When I attended Freedom Fest 2010 in Las Vegas last week, I found attendees far more interested in purchasing physical gold and silver than I have seen at prior Freedom Fests and other such conferences. The questions I was asked indicated that the people asking had been doing some research on the subject, not just vaguely “thinking about it.”
Perhaps the biggest obstacle for several people was not making the decision to acquire physical precious metals and rare coins, but instead they wanted to know who would be a good dealer to contact to conduct the transactions. Several of the attendees I talked with had already made some purchases, though they often said they felt uncomfortable about the particular dealer they dealt with. The number one complaint was that they felt pressure to be steered to a particular product, one which did not necessarily seem appropriate to their reasons for wanting to buy gold or silver.
My own company has been operating for almost 40 years and trades a sizable volume of both bullion-priced products and numismatic items. Our company stocks a broader product line than many of our national bullion competitors. We also have a strong emphasis on trying to serve the customers in a way that best suits the customer, rather than pushing what would be most profitable to my company. I am biased, but I think my company deserves to be considered by potential buyers.
However, I also know that there are other competitive dealers, so there are many options for customers. I consider that good for the customers as it prompts each of us to keep on our toes with product selection, quality, helpful, friendly, and fast service, and price.
I have also seen what might be described as the unattractive side of the business, where dealers seek to take advantage of novice customers to sell them unsuitable merchandise at prices that may not be competitive. To help new (and even experienced) traders in physical precious metals, I have recently written four commentaries posted at http://coinupdate.com listing some tips to find good dealers and warning signs of dealers to avoid.
My June 8 column titled “The Specter of ‘Gold Confiscation’ Is a Deceptive Marketing Gimmick Rather Than Reality!” and June 19 column titled “The Main Reason the US Government Is Unlikely To ‘Confiscate’ Gold, But the Legal Basis on Which It Could Theoretically Try To Do So” warns customers that about dealers pitching the acquisition of particular products to avoid the risk of “gold confiscation.” These essays try to offer the straight story so that readers will be able to tell when a coin dealer, in an effort to maximize profits for the dealer rather than the customer, is basically lying to them.
I followed up these commentaries with my July 8 discussion of “IRS and Government Reporting Requirements for Coin and Bullion Dealers”. This column tries to explain that there are a number of bullion transactions that do not call for any government reporting, contrary to what some dealers state when they are trying to steer customers toward numismatic coins (which are more profitable for the dealer).
Another warning sign about possible dealers to avoid are those that promote storing of purchases with the dealer who sells them, or at least with an affiliated company. Over the years, too many such companies have failed, including some with strong reputations, leaving their customers with little to nothing. I highly recommend taking prompt delivery of your purchases, for your own protection. If you really prefer to store them, you should set up your own storage account at a company that is independent. Further, for maximum protection, I advocate that you use segregated storage, where the exact items are set aside with your name on them. Goods in allocated storage may have the buyer’s name on them, but there is still a risk that the creditors of the storage company could have claims against those assets. Unallocated storage may be the least costly storage alternative, but it has almost no legal protection of the buyer should the storage company go bankrupt.
When comparing prices, it is important to ask for the total payment involved including any commissions, postage, or other charges so that you are really making honest comparisons. I am aware of some national competitors who quote very low sell prices but add a commission on top of the price of the merchandise. There are other dealers who quote an exceptionally high postage charge on top of an otherwise apparent bargain price.
There are also some national dealers who will refuse to confirm prices at the time of talking with a customer. Instead, the potential customer must already have delivered the physical goods to the dealer before locking in a price or have cleared funds on account before they can commit to a purchase. By engaging in these practices, it enables a dealer to have little risk of a transaction failing to consummate, thereby theoretically making it possible for the dealer to quote a slightly more competitive price. Unfortunately, such arrangements preclude customers from taking advantage of a sudden price jumps and drops. I won’t necessarily warn readers away from dealers who engage in such business practices, but rather just point out that this method of doing business is less customer-friendly.
On June 16, I posted a column of tips to help sellers of gold jewelry realize the highest possible prices for their items. Titled, “Thinking of Selling your Gold Jewelry? Watch Out for Gold Buying Tricks and Scams” it includes 14 ideas to use to the seller’s benefit. Many of these steps also apply if someone is trying to sell precious metals or numismatic coins. A 2009 survey done of the competition in my area showed that almost 80% of those who advertise to buy gold were offering prices lower than what Consumer Reports judged to be acceptable prices. In some instances, the on-line, hotel, and other local buyers were offering customers as much as 85% less than my own company offered for the exact same merchandise.
To make it easier, my company is assembling these four consumer protection essays into one collection. If you would prefer, you are welcome to send me an email at to request one of them and give your mailing address.
I am a coin dealer, and I am definitely seeking to earn more business. But I am also a 46-year coin collector and a consumer who wants to help those on the other side of transactions avoid instances where they get taken advantage of. Feel free to pass along this offer of copies of these articles to others that you know. This is an offer made as a public service. We are not assembling a mailing list to solicit business from my company. We will not call you (don’t even send your phone number) or ever mail you anything else. If you might have an interest in buying or selling with my company, you will have to initiate that contact.
A lot of our customers are now happy with the profits they are making by owning precious metals and rare coins. I’d like to see more happy owners, even if they never deal with my company, by helping them find a good dealer rather than see them fall for some of the misleading sales practices of some other companies. Happy trading.
Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes “Liberty’s Outlook,” a monthly newsletter covering rare coins and precious metals. Past issues can be found online at http://www.libertycoinservice.com/ Pat Heller is also the gold market commentator for Numismatic News. Past columns online at http://numismaster.com/ under “News & Articles”. His periodic radio interviews can be heard on WILS 1320 AM in Lansing, www.talkLansing.net, and on www.yourcontrarian.com.