Watch Out for These Common Gold Scams

Posted by Amanda on September 10, 2014

If you watch commercials or are ever bombarded by internet ads, then you would think everyone and their mother are emptying their jewelry coffers and melting their gold down at gold parties being held across the United States. Or perhaps you think you are the last person remaining who has not purchased a stash of gold coins to take advantage of rising prices.

I’m here to tell you, you are not alone (and perhaps you have been smart for not jumping on the bandwagon!). Here are some scams to watch out for, and ways to make sure you won’t be scammed if you decide to jump in on the gold craze.

Gold Party Scams

If you go to a gold party with some gold jewelry, then yes, you should walk away with a check in hand. That’s pretty exciting and convenient, plus you get to eat some appetizers, have a drink and mingle.

What you need to be aware of is that you will make far less at a gold party than you would submitting your jewelry to a gold refiner yourself. This is because there are essentially two middlemen selling your gold to a refiner who is going to offer generally 50% or less than what your gold is actually worth (ask yourself this, have you ever seen a gold party company furnish the current gold market prices that they say they are competitive with?).

Here is who gets a cut of your money:

  • Host: The host typically makes 10% of all the value that they bring in.
  • Gold Party Company: The company itself is not a refiner, so they take a cut as well.
  • Gold Party Representative: Yes, the rep who shows up at the party also gets a cut of the profit (on top of being reimbursed, as typically they pay people at the party out of their own pockets).

Gold Coin Grading Scam

Perhaps you are looking to get into gold coins. What you need to know is that gold coins, like all other coins, have a grading system. Grades refer to the karat (aka purity), of the gold, which in turn determines the value of the gold and its sale price. The grade point system goes from 1-70, with 70 being the best condition, or saved for coins that have never been used. Coins are also graded with an acronym, such as MS for “mint state”, or AG for “about good”. Overall, a coin’s grading will look like this: MS70, AG3, etc. (MS70 is the best possible grade a gold coin can get).

The thing is, people who sell you gold coins (and especially if they know you don’t know much about the market) may up the grading just to charge you more.

Gold Coin Marketing Scam

Gold coins have been marketed as your ticket into the surging gold market. And it’s true, the gold market has definitely surged in the last several years.

The thing is, gold coins do not necessarily follow the gold market, especially if they are alloys, even if that is how it is being marketed to you. So when you purchase gold coins, you should not expect to be able to turn around, melt them and then reap 100% of the money in accordance with the weight.

How to Safely Cash in Your Gold Jewelry or Buy Gold Coins

If you are still interested in either cashing in your gold jewelry or purchasing some gold coins, how are you supposed to do so without getting scammed? Here are some tips for you:

  • Double Check that Appraisal: Get any grading verified by a third party that is not being paid for by the person selling you the gold coin.
  • Examine What You are Buying: Sometimes sellers put their gold coins in a fancy display case so that you can’t really access the product. How are you to know whether or not it’s gold or if it’s an alloy? You need to be able to access the actual product and examine it (preferably with a third party) before making your purchase. If the seller won’t let you, then you should probably run away.
  • Cut Out the Middleman: For either of these, you can simply cut out the middleman and put more money and/or value into your own pocket. For gold coin (and other currency) purchases, you can simply visit the United States Mint website and get it straight from its source. In order to cash in the gold value of your jewelry, you can take it straight to a gold refiner.
  • Make Sure the Scale is Fair: When having your jewelry weighed to figure out a fair price, you want to make sure that the weight scale is fair to begin with. Gold is typically weighed in grams. Some people will buy gold jewelry based on ‘penny weight’ (abbreviation: dwt), which is  about 1.555 grams. If you hear ‘penny weight’, go someplace else.

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