Investments in commodities and precious metals can be made
indirectly through stocks, mutual funds, ETFs, or derivatives or people can
directly buy or sell the commodity or precious metal itself. Commodities may
include crude oil, coal, sugar, coffee beans, wheat and other goods. Precious metals are gold, silver or
platinum. Interest in precious metals
has increased in recent years as the price of gold and silver has reached all-time
highs. These commodities and gold are bought by investors primarily to hedge
against inflation, economic uncertainty, and foreign exchange risk, in the
belief that these metals, particularly gold, are repositories of absolute
value, whereas paper currencies and securities dominated in such currencies
have relative value and are vulnerable to loss.
The high value of gold and commodities lead to easy money for
scammers. It attracts more vigorously of
fraudulent activity. There are many
types of common tricks that are actually uncommon to ordinary people.
• Cash for
gold – With the rise in the value of gold due to the financial crisis, there
has been a surge in companies that will buy personal gold in exchange for cash,
or sell investments in gold bullion and
coins. Several of these have prolific marketing plans and high value
spokesmen, such as prior vice presidents.
Many of these companies are under investigation for a variety of
securities fraud claims, as well as laundering money for terrorist
organizations. Also given that ownership
is often not verified, many companies are considered to be receiving stolen
property, and multiple laws are under consideration on methods to curtail this.
• High-yield
investment programs – HYIPs are usually just pyramid schemes dressed up with no
real value underneath. Using gold in
their prospectus makes them seem more solid and trustworthy.
• Advance fee
fraud – Various emails circulate on the Internet for buyers or sellers of up to
10,000 metric tons of gold. This is more
gold than the US Federal Reserve owns. Often naive middlemen are drafted in as
hopeful brokers, and usually mention mythical terms like 'Swiss Procedure' or
'FCO' (Full Corporate Offer). The
end-game of these scams is unknown, but they probably just attempt to extract a
small 'validation' sum out of the innocent buyer/seller from their hope of
getting the big deal.
• Gold dust
sellers – This scam persuades an investor there is real gold with a trial
quantity, then eventually delivers brass filings or similar.
• Counterfeit
gold coins.
• Shares in fraudulent
mining companies with no gold reserves, or potential of finding gold.
• Gold Party
Scam-- Gold parties are typically held in people’s homes, at places of worship,
and at schools. The hook used to lure you in is the promise of cash for your
unwanted gold jewelry, coins, and other items. The buyer tests your gold and
pays you cash on the spot (based on the gold’s purity and weight). Sounds like
a good deal, right? WRONG!
New report shows an increase in investment fraud
scheme. If someone asks you to engage in
big investments and big payment up-front and you are unsure of their identity,
be very cautious. Be extra careful to
those people promising you a 20-25% result.
More often than not most promising deals are created just to attract
potential victims.
