How to Spot a Gold IRA Scam?

When it comes to speculative investments, there are two important rules you should always follow:

  1. If something looks too good to be true, it probably is!
  2. caveat emptor, i.e., “let the buyer beware.”!

These rules also apply to life in general, so they represent a serious win-win, and they can also be used to spot a gold IRA scam. These scams have become especially popular given the popularity of gold as an investment vehicle, and some of the scammers know how to look like the real thing when it comes to selling gold IRAs.

But they’re not. Those two basic platitudes we just mentioned won’t get you all the way through the evaluation process, either, so let’s offer some specifics. What follows is a breakdown of some ways to spot a gold investment scam that’s mostly designed to part you from your money.

The Source of the Gold IRA Scam

The first thing you need to consider when you think you’re being pitched by a gold scammer is to consider the source. We’re not talking about the pitchman, either. We’re talking about the message itself and how it arrives.

Specifically, did you get the offer via an email? Did you get a cold call from out of the blue? Both of these tactics may indicate that someone bought a financial investment list with your name on it, and if that’s the case they may be prospecting.

The simplest way to deal with this is to mark the email as spam and hang up on the caller. That will completely eliminate the possibility of getting scammed, regardless of how good the offer looks or sounds.

If you do choose to evaluate the specifics of the offer, here’s something else to keep in mind. Reputable gold investment companies don’t need to send blind emails or make cold calls.

They know that there are far more reliable vehicles they can use to attract prospective customers, so these two methods won’t be part of their sales formula.

Also, they know that their best customers will generally find them somewhere along the line. Savvy gold investors do plenty of homework, and the best and most reputable companies always turn up during the research process. The simple fact is that’s usually when and how the match happens.

Finally, reputable companies don’t necessarily want anything to do with potential customers who think that gold is an excellent way to make big bucks. The Gold Rush happened back in the 1800s, and in today’s investment world, savvy investors buy gold as part of a balanced portfolio.

They take into account all of the market factors, both good and bad, and they make their gold investment accordingly.

The Guarantee Scam

If you get or see a gold investment offer that includes the words “guaranteed return,” your response should be simple—run. Or hang up the phone, bounce the email or click on that little X in the corner, which may be harder than usual to find.

Why? Because there’s no such thing as a guaranteed return!

The closest thing you’ll get to a guarantee in the gold investment world is a series of numbers based on the return history. Gold has a strong history of positive returns, and smart investors often use it as a hedge against inflation or a way to make their portfolios more stable in a volatile market.

Promising anything more than that is stretching the truth in a best-case scenario, but more often than not it’s a red flag that you may be dealing with a scammer.

The Broker Scam

Another quick way to spot an investment scam is to check out the broker. If you think you’re dealing with a gold scammer, the fastest way to verify this possibility is to ask about licensing.

The best gold IRA brokers are licensed by the Financial Industry Regulatory Authority (FINRA), which is a non-profit organization that’s authorized by the government to oversee US brokers.

If you ask about the FINRA during a cold call and the line goes dead, you’ve just found out everything you need to know about that broker’s bona fides.

If the broker does claim to have an FINRA license, though, that doesn’t mean you should stop asking questions.

Brokers who offer gold investments typically belong to several gold-specific financial organizations that provide information and recommendations to help them stay on top of the market, so it’s worth your while to invest a few minutes of research to be able to know them and use them to verify a broker’s bona fides.

The Gold Ownership Scam

Another popular gold scam is based on the fact that you “own” the gold. The scam goes something like this: Because you physically own the gold, it will always be yours. No one can take it from you, and it will always go up in value. Hold on to it for long enough, and you’ll literally be sitting on a gold mine.

This is nonsense, of course. Anyone who knows anything about the specifics of gold investment is well aware that the so-called “ownership” of gold is based on the fact that purchased gold is stored in a repository that’s closely overseen and regulated by the federal government.

That usually doesn’t stop the gold scammers who use this one, though. Many of them will spin some pretty impressive fairy tales, and most of them are designed to separate fools from their money.

There’s no need for you to be one of them, though, so if you do happen to encounter one of these scammers you should quickly move on so you can keep your time sink to a minimum.

Bait and Switch

Bait and switch is an ever-popular scam tactic that’s also found a home in the world of gold investment. It’s not all that hard to spot, but you have to know the right questions to ask.

This one generally comes in two flavors when gold is the bait-and-switch vehicle. One is that the scammer may tell you about a new mining venture in a particular company or location that represents “the opportunity of a lifetime.

The gold you buy from this mining operation will be the ultimate bargain, according to the scammer, and you’re ROI will be incredible.

This ignores several important facts. One is that the gold industry is carefully regulated—in fact, it’s one of the most carefully scrutinized and monitored investment vehicles in the financial world.

Fees, Regulations and Storage Costs

If your potential gold scammer has made it through your initial questions but you still have some doubts, ask him or her about fees, regulations and storage costs.

What you’re looking for is simple. Good brokers know that gold and gold IRAs are highly regulated, and the answer you get should recognize that.

Most of the regulations are based on common sense, so if your broker can’t come up with any of them, that’s a good sign that you may be on the wrong end of a scam attempt.

If the broker tries to tell you that there are no fees and storage costs, don’t buy it. Reputable brokers and companies will tell you about these going in, so you know the costs up front.

You can research this on your own, too. The fees and storage costs are part of the package, and it’s one way to tell the real firms from the approach taken by some of the johnny-come-lately companies that are new to the gold market.

The Silver Scam

Many potential investors are awed by the glamour of investing in gold and precious metals, and gold scammers are well aware of that. One popular scam is to take advantage of investors by “throwing in huge amounts of free silver as part of the deal.”

Your eyes should definitely be rolling by now. Yes, the silver market it considered glamorous by many investors, and that also means it’s just as carefully regulated. No one is going to “throw in” silver for nothing, as that would violate enough laws to excite a dozen or so zealous federal regulators.

Similarly, be aware of special discounts. Companies that sell gold IRAs don’t rely on discounts and special deals to make their money. They rely on knowledge of the market, experience, and the ability to supply investors with solid investments that fit their needs and enhance the quality of their portfolios.

The Storytelling Tactic

We’ve discussed a number of specific gold and gold IRA scams, so let’s take a step back and talk about some of the things scammers do that run through multiple scams.

One of the biggest one is the storytelling tactic. This one works in any number of ways, and one of the most common ones is to describe an “unprecedented” turn of events in the gold market.

To wit: It crashed unexpectedly just before you were approached, offering opportunities to get in on the ground floor that will never be seen again. Lucky you, right?

Another type of storytelling has to do with the mining companies that dig up the gold. One of them made an unexpected find in a far-flung location, and only the scammer’s company has first access to that gold. You can get in on it, too, if you’re willing to dive in right now and pony up for this great one-time offer.

It’s all ridiculous, of course. Significant shifts in the gold market often follow other market trends, and while the gold market does sometimes go in opposite directions, the chances that you’re going to see something historic and unprecedented are slim and none, especially if they pertain to a gold scammer’s deal.

One quick way to spot storytellers in their tracks is to ask to get an offer in writing. If you get push back—“but this offer will expire before I can do that!” is a common one—there’s a very good chance you’re dealing with a gold scammer.

Obfuscation Masquerading as Information

Some gold scammers try to use their knowledge of the gold market and the investment world in general to get would-be investors to take the bait.

How does this work? They’ll use terms like pricing futures, the spot price, lowering the spread and piggybacking on a big trade to lure you in.

It may sound impressive, but a lot of these terms are very basic. Doing a few searches and reading some articles from reputable firms will quickly cut through the financial language fraud, and once you do you’ll be able to see just how laughable most of these scams are.

Another way to prevent this from happening is to talk to a couple of reputable brokers. They’ll all be speaking the same language, more or less, and most will be more than happy to educate you about any false impressions you might have about a possible scam.

The reason they’re doing this is simple—they don’t want gold scammers to take advantage of you any more than you do. They know that gold IRAs are a great investment, and the more they can eliminate scammers from the gold market, the more they can help you make money with a genuinely great investment.