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10/06/10 --- With the price of gold over $1300 USD, the dollar's value down, and talk of inflation spreading, many people are becoming interested in gold investment. However, not all investments are equal, and investors must remain ever-vigilant regarding potential fraud and other risks.
Some investors actually receive the metal in various forms, while others only possess certificates indicating how much they own. According to a Shanghai Gold Exchange survey cited by the China Daily, just over a third of Chinese investors purchase non-tangible gold, also known as "paper gold".
Investments of this type are faster and involve fewer transaction costs. They also eliminate the expense and possible risks involved in transporting the precious metal. However, companies fraudulently offering such investments can escape detection longer than businesses selling gold directly.
Last October, Montana's Commissioner of Securities & Insurance urged investors to use caution with regard to companies that sell gold and keep it in a "secure vault" for the investor, warning that the gold is sometimes non-existant. In other cases, such businesses might have some but sell certificates for more than they possess.
The high price of gold has led to many scams involving fraudulent sales of both "paper" and tangible gold. In July, a Texas man was convicted of defrauding investors of $300 thousand by operating a fake gold sales company which actually possessed no gold. Investors were allegedly cheated out of $1 million by two Michigan individuals who were indicted in August.
An advantage of purchasing tangible gold coins is that they hold both collecting value and metal value. Investors should carefully consider the storage of such coins or bars. According to the FDIC, the government does not insure safe deposit boxes, but individuals can buy extra insurance to cover them. Though sturdy, safe deposit boxes and safes have been destroyed in large disasters.
Basically, it is important to only purchase gold from reputable dealers and have it transported/stored securely, regardless of whether it is directly tangible or not. Keep in mind that even well-known, major companies may not be providing a good deal; some have used extensive marketing to compensate for overpriced offerings. Also See... Life Insurance: Still a Good Investment? |