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Educational Consumer Tips

What You Need to Know about Silver/Gold Investments

Author: Better Business Bureau
Category: Finance

Many investors turn to precious metals such as silver and gold as a means to build wealth. As with any investment, however, there are pros and cons.

The Federal Trade Commission advises consumers to consider these universal truths:

  • The price of gold fluctuates over time. There is no guarantee that gold will increase – or even maintain – its value.

  • The prices coin dealers, banks, brokerage firms and precious metals dealers charge for gold products, such as bullion and coins, are almost always higher than the value of the gold the products contain. So it's wise to compare prices before making a purchase.

  • Some sellers say that the government may confiscate gold. Others say that "reportable" transactions lead to confiscation. Yet other sellers claim that modern bullion coins produced by the U.S. Mint are subject to confiscation while historic or collectible coins aren't. These claims sometimes lead people to buy historic coins at prices that exceed their value. No current federal law or Treasury Department regulation supports any of these claims.

Investigate Before You Invest

Whether you buy gold stocks and funds, bullion and bullion coins, or collectible coins, BBB® and the FTC advise doing your homework:

  • Check out the seller with and by entering the company's name in a search engine online, even if you have done business with them in the past. Read about other people's experiences with the company. Try to communicate offline if possible to clarify any details. In addition, contact your state Attorney General . This kind of research is prudent, although it isn't fool-proof: It may be too soon for someone to realize they've been defrauded or to have lodged a complaint with the authorities.

  • Consult with a reputable dealer or financial adviser you trust who has specialized knowledge.

  • If buying bullion coins or collectible coins, ask for the coin's melt value – the basic intrinsic bullion value of a coin if it were melted and sold. The melt value for virtually all bullion coins and collectible coins is widely available.

  • Get an independent appraisal of the specific gold product you're considering. The seller's appraisal might be inflated.

  • Consider additional costs. You may need to buy insurance, a safe deposit box or rent offsite storage to safeguard bullion. These costs will cut into the investment potential of bullion.

  • Some sellers deliver bullion or bars to a secured facility rather than to a consumer. When you buy metals without taking delivery, take extra precautions to ensure that the metal exists, is of the quality described, and is properly insured.

  • Walk away from sales pitches that minimize risk or sales representatives who claim that risk disclosures are mere formalities. Reputable sales reps are upfront about the risk of particular investments. Always get a receipt for your transaction and get delivery times of your purchase inwriting.

  • Refuse to "act now." Any sales pitch that urges you to buy immediately is a signal to walk away and hold on to your money.