaning withdrawals from your gold IRA after the age of 59.5 are not taxed, and therefore, the user does not have to pay any capital gains tax on the appreciation of their precious metal investments.
While Gold IRA scams are less common, gold scams themselves can be widespread. They can affect both individual investors as well as commercial investors.
Kingold was an established jewelry company that was traded on the Nasdaq at once. Over the course of several years, it deposited several billion gold bars into 14 different banks throughout China. It then used that gold as collateral for $2.8 billion in loans for real estate investments.
Because of the real estate bubble in China, millions of the homes that Kingold invested in were still vacant when one of those lenders decided to call its loans. Kingold was not able to cover the loans with cash, so this failing bank converted the gold to cash.
Kingold was then hit with a double whammy because through this step; it was eventually determined that roughly 83 tons of gold that had been deposited into those 14 banks were actually comprised of copper rather than gold.
Similar counterfeiting scams can impact investors around the world. However, you can take advantage of gold’s benefits in your portfolio and reduce your risk of being the victim of a scam. For example, you may reduce your risk of purchasing counterfeit gold by carefully selecting a reputable, established gold IRA company to invest through.
The pros of a gold IRA: – Hedge against traditional investments like the stock market and cash – Tend to perform well in a market downturn – Roth IRA: Tax advantages on capital gains – Traditional IRA: Tax write-offs on deposits
The cons of a gold IRA: – No home storage; precious metals must be kept in a vault. – Higher fees than buying on the spot market – Gold does not pay dividends
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