(VIDEO) 1-15 Bad Reasons to Buy Gold and Silver

What are the warning signs of a misleading gold or silver sales pitch? Augusta Precious Metals’ Director of Education, Devlyn Steele, examines 15 reasons not to rush into a precious metals purchase, including fear-based marketing, guaranteed-return claims, misleading coin promotions, and pressure to sell other investments.

What Should You Know Before Buying Gold and Silver?

I’m Devlyn Steele, Director of Education at Augusta Precious Metals. I’ve recently been made aware of the practices of some companies in the gold and silver industry, stoking, in my opinion, false fears to push people to buy gold and silver. Today, I want to share what I believe to be bad reasons to buy gold and silver.

Can Banks Take Your Deposits?

Bad reason number one: the banks are going to take all your money away. It is true that in response to the 2008 economic crisis, on July 21st, 2010, then-President Obama signed the Dodd-Frank Reform Act, the broadest bill giving power to the regulators over the banks and financial institutions ever put in place.

It is true that in Article 1, it provides regulators to deem some banks and financial institutions too big to fail, and it is true that Article 2 provides for regulators to enact a bail-in that allows banks to convert customer deposits into equity for the purposes of increasing capital requirements. So yes, if the banking system fails again, they can replace your cash deposits with equity in the bank to shore up capital requirements.

However, I believe that the likelihood of the banking system failing again right now is extremely low. In my opinion, the recent actions of the Fed to support the economy through QE make the bail-in scenario nearly impossible. No one can tell you what will happen. My thought is, if you get a call to buy gold because the banks are going to take your money away, hang up.

Should You Buy Gold Because the Stock Market Might Crash?

Bad reason number two: the market is going to crash. No one has a crystal ball and can tell you whether the stock market is going to go up or down. It is true that there have been times historically when markets corrected, gold and silver rose. It is also true during the housing bubble pop that led to a market correction that gold rose 240 percent and silver 500 percent from 2008 to 2011.

I’m sure that many of you are hearing a lot of alphabet economics right now: V’s, U’s, W’s, K’s, L’s, and so on. Is there a theoretical risk of a market drop given the political environment right now? Of course there is, but there is a chance that markets could continue to rise or show no significant change in the near term.

Anyone telling you to pull out of the stock market and buy gold and silver is just trying to scare you and probably violating federal securities laws. The bottom line is, don’t let anyone scare you. You don’t need to be scared of stocks to buy gold and silver.

Can Anyone Guarantee Profits From Gold and Silver?

Bad reason number three: guaranteed to make money. I know this might sound ridiculous, and yet it’s actually true. There are salespeople who guarantee a profit on your gold and silver purchases. This explanation is going to be short. Nobody can guarantee a profit in any asset in any market. If someone calls you up and guarantees you a profit, hang up.

Should You Buy Gold for Short-Term Profits?

Bad reason number four: short-term profits. This is my general opinion about taking a position in gold and silver. Gold and silver should be purchased for the long term. That is why they are used by many people to stabilize retirement savings.

Can Gold and Silver Provide Portfolio Income?

Bad reason number five: income from your portfolio. Gold and silver do not pay you dividends. If you’re living off the income from your savings, you probably shouldn’t invest in gold and silver.

Should You Buy Gold Based on Price Predictions?

Bad reason number six: price predictions. There are endless price predictions in all markets on all assets based on endless factors. Price predictions are opinions and not guaranteed. There are those who have a history of making better price predictions based on data than others. However, all predictions, including mine, are just that: predictions. But here are two that I like.

Bank of America thinks gold is going to $3,000 in 18 months, and Nick Barisheff thinks $10,000 is down the road, as stated in his book, Ten Thousand Dollar Gold book. I’m at $5,000 in 36 months. Do your own research. Make a move into gold and silver if you feel it’s right for you, not based on anyone else’s predictions alone.

How Can Fear-Based Sales Tactics Affect Your Decision?

Bad reason number seven: stoking fear. Listen, what to avoid is anyone trying to get you to make a decision based on fear. You don’t need to be fearful to buy gold and silver. There are many more good reasons to buy physical gold and silver that are happening right now.

Are Free Gold and Silver Promotions Really Free?

Bad reason number eight: free gold and silver. Let’s discuss getting free silver. Does that sound good, getting free silver? Up to $5,000 in free silver sounds good to me. Or does it? I have seen extraordinary offers on TV and on the internet where you can get up to $5,000 in free silver. You know the old adage: if it’s too good to be true, well, you know the rest.

Can you imagine your banker telling you that they will add $5,000 to your account when you open a new account? Of course not. Listen, there are reasonable gift incentives, and then there are outrageous gift incentives that simply don’t make sense.

How Do Dealers Appeal to Greed?

Bad reason number nine: greed. We’re all naturally a little greedy. We hate to admit it, but it’s true. We all want to make money. The problem is some people might try and appeal to your greed in order to get you to make decisions you wouldn’t normally make. They paint a picture that you’re going to make all of this money if you act today. Here’s the thing that many people don’t understand: there’s no such thing as a guaranteed profit.

Don’t let anyone appeal to your greed. When you hear someone doing this, let the warning bells go off and back away.

Should Limited-Time Offers Rush Your Decision?

Bad reason number 10: ticking clock. Listen, we’ve all seen those TV ads where the sale is ending at midnight or the sale’s ending after this weekend. Get out and buy, get out and buy. The idea is to get you to do just one thing: act now. Otherwise, you’re going to lose an opportunity. You’re going to lose a special limited-time offer. You should be buying gold and silver for the long term.

When looking at using your retirement account or other funds, you have to make sure that gold and silver is right for you. There’s no ticking time clock. Make the decisions that are best for you, and then the clock will work for you.

What Does Bad-Mouthing Competitors Tell You?

Bad reason number 11: bad-mouthing. What do I mean by bad-mouthing? Well, when you speak to certain companies out there, the way that they try to get you to buy from them is telling you how bad other companies are. I always tell people that my food doesn’t taste good because other food tastes bad. It either tastes good or doesn’t. Either there’s a good reason to do business with a company or there isn’t.

As soon as I hear someone bad-mouthing, the hairs in the back of my neck go up, and I know I am talking to the wrong company.

How Can You Recognize High-Pressure Sales Tactics?

Bad reason number 12: pressure. We’ve spent a lot of time talking about the bad reasons to buy gold and silver, and there are probably many, many more. In the end, ultimately, the main bad reason to buy anything is pressure. All of these reasons are designed to get you to act quickly without thinking about them and to get you to move forward without doing your due diligence.

Should Confiscation Fears Determine Which Gold Coins You Buy?

Bad reason number 13: government recall of gold. Some gold companies are stoking the fear that government might recall or confiscate gold from Americans. Here’s what they do: they get you on the phone to complete your transaction, and then they try to scare you to choose certain coins that they claim won’t be confiscatable. They essentially say, don’t worry, this coin is different and the government can’t take it. There are actually two things that we want you to know about this.

First, our position is that no one can say whether or how the government might recall privately owned gold in the future or prohibit gold ownership in any way. We think this is very unlikely. Second, no one knows which kinds of coins might or might not ever be deemed confiscatable. So choosing certain coins out of fear to avoid government confiscation of gold is a bad reason to buy them.

If you do this, you might end up with coins that are not the best choice for you. To summarize, never buy coins because someone tries to make you afraid of government confiscation and tries to tell you certain coins will be exempt. They’re just trying to use fear to get you to buy what they want you to buy.

Do Non-Reportable Gold Coins Mean Tax-Free Profits?

Bad reason number 14: non-reportable coins. Some companies out there will tell you that certain gold and silver coins are non-reportable. They insinuate or just flat out tell you that you won’t get a 1099 for your metals, meaning you won’t have to pay taxes. When a gold provider pitches this and tries to get you to buy, be careful. The truth is, you certainly do have to pay taxes on any coins you sell and make a profit on.

Yes, it is true that the seller doesn’t have to report certain coin sales, but you still have to pay your taxes. A gold company with integrity will make this clear. To summarize, never buy coins because someone tells you that they’re non-reportable and hints that you won’t have to pay taxes. This is flat-out not true.

Should Gold Dealers Tell You Which Investments to Sell?

Bad reason number 15: investment advice. We’ve been hearing about gold companies that act as if they are licensed investment advisors. They ask you to tell them about investments that you currently have and then try to get you to sell them to buy precious metals. Some even tell you specifically which assets you should sell to go into gold and silver. This may include stocks, bonds, annuities, and other investments, including your hard-earned retirement accounts.

This is not acceptable because gold dealers are not licensed investment advisors. If you’ve decided on your own that you want to buy precious metals, then a gold dealer can help facilitate the process of buying gold and silver. So here’s a warning: if you speak with a gold company that advises you that the market is about to crash and you should sell your stocks, stop. Beware of this type of pressure from any precious metals provider.

A gold company representative is not qualified to give you investment advice, and it is illegal. The good news is there are tons of good reasons to buy physical gold and silver. I suggest you learn more about the good reasons to buy gold and silver by studying one of Augusta Precious Metals’ guides, or even better, sign up for an Augusta one-on-one web conference, where we make economics simple.