The Better Business Bureau (BBB) urges consumers to use caution when approached by businesses that sell investments in precious metals and other commodities. Some unscrupulous companies advertise on radio, television or Internet Web sites, or make telephone "cold calls" to promote the purchase of precious metals such as gold, silver and platinum. Their claim is that customers can double or triple their initial investment in just two or three months, with little risk.
According to the U.S. Commodity Futures Trading Commission (CFTC), these fraudulent companies offer to purchase metal for the customer through a financing agreement. The customer is asked to pay a small percentage of the total purchase price. The company often charges customers a commission for the purchase transaction, a loan origination fee, an interest charge on the remaining balance (which accrues over time), and fees relating to storage and shipping of the metal the company pretends to purchase.
Be skeptical if the commodity sales pitch:
- Claims their ability to predict prices or the direction of the metals markets;
- Minimizes the degree of investment risk involved in metals investments;
- Fraudulently fails to disclose how much the price of metal must go up for the customer to break even (let alone profit), since hefty finance and storage fees and commissions are deducted from the customer's account before any profit accrues;
- Falsely claims to purchase and store metal, when the company does not actually do so.
- Charges phony "/storage" and "interest" fees.
If you are solicited by a company to purchase commodities, the BBB and the CFTC, suggest you:
- Avoid any company that predicts or guarantees large profits with little or no financial risk.
- Be wary of high-pressure tactics to convince you to deliver cash immediately to the firm, via overnight delivery companies, the Internet, or otherwise.
- Be skeptical about unsolicited phone calls about investments from offshore salespersons or companies with which you are unfamiliar.
Prior to purchasing, be sure to check out the company. Contact the BBB (www.bbb.org), CFTC (www.cftc.gov) or other authorities, including your state's securities commissioner (www.nasaa.org), Attorney General's consumer protection bureau (www.naag.org) and the National Futures Association (www.nfa.futures.org).
Obtain as much information as you can about the company and verify that data. Check the company's materials with someone whose financial advice you trust. If in doubt, do not invest. Without solid information about the company, the salesperson, and the investment, you should not risk your money.