What follows is my opinion. Nothing more, nothing less. I don’t want the gold industry to come after me.
As an advisor for twenty years, I’ve seen a lot of terrible investments. If you can invest in it, I’ve investigated it. At this point in my career, I rarely see new products come across my desk.
In my opinion, I have officially found the worst investment I have ever witnessed in my career. I have no idea how this is even legal.
Have you ever seen commercials or heard radio commercials or seen internet ads about buying gold?
“You can put your gold into your IRA,” they excitedly inform you.
“With all the uncertainty in the world right now, gold gives you a hedge against the stock market,” they exclaim.
“When the world descends into anarchy and ruin where money is worthless, gold will be the only thing of value,” they warn.
So how does this really work? Someone who actually purchased one of these investments came into my office and shared the statements. I finally get it.
I’ve always been very suspicious of the idea. Why would some famous (past-his-prime) actor be promoting these kinds of products on TV and the radio … endlessly? The idea of using physical gold in your portfolios is everywhere.
Here’s the deal…
Let’s say Susan and Larry buy $100,000 worth of gold. They are not technically buying gold, but they are buying “rare” coins made of gold. Some examples would be the Gold American Eagle Coin or the Patriot Gold 5th Anniversary Coin.
The idea is that by owning these coins you would have the flexibility of turning them into cash whenever needed. Who is going to walk around with a gold bar anyway? Coins make more sense, right?
Now, understand, it’s not like the coins are being sent to your house. They are usually held at the company from which you purchased them. Which seems to defeat the whole purpose of the safety of gold-in-hand, but I digress…
Now after Susan and Larry purchase their $100,000 in gold they excitedly wait for the value to increase. In fact, it does increase. During the first month alone gold increases by a whopping 5 percent.
They look forward to their statement so they can see all their gains.
At the end of the month, they receive their statement and are a bit confused. It shows that their investment is now worth $60,000. “There must be a mistake. We must be reading this wrong.”
They start reading the documents. They see pages and pages of tiny print, full of terminology they do not understand. So they bring in the paperwork to their friendly, local financial advisor (me).
Why did it reduce in value? After reviewing the statement, I am flabbergasted. The $60,000 value is accurate. How?
These big companies are buying the gold wholesale which means they are basically getting the gold at the spot price When they sell you the gold, they sell it at retail. This “spread” can be as much as 17 to 33%.
The coins Susan and Larry purchased were worth $100,000. Or at least, the way the coins were originally “appraised” were worth $100,000. This is the problem.
Real institutional gold investors have no interest in coins. They are interested in one thing: the weight of the gold.
The statement Susan and Larry were viewing, was accurate. If the coins were melted down into pure gold, the value was….$57,000 (plus the $3000 increase from the gold price appreciation).
It only gets worse. Who do you sell these gold coins to? Once you have come to terms with the fact that you got ripped off, how do you get rid of them?
Maybe the company who sold you the coins will buy them back. But there is nothing saying that they need to give you full market value for the coins. The value on the statement becomes even more useless.
But since you actually own the gold, you are able to go out on the open market and sell it anywhere right?
Let’s take that path to its logical conclusion. You go to some gold purchaser in Tampa, coins in hand. The buyer is thinking, “These people have no idea what they are doing. They are stuck and they want to get rid of this stuff. I’m going to lowball them. Big time.”
So that’s it.
- Gold coins are not the same as gold.
- Real gold investors care about the weight of the gold, not the coin.
- The fees around these investments are insane.
- Investing in gold coins almost always ends up a loss.
Here’s the dirtiest trick of them all. These gold sellers are incredibly smart. The industry is so profitable, they will do anything. Gold sellers have taken over Google searches. Go ahead. Search for “buying gold.” There will, of course, be lots of ads.
These companies understand search engines so well that they flood the internet with positive articles about gold. I couldn’t find anything about the secrets I’m revealing to you.
How scary is that? They have found a way to bury negative search results so deep that no one can find them. Not even me.
Unsuspecting people are doing their research from seemingly reputable sites, only to be completely conned.
In my opinion, this is the worst, most underhanded investment opportunity I have witnessed in twenty years. If anyone has any gold they want to sell me, I’ll be happy to buy it at 25 percent of its value. Give me a call.