These days, economic uncertainty has led many to invest in precious metals. Unfortunately, because most ordinary consumers don't really know how to buy gold, they're left susceptible to scams. Before you give your hard-earned cash to just any company, learn what the Federal Trade Commission is saying about this type of investment strategy.
How people usually do it
According to the FTC, investors usually invest in precious metals using one of two strategies. While some buy stocks and funds from mining or brokerage firms, others choose to purchase bullion and/or collectible coins. According to the agency, in most cases, the value of bullion coins is usually based on the precious metal content and not the rarity of the item. On the other hand, collectible coins may have a market value exceeding the precious metal value if the item is scarce or in high demand.
To buy gold or not to buy gold
Many television commercials and online advertisements tout precious metals as a solid defense against economic uncertainly and inflation. According to the FTC, this may be a sound strategy for investors looking to diversify their portfolios. That said, there are all sorts of fear-based marketing campaigns attempting to scare consumers into trading their money for precious metals to protect themselves against a potential collapse of the American economy. Usually, this type of marketing is aimed at confusing consumers who aren't experienced investors. On the other hand, if you're interested in buying precious metals for the right reasons, the FTC does offer some valuable tips on what you should look for.
The FTC offers recommendations
According to the FTC, many companies don't deliver on their bold promises; and the agency advises consumers to do some research on each organization before investing. When buying bullion coins, investors are advised to ask what the melt value is for each one. Additionally, when buying from local dealers, consumers are urged to acquire independent appraisals before committing to a sale.
The FTC also encourages investors to consider any additional costs that might come with this type of investment. For instance, when deciding whether or not to buy gold, consumers should consider the price of a safety deposit box, theft insurance and any other expenses related to safeguarding the precious metals.
Finally, when evaluating any one individual company, investors are urged to be wary of those that use high-pressure sales tactics or that use phrases, such as "act now" or "for a limited time only." According to the FTC, consumers can contact their local consumer protection agency and state Attorney General to find out if there are any complaints associated with a particular company. The agency also urges investors to collect pre-sale risk disclosures and post-sale receipts for any potential purchase.