All they want is a small percentage of the deal. Usually, the seller will demand some form of good faith deposit from you before the deal is concluded and if you are dumb enough to pay, this will be the last you will see of your money.
While these are outright scams that can end up costing buyers millions of dollars, there is another form of gold scam to avoid. In South Africa they advertise Krugerrands at highly competitive prices to attract customers.
But, as soon as a customer walks into their showroom, or shops, the dealer tries to persuade the buyer into buying a limited edition or commemorative medallion that is not a rare coin.
It is simply a gold medallion that has been made by some mint on behalf of the company promoting them. Perhaps one day they may become rare but to tell investors that they will become worth a fortune in years to come simply because of the limited number minted is completely false.
But, since these medallions have massive margins, the company promoting these medallions as well their brokers selling them stand to make themselves some good money. In South Africa, many individuals are beguiled into believing that the various Mandela medallions are rare coins which they are not. The South African Gold Coin Exchange, the official distributor set the prices of the new issues they regularly introduce to the market.
They often infer that due to the limited mintage, demand exceeds the supply which bodes very, very well for future growth. At the beginning of February they introduced a 5oz Bimetal 2oz gold: They even offered clients a Prelaunch Price of R79 At the time, the Rand price of gold was around R13, per ounce and the silver price was around R an ounce.
So, the intrinsic value of this item was around R28, And, yes, there are manufacturing costs, marketing costs, and other costs involved, but at the end of the day, there is one huge margin in these medallions. A numismatic coin is a collector coin that has value in excess of its metal content because it is historical or rare. But, you cannot create rarity or claim an item to be rare simply because you restrict the quantity being minted.
Frankly, I do not see any investor value in these medallions. However, if you are a collector, then this is a different matter. A collector might purchase a rare coin for many multiples of the value of the metal it contains, but for the average investor numismatic coins and medallions are on a par with rare stamps, art, ceramics etc.
GOLD AND DIAMONDS SCAM LIST
You must also bear in mind that in most instances it is not all that easy to liquidate numismatic coins and in contrast most bullion coins are easy to sell anywhere in the world. My message is very simple. If a deal looks too good to believe, it probably is worse than you can imagine, and when adding precious metals to your investment portfolio stick with bullion bars and coins. About the author David Levenstein is a leading expert on investing in precious metals.