Posted By Isaac Nuriani
Gold IRA scams are common. The Securities and Exchange Commission regularly writes about gold IRA scams to keep investors abreast of the risk factors. Even Hollywood has come out with several movies revolving around scams and scammers, yet investors continue to fall for such scams. The FBI and SEC track the number of scam cases, which have increased over the years, highlighting the need for education on how to identify scams and stay safe. Hundreds, if not thousands, of fraud related cases are filed every year, even though people are now waking up to the risks.
You have to keep in mind that scams are a reality. Whenever you’re making an investment or any decision involving money, you run the risk of being scammed. It’s not only common in gold IRA investing, but in other areas of investment as well.
Let’s talk about gold IRA scams. With experts predicting another financial and economic crisis, thanks to changing policies and increasing national debt, more and more people are expected to turn to gold, which they perceive as a safe haven investment option. While a growth in demand for gold is a good thing, that increase in demand may also result in an increase in scams.
Technically, nobody is safe or immune to these scams unless they have the right knowledge. You can be scammed by anyone, ranging from bullion companies looking at making profits by lying to investors to financial management institutions robbing you of your money. You need the secret formula to identify such scams and keep your hard earned money safe. And experts at Augusta Precious Metals have created this Augusta Precious Metals scam guide for you.
Gold IRA: Terms You Need to Know
Before we move ahead with our Augusta Precious Metals scam guide, we’d like you to have a look at a few words commonly used in the industry. You must be aware of these terms and what they mean to be able to speak to a trader and understand IRAs better.
Let’s have a look:
Precious Metals IRA: It is a self-directed IRA where you can invest in gold and other approved precious metals. If a precious metals IRA contains gold as a primary investment, it is called a gold IRA. Only approved metals can be invested in an IRA.
Appreciation and Depreciation: Appreciation is an increase in an asset’s value, and depreciation is a decrease. For investors, an asset benefits when it appreciates. Gold prices depend on a number of factors, and are expected to increase in the near future, which indicates it may be the right time to invest in gold. Appreciation and depreciation is generally counted in percentages. For example, if gold is trading at $1,000, a 10% increase would cause the price to go to $1,100.
Historic Coins: As the name suggests, these are coins that were made before 1933. Many companies sell historic coins on their website under the name ‘Pre-1933’ coins.
Karats: The measurement unit for precious metals like gold. 24-karat gold is considered the best, however you will mostly find 22-karat gold when you step out to purchase the yellow metal. This is mainly because a mixed down metal is more durable than pure 24-karat gold.
Mark-up: In simple words, mark-up is basically your dealer’s profit and the difference between the wholesale and retail value.
Liquidity: Liquidity defines how easily an asset can be converted into cash, i.e: get sold. Assets that are more in demand are more liquid than assets that are not very much in demand as it takes time to find a buyer for an asset that doesn’t have many takers. Gold is considered one of the most liquid assets and can be converted into cash without any trouble.
Mint State: Tells the quality of coin you buy. It ranges from MS-61 to MS-70.
Numismatic Coins: These coins cannot be held in an IRA and can be used for other purposes such as gifts. They are valued based on factors such as their mint date and rarity and not the metal’s actual value.
Spread: This is a term you must know to be able to buy your gold at the right place. Your dealer’s spread tells you how much profit the dealer is making as it tells the difference between their buying and selling price. You should look for dealers with a low spread to ensure you buy gold and other metals at good prices.
Spot Price: This is the price the wholesaler pays for the precious metal. The spot price can help you find markup which would allow you to make an educated move.
These are some of the terms you will hear or read when you learn about Gold IRA and gold IRA scams. Not being aware of these industry terms would put you in a risky position as sellers can then lie to you or cause confusion. However, if you’re aware of these terms you will understand all statements clearly and know what a sentence means.
Gold IRA Scams: Why Do They Exist?
There are only two reasons why scams exist.
There isn’t much you can do about people with malicious intentions, but what you can do is learn about these scams and educate yourself on ways to protect your investments.
When we say there are a large number of scams out there, we don’t mean everyone’s a scam. But there are going to be some bad ones among the good ones. You just need the eye (knowledge) to tell bad apart from good. However, this is easier said than done.
These scams do not always look like scams. They are often in the shape of investment agencies trying to profit in a dirty manner. In order to make high profits, they will give you wrong suggestions. All these people think of are their own profit and not the client’s benefit. However, we at Augusta Precious Metals put our clients first. We do not only have the highest quality of products, but we also have an experienced team to answer all your investment related questions in a detailed and professional manner. We like our clients to be well-informed and have also prepared a detailed guide on ‘gold IRA investment’ to help you understand everything about gold IRAs.
Without much ado, let’s have a look at how to stay away from gold IRA scams:
What the SEC Says
According to the government (as seen in these SEC reports), self-directed IRAs play a major role in this increasing number of fraud cases. However, this doesn’t mean all self-directed IRAs are scams. In fact, self-directed IRAs are great for many people, which is why so many people prefer to invest in a self-directed IRA. Sadly many do so without doing proper research.
Some believe that the trend to invest in a self-directed IRA is due to a falling economy. The job market is tough and people are jumping from one job to another, resulting in more 401(k) rollovers. It’s understandable why someone would want a unified investment as it offers more clarity and better control. When you rollover your multiple retirement accounts into one big investment, you usually turn to self-directed IRAs. And this is exactly where the problem begins.
Do not question your decision to go for a self-directed IRA. We think this is the best move you would make for your investment, but never make such a decision in haste.
What makes a self-directed IRA special is the control factor. You are in full control of your IRA, which provides you with more investment options than usual. However, it is the availability of more options and a lack of knowledge and information which results in confusion, and that is what these scams thrive on. The scam would not become apparent until it’s too late, since you’re not aware of what you’re dealing with or you don’t have enough knowledge. So how do these sellers fool people?
They will get you excited by creating false stories. They will show you incorrect figures and predictions. Such false claims can get you excited about the investment and you may end up making wrong investment decisions.
They will focus more on rumors and hype and less on actual figures and facts. Next, they will entice you by sending you glossy promotional materials and pushing you to invest by painting a false picture. These offers look too tempting to let go, and most investors are too late to find the truth.
There’s no denying the fact that self-directed IRAs are good, and gold is on the rise, but any company that inflates figures or lies to you is not a company you should do business with. Above all, the problem arises when you find out that not just the figures, but even the company was not authentic. You do not find actual transaction history or documents related to the transaction, and realize you’ve been scammed. It may sound unbelievable on paper, but thousands of such cases are filed every year. Unfortunately, it is often very difficult for people to get their money back.
In some cases, these scams also use the now infamous bait-and-switch technique. You are led to believe that you’ll be buying physical gold, but all you end up with is gold certificates. And in most cases it’s too late by the time you realize this.
These cases are reported in high numbers. Here are some tips on how to prevent gold IRA scams:
Choose a Trustworthy Custodian
You need a custodian in order to have a self-directed IRA. Custodians are approved companies that handle your account. It is important that you pick a reliable custodian, someone who is established and responsive. Your custodian will not make your investment decisions, but will facilitate your decisions.
To be safe, you must make sure to pick a custodian who has been in the business for a good period of time and has a good history. You can find this information by researching online. A conversation with the company may also provide you with a lot of insights that can help you gauge a company’s reliability.
However, make sure to not make the mistake of relying only on your custodian. At the end of the day, it is your money and you make all the important decisions, based on your own research.
Don’t Entertain Unsolicited Offers
Unsolicited offers to buy gold are guests your shouldn’t let enter your house because you know they’ll be leaving with a lot more. It’s common to receive emails highlighting the advantages of gold investment, pushing you to buy gold showing its benefits. Even if the information provided is true, you shouldn't blindly jump on this opportunity and make an investment unless you are sure of the company and the information found in the email.
You can run a background search by checking the company’s official website, rating and third-party sites that give you information on customer reviews and on fraud.
Buy Gold from The Right Seller
Look for accredited gold sellers and nobody else when it is time to buy gold for your gold IRA. For example, we are an accredited business with an A+ rating and have a great reputation out there. Businesses that are accredited generally do not indulge in scams, as they have a lot on the line. You can find this information easily on the website as most sellers would gladly flaunt their accredited status. However, don’t just take their word, make sure you validate the credentials they claim to have.
Do Not Make Emotional Decisions
It is important to not let emotions control you. Always make rational investment decisions. You must check everything from a company’s background to your custodian’s details. In addition to this, make sure the gold you’re purchasing is approved and authentic as well.
These simple tips will help you stay away from gold IRA scams. Augusta Precious Metals can tell you all about gold IRA scams and help you make the right decision. We also would like you to check out our recent press release on the same topic.
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