Scams seem to follow any sort of financial opportunity and rise simultaneously. This is why it’s no surprise that gold IRA scams are also turning into a major issue.
If you want to learn about gold investments, you may have heard about IRA gold or a gold IRA account. While it looks promising, there are serious risks involved with a gold IRA or silver IRA that you should do your best to avoid.
That’s why choosing the best precious metals companies or gold IRA companies is crucial to avoid gold scams. Additionally, crucial resources like our 401k to gold IRA rollover guide can help you learn the pros and cons of transferring your retirement account to a gold IRA through top-rated gold IRA rollover companies.
And since gold prices continue to climb, so does the number of scammers looking to take advantage of people with investment fraud in the form of gold IRA scams. So, if you want to avoid getting scammed on gold or other precious metals, this article will shed light on the top scams to avoid in 2023.
Gold is one of those unique assets that attract both investors and scammers like sharks to blood. While you may see many of them out there, there isn’t a complete list that discusses the various types of gold IRA scams to watch out for.
While the opportunity to invest in gold may seem appealing, it is essential to get it right and evaluate gold IRA pros and cons and the differences between investing in a gold IRA and physical gold. That’s because there are now more scams and gold IRA lies than ever before.
In this article, I’ll discuss the most common gold IRA scams to avoid and how you can find legitimate gold dealers so you can securely invest in precious metals IRA assets.
You can download this free guide to learn more about gold IRAs. It’s the same guide that the former American football player Joe Montana used to make his personal gold investment.
Table of Contents
Well-Known Gold Scams
1. Lost $60K Overnight
A renowned precious metals dealer once promoted its Gold IRAs using high-pressure techniques. They were frequently heard on the radio programs of well-known right-wing broadcasters.
A congressional hearing was held in 2010 to investigate the dealer after a customer testified that he had been persuaded by a salesman into changing his IRA into a gold IRA and then using the proceeds of $140,000 to purchase rare proof coins. The customer detailed how the incident occurred.
The only coins that are appropriate for a gold individual retirement account are bullion coins. That’s because you are purchasing the coins for your IRA for the amount of gold they contain rather than their rarity level. The unfortunate consumer was overcharged by the company, which resulted in him losing $60,000 in one night.
After that, in 2012, the company reached a settlement in a lawsuit, during which it agreed to modify its sales methods and refund millions of dollars to former clients. It was compelled to disclose its price markups in recorded talks with its consumers and abandoned the use of bait-and-switch strategies due to these revelations.
Thankfully, this gold IRA company has gotten its act together recently.
2. 83 Tons Of Fake Gold
The second example of well-known gold scams refers to Kingold, which is the largest privately held gold processor in the province of Hubei in central China.
Once listed on the Nasdaq stock exchange in New York, Kingold Jewelry Inc., a gold jewelry company, deposited billions of gold bars as security with over a dozen different banks to borrow $2.8 billion against them so they could invest in the Chinese real estate boom.
The issue is that at least some of the 83 tons of gold bars provided as collateral were discovered to be nothing more than copper that had been gold-plated—meaning fake gold.
The incident came to light when one of Kingold’s lenders, Dongguan Trust, had to sell off Kingold’s assets to pay for unpaid debts. The bank examined the gold bars on deposit and found that many of them were actually made of gilded copper.
If more than a dozen well-known banks were able to be fooled with such ease, what kind of a chance does the average person shopping for or investing in gold have?
As it turns out, there are many things you can take to protect yourself.
Most of the time, financial advisors and consultants advise including at least a small amount of precious metals in your retirement plan.
Holding physical gold and other precious metals alongside mutual funds, retirement funds and savings, annuities, pensions, and other assets is a way to diversify your portfolio against stock market risk, inflation risk, currency risk, and other risks.
The first step in defending yourself from gold scams, precious metals fraud, and counterfeiting networks is to grasp these criminals’ many methods and strategies to further their investment fraud schemes.
Common Gold Scams
If you want to purchase gold for your precious metals IRA, it’s a good idea to work with a gold IRA company that frequently interacts with gold IRAs and other retirement accounts and does so expressly for them.
However, you should be cautious when picking an IRA custodian or broker.
The Securities and Exchange Commission (SEC) of the United States has warned the public about a number of gold IRA fraud schemes.
The SEC warns investors to be aware of salespeople who demand payment to a government organization or “sponsoring corporation” in exchange for free gifts or awards. This is not how reputable investments function and is a common scam on physical gold or other precious metals retirement investments.
Additionally, be aware of businesses that promise to sell you gold for below-market prices; frequently, these businesses demand significant commissions for their services and withhold the costs from clients until after the deal has been completed.
Investigating potential gold IRA dealers before opening an account with them is the best method to guard against precious metals investment scams.
The best gold IRA companies will educate you about IRA-eligible precious metals:
- Other than particular kinds of bullion coins, you cannot use your IRA investment to purchase jewels, jewelry, or collectibles.
- All of your assets in precious metals must be bullion coins, bars, or rounds that are sufficiently fine and pure (Gold: 99.5% pure; Silver: 99.9% pure; Platinum and palladium (99.95% pure).
- Assets for precious metals IRAs must be created by a national government mint or an assayer, manufacturer, or refiner that has received approval or certification from NYMEX, COMEX, NYSE/Liffe, LBMA, LME, LPPM, TOCOM, or ISO 9000.
- Proof coins ought to be flawless and in their entire original mint packaging. An authenticity certificate must also accompany them.
- Small bullion bars must be produced to precise weight requirements (apart from 400-ounce gold, 100-ounce gold, 1000-ounce silver, 50-ounce platinum, and 100-ounce palladium bars).
- Coins designated as non-proof (bullion) must be undamaged and in excellent uncirculated condition.
Unethical or uninformed precious metals vendors and salesmen may try to offer you collector gold coins, bars, or rounds for your IRA, even though the law disallows them. These salespeople are only after the commission.
If you possess numismatics, collectibles, or unlicensed coins in your IRA, the Internal Revenue Service (IRS) may invalidate the entire account and require a taxable withdrawal. This can lead to high taxes and fines.
The Home Storage Gold IRA Scam
Any real physical gold, silver, platinum, or palladium held in an IRA or other retirement account must be stored in an IRS-approved custodian, such as a third-party vault or depository facility, according to the IRS regulations.
Your gold IRA assets cannot be taken personally, nor can you keep them in a safe at home or even a safety deposit box under your control.
Some precious metals dealers have advertised something termed a “home storage IRA” sloppily or misleadingly.
They suggest that buying physical gold bullion, palladium, platinum, and other types of precious metals and having them delivered to your house is an option to keeping them at a third-party bank vault facility that serves as your IRA custodian.
However, you can’t store precious metals that belong to your IRA at home. Gold investors can avoid getting scammed by considering this simple information.
Rare Coin Valuation Scams (Fake Gold IRA Investment)
Sometimes coin sellers would work to gain the trust of a potential customer in order to obtain payment for future delivery of gold and silver coins, only to never actually deliver the goods. This kind of fraud with non-delivery is theft.
Once the victim trusts the con artists, they coerce them into sending money. And once they have the cash, they frequently stop communicating with the victim and decline to deliver the coins or issue a refund.
In a true story reported by the Minnesota Attorney General’s office, a 70-year-old widow was offered $10,000 for her collection of Swiss gold coins. The dealer received the coins and said gold’s price had plummeted, so he could only pay her $8,500.
She disagreed and wanted her coins back. After delaying her coins or payment, the dealer sent her a new set. When evaluated, the replacement coins were valued at $1,100.
She never recovered her coins or money.
The average consumer and most gold investors should avoid rare coin speculation and collector’s items and only focus on bullion coins and bars. These are made for their precious metal content and trade close to their spot price.
Sticking to regular bullion goods and paying close attention to the current price for precious metal content reduces scammers’ opportunities to exploit consumers’ ignorance. This is one of the best ways to prevent precious metals investment scams.
Ponzi Schemes (Non-Delivery Scams)
A Ponzi scheme is an illegal financial scam where the operator, instead of engaging in legitimate business activity, uses the contributions of new investors to pay the very early investors.
To put it another way, it’s a fraudulent plan that pays investors’ returns with their own money or the money paid by later investors rather than with money made by the person or business that’s conducting the operation.
This does sound like a pyramid scheme, and it is. The main difference between a pyramid scheme and a Ponzi scheme is that in a Ponzi scheme, no real product or service is exchanged for money.
The scheme is named after Charles Ponzi, who became notorious for using the technique in the 1920s. The idea has been successfully imitated by many criminals since.
Some gold scams are similar to Ponzi schemes. For instance, the operators of the Northwest Territorial Mint took millions of dollars in orders to produce gold bullion coins but misled their customers by lying about shipment dates.
They repaid older clients with the funds from fresh orders, resulting in over $25 million losses across 2,500 customers.
In another case, Hannes Tulving of the Tulving Company scammed more than 380 individuals for more than $15 million.
Tulving marketed bullion, coins, and precious metals via the Internet and convinced his customers to make orders for coins and other products despite being unable to fulfill their requests.
According to court documents, the clients paid for the merchandise, expecting their orders to be fulfilled within the timeframe specified on the company’s website.
Even with respectable vendors, there are occasionally delivery issues. However, if you feel like you’re being duped, ask for a refund immediately (even if you have to take legal action).
Affiliate Scams
In an affiliate scam, the perpetrator uses common affiliation to gain the participants’ trust before exploiting them. Frequently, the scam artist targets fellow members of a religion, church, or veterans club. It is not to be confused wth affiliate marketing, which is a legitimate business.
People tend to trust those that are similar to them, making them especially susceptible to con artists and scammers.
As another type of Ponzi scheme, Larry Bates and his family actively advertised their precious metals firm, First American Monetary Consultants, on Christian and Jewish television and radio.
He hosted lectures throughout the United States to discuss the impending economic collapse and the necessity of investing in precious metals. Between 2007 and 2013, clients contributed to First American Monetary Consultants about $87 million to purchase precious metals.
However, Bates used the money for his own use and benefit. He used $4 million to create International Radio Network, a Christian radio network. Other funds were used for commodity trading and the construction of a 10,000-square-foot home on 300 acres in Middleton, Tennessee. Still, other customers’ funds were utilized to fulfill unfulfilled orders from the past.
By 2009, the business had already cheated investors out of $26 million in unfulfilled gold and precious metals purchases.
The family was subsequently sentenced to 627 months in federal prison.
The affiliate scams aren’t religious-only. According to the FTC, African Americans and Latinos are vulnerable to criminals who exploit their faith in fellow minorities.
Gold Counterfeiting
Counterfeiting is a significant problem in the gold industry.
The most common examples of counterfeit gold bars and coins are from China and Africa. They’re typically sold at a discount to attract buyers, but they often end up disappearing after a few days. Delivery can be problematic, too — as soon as you give them your money, they disappear.
For example, Jonathan Kirschner of New Jersey imported and sold fake silver “Morgan dollars.” He also acknowledged selling fake gold bars for $11,000 to another bidder.
Additionally, he was found guilty of pretending to be a government agent. He would pose as a representative of the Bureau of Alcohol, Tobacco, and Firearms while meeting with customers in order to reduce skepticism and opposition.
According to Reuters, Refining and banking executives, as well as smuggled or illegal gold, are being laundered using gold bars that have been falsely stamped with the logos of major refineries. The fakes are difficult to spot, making them the perfect funding source for warlords or drug traffickers wanting to sell phony gold IRAs.
Most fake gold coins and bars come from China, specifically, and are sold online rather than in person.
By evaluating the appearance and texture of the coin, seasoned gold buyers can typically identify fake coins immediately and distinguish them from real gold.
On the other hand, criminals don’t have that issue while selling counterfeit coins to customers online. It’s challenging to identify fakes over the Internet. Furthermore, you might not even receive the coin depicted in the website’s photo.
To avoid the counterfeiting gold scam, you should:
- Buy only from reputable sources.
- Raise your red flags if the coins or bars are being offered for less than the current spot price.
- Invest in scale and calipers to identify the weight and thickness of the coin. For example, 1oz 24k gold coins should weigh precisely 31.1 grams, and 22k gold coins made of a “crown gold” alloy should weigh 33.93 grams. Not more, not less.
Gold Scam Warning Signs
The information presented here is intended to alert you about dubious claims of quick money to be made from rising prices for platinum, palladium, gold, and other precious metals. Below are details on these offerings and strategies to spot scammers.
Fraudulent Sales Pitch
- Lead you to assume that you may profit from the recent news that is already well known. “You are guaranteed to earn significant returns on your deposit after the mine accident.”
- Made by individuals who identify as “merchants” or “metals dealers.”
- Advertisements on the internet, television, or radio.
- Calls you requesting personal information from you, including your name, phone number, email address, and residential address.
- Received calls from a company broker or sales representative promoting the purchase of precious metals.
- Use high-pressure tactics to entice you to invest in gold or make IRA investments.
Persuasion Tactics
- Enticing you with wealth you can’t have. “Gold will quadruple your present investments’ returns.”
- Claiming to be from a prestigious company or to have particular credentials or experience. “As XYZ Metals Merchant Inc.’s senior vice president, I’d never sell a losing investment.”
- Doing a minor favor for a large one. “If you buy now, you’ll get half my commission.”
- Claiming low supply to create urgency. “Only two units are left, and the Asian market is opening soon, so sign up now.”
Sales Arrangement
- Claiming you can gain much money with minimal risk by acquiring something through a “financing agreement.”
- Designed so that you just have to pay a small portion (anything from 15% to 25% of the total buying price).
- Complete payment made through a loan that the company finds for you and sets up in order to finance the remaining portion of your acquisition.
Unsolicited Calls
- If a salesperson calls out of the blue, they’re generally not authentic. Respected gold retailers don’t cold phone to drum up business. A professional gold dealer will respond to your interests, not solicit business.
- Don’t let a gold salesperson into your home if you’re a widow. You never know if they’re robbers or worse. Gold IRA custodians should be kept at arm’s length.
In a nutshell, gold investing is risky. When it comes to the precious metals market, you should not believe anyone who claims they can “guarantee” profits.
Also, if the price of an ounce of precious metals being sold is significantly lower than the spot price, it should raise red flags immediately.
How To Avoid Gold IRA Scams with Gold IRA Companies
A gold IRA must be a self-directed account, which means you can’t rely on a neutral custodian to analyze your assets for you. That is to say, you are responsible for yourself.
Your only line of defense is to conduct business with a reputable gold dealer with a track record of receiving positive customer feedback from verified review sites such as TrustLink, the Better Business Bureau, or the Business Consumer Alliance, in addition to positive feedback from third-party websites.
This section will walk you through all you need to know before starting a gold or silver individual retirement savings account. To avoid being scammed when opening a gold IRA, here are five points to keep in mind.
1. Pushy Salespeople
Be wary of the smooth-talking salesperson who promises that the price of gold will only continue to rise and presses you to make a hasty purchase right now or risk missing out on a chance that will never come around again.
2. Contracts
Before you sign any contract, including the one to establish a gold IRA, you are required to read and review all of the terms and conditions, even if it feels like a hassle.
You may assume you are engaging in a typical transaction. Still, you will later discover that the contract does not safeguard either you or your money.
Once more, if you don’t feel confident that you understand what you’re signing, you should first consult with an experienced attorney to make sure that the contract is legal before you sign it.
3. Gold IRA Self-storage
You must confirm that the custodian handling your gold IRA is purchasing gold on your behalf and depositing it at a reputable depository.
It is the responsibility of the custodian to provide you with documentation proving that you did, in fact, buy physical gold and that it is being stored in accordance with industry standards at a depository that is covered by insurance.
Some new Gold IRAs offer the possibility of self-storage, in which case you would be responsible for maintaining physical possession of your IRA gold.
It seems nice on paper, but the Internal Revenue Service has never formally sanctioned this method; therefore, it is critical to consult an experienced attorney before going down this path.
4. Selling Collectible Coins
The IRS permits the use of precious metal IRAs for the purpose of purchasing gold not as a collectible but as a commodity. Do not fall for sales efforts that aim to convince you to purchase “rare coins,” as these items have no place in a gold IRA.
In addition, if you are not a specialist in numismatics, there is a significant probability that you are being overcharged for the item that is being offered to you.
However, the genuine market for rare coins is fun and exciting, and we won’t discourage you from joining once you have the expertise.
Remember that collectible coins are not IRS-allowed for gold and silver IRAs.
5. Shaved Coins
Some precious metals dealers actually remove a few grains of gold from each coin they sell you before handing it over to you. The gold dealers stand to benefit from this, while you stand to lose money as a result of it.
Stick to retailers who have a good reputation and have been thoroughly investigated, rather than buying from some shady person who is just trying to make quick cash.
How to Report Precious Metals IRA Scams
There are several federal and state regulators that you may get in touch with if you suspect that you have been taken advantage of by gold IRA dealers or any other form of gold scam.
You have the following options to report a gold IRA fraud or self-directed IRA scams:
- Complain online at https://www.ic3.gov/complaint/default.aspx.
- Speak with your FBI’s local field office or your state’s attorney general’s office.
- Inform the Federal Trade Commission of any suspected fraud.
Also, the Commodity Futures Trading Commission recommends the general public from buying gold, silver, or other precious metals without first seeking the advice of qualified or registered financial, tax, or legal professionals.
Download your Free Gold IRA Lies Guide to learn more about the top precious metals IRA lies and how to prevent them.
Be Cautious with Your Precious Metals Investment Funds
When purchasing gold, you need to keep an eye out for a great number of scams. Although there is a wide variety of gold IRA scams, the vast majority of them share one thing in common: they are meant to take your money.
You can prevent yourself from falling victim to these scams by familiarizing yourself with them in advance so that you are prepared when they occur.
Before you buy any gold for your retirement account, be cautious and search for a gold IRA dealer with a good reputation.
Look for third-party accreditation while examining a Gold IRA provider. For instance, a trustworthy precious metals merchant with high rankings from one or more of the following is unlikely to be associated with any gold IRA fraud schemes:
- Better Business Bureau
- Business Consumer Alliance
- TrustLink
- Ethics.Net
For example, Augusta Precious Metals has been in business for 10 years and hasn’t received any complaints whatsoever from the Better Business Bureau. This is unmatched in the industry.
You can read our review of the best gold IRA companies if you’re curious to learn more.
Or you can get a Free Gold IRA Kit from our top recommendation for precious metals IRAs.