Gold IRA Scams – Know Before You Buy

Sep 2, 2022 | Gold & Silver, IRAs | 0 comments

Gold investments have become increasingly popular over the years thanks to their extensive benefits. These include serving as a hedge against both deflation and inflation. Gold investments are often made to more fully diversify a savvy investor’s portfolio. Unfortunately, as interest in gold as an investment vehicle has increased, the creativity of Gold IRA 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 that are being used today. This article will teach you what you should know about the gold IRA scams that are prevalent today?

Gold IRA Scams - Buyer Beware

Counterfeit Gold Investments

When you open a gold IRA account, you will not have immediate physical access to the commodity. This is because the IRS requires gold IRA investments to be held in a secure depository. With this in mind, the possibility of investing in counterfeit gold should be considered.

It is good to choose a Gold IRA company that offers you the option to visit your gold vault.

How widespread is this type of scam?

It affects individual investors as well as commercial investors. In fact, a well-publicized example of this scam occurred in China.

Kingold Scam

Kingold is an established jewelry company that was traded on the Nasdaq at one time. 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 not yet leased when one of those lenders decided to call its loans. Kingold was not in a position to cover the loans with cash, so this failing bank converted the gold to cash. 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.

Gold Buyers Beware IRA Scams

More Warnings on Counterfit Gold Scams

Commonly, counterfeit gold 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.

On the other hand, counterfeit gold coins and bars may also be sold in person by what could be perceived to be a reputable source. In one example, a New Jersey man wore a federal ATF badge to establish authority and legitimacy in his dealings. However, he was selling fake gold to his customers.

In many cases, investors who purchase counterfeit gold do not become aware of the situation until they attempt to convert that investment into cash. At this point, it is often too late to take action, and the financial loss may be set.

Rare Coin Opportunities

Gold investors understandably want to see the maximum return on their investments, and some scammers prey on this motivation. This scam could involve both buyers and sellers.

For example, some gold dealers may market some coins as being rare at an extraordinary price. Variations of this include the sale of uncirculated or proof coins. Once the sale is finalized, the dealer may ship a much less valuable coin to the investor. Often, gold investors cannot spot the difference, and they may not realize that they have been duped until they try to sell their investment.

Even if you make a solid investment, you could fall victim to a scam when you sell your coins. For example, a dealer 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, however, 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 lower-valued versions of the originals.

While rare, collectors’ and other similarly valuable coins may have a place in some investors’ portfolios, it may make sense for most investors to stick to bullion investments. This is because they are traded almost on par with the spot price, and this leaves little room for a scammer to take advantage of you. You should be aware that the IRS regulates which coins and bars can be invested in through a gold IRA account.

Ponzi-Like Scams

Ponzi schemes have robbed many people of their hard-earned cash for decades. They take on many forms, including the form of gold IRA scams. One example 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.

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.

If you choose to open a gold IRA account, your investment company will directly ship the gold to an approved, depository to comply with IRS requirements. Because of this, it is crucial that you are discerning when selecting your gold IRA company.

Further Reading: Birch Gold Group Lawsuite & Review

Affiliation Scams

Commonly, people may more easily establish a level of trust with an entity or group that they are affiliated with. 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 take advantage of 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 personal bank account to cover his own investments and lifestyle.

As you prepare to convert an IRA to gold, it is important to look beyond affiliations. It is understandable that investors want to work with people and companies they trust, but you should ensure that the trust is well-founded. One way that you can do this is to conduct ample online research, such as by reading reviews and checking a company’s status with reputable industry agencies.

Augusta Gold IRA Education

Gold IRA Storage Scams

When you purchase precious metal coins and bullion independently outside of an IRA, the dealer will generally ship the assets directly to your home. At that point, it is your responsibility to safeguard your assets, such as in a safety deposit box or a personal safe. On the other hand, when you invest in gold through an IRS-approved gold IRA account, you cannot be in physical possession of 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 investors may prefer to keep their gold at home if they have the opportunity to do so. The option to perhaps pay a premium for a home storage IRA may be desirable, and these investors may assume that they are reaping the benefits of a qualified retirement account through their investments. However, the gold investment company offering a home storage IRA may not actually be setting up an IRA at all. Even if the IRA is established according to IRS rules, however, taking physical possession of IRS assets has been ruled to be illegal.

Regardless of whether you choose a non-IRA purchase and have the assets shipped to your home or your gold IRA investments are shipped to a depository, it is crucial to confirm shipping methods. Verify the timeline of the shipment and how securely the assets will be shipped.

The Importance of Choosing a Reputable Gold IRA Company

A quick online search will reveal a large variety of gold IRA companies that you could open an account with. However, these companies may have numerous important differences, including in areas like products offered, fees, the depository where your investments will be stored and more. More than that, some of the gold IRA companies that you find online may not be legitimate or may try to sell you products that are not allowed by the IRS.

As you select your gold IRA company, you should be aware that only specific types of bars and coins may be purchased for your gold IRA. Collectible coins, 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. To ensure that the gold meets this important standard, the IRS requires that the assets be produced by specific entities. This includes a national mint or an entity that is accredited by ISO 9000, TOCOM, LPPM, LBMA, LME, COMEX, NYMEX or NYSE.

In addition to these important requirements, the IRS requires that each asset be accompanied by a certificate of authenticity from its manufacturer. It also must be in its original packing and in mint condition. The bullion bars must meet their established weight exactly. Bullion coins must be uncirculated and damage-free.

Before you invest with a gold IRA company, you should thoroughly review its website. Ensure that the products that it offers meet all of these requirements. If you notice that a company offers numismatic collectibles for IRA investments, this should be a red flag warning. 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.

In addition to focusing on the types of products that are offered for gold IRA investments, research the company 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.

Other Important Factors to Focus On

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 IRA company with care, you can more easily avoid falling victim to a scam. However, there are other important steps to take as well.

For example, if you choose to invest in physical assets for home storage outside of an IRA, you should purchase a scale and calipers. As soon as your asset arrives, ensure that its weight and dimensions are acceptable. For example, 22-karat gold coins should weigh 33.93 grams, and 24-karate gold, one-ounce coins should weigh 31.1 grams. Any variance is a sign of a counterfeit.

Whether you invest in physical assets or in gold through an IRA, pay attention to the cost. Gold prices fluctuate frequently, but you should never pay much higher or lower than the spot price. Keep in mind, however, that some prices may be inflated by dealer fees. Dealers that do not incorporate their fees into the price may charge separate transactional fees.

If your gold will be secured in a third-party vault or depository, it must be affiliated with the National Futures Association. These storage sites may offer different levels of security, so consider researching them separately as well.

Important Warning Signs of Gold and Gold IRA Scams

Some scammers may make many grandiose claims that should be met with skepticism. For example, some scammers may use high-pressure sales tactics, such as by saying that only a few of the coins are still available. They may also guarantee a specific return on your investment or state that gold is a safe, risk-free investment.

You should also be wary about investing with 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 make a gold purchase 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.

Get Familiar with Your Options

Converting funds in a traditional IRA into a gold IRA yields notable advantages, but you can see that there are some scams to pay attention to. Augusta Precious Metals is a respected gold IRA company with a solid reputation for supporting investors through education, great customer service and account setup assistance. To get to know more about gold IRA investing, contact Augusta Precious Metals today.


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