Not Again! Wolves Loose in the Gold and Silver Market

by: Franklin Sanders

In 42 years selling gold and silver, I have seen frauds over and over. Now another California company, Regal Metals, has collapsed and the owner, Tyler Gallagher, has disappeared, taking most of his customers’ assets with him. Read the sad story here. ¹ Regal Metals especially promoted a Gold IRA and defrauded older, big ticket customers.

OTHER SCAMS

It isn’t only dealers who run off with investor’s money, but also the conmen and scammers who sell obscenely overpriced items to customers. Thirty years ago this was over-priced numismatic coins. Today is numismatic coins plus so-called “modern rarities.” Most are minted by the Perth Mint or the Royal Canadian mint in outlandish weights like 1.25 ounces for a silver coin. Although the salesmen present them as “rarities” there is no secondary market for them except at their bare bullion value.

The salesman assures the buyer that these overpriced items are “rare” and will rise faster than gold and silver, then sells them at incredible prices, as much as three times their silver or gold value. Clearly, gold and silver will never rise enough to pay back commissions and markups like that. These crooks are especially active selling IRAs to older people and widows. That’s better for them since the items will be buried in an IRA most people don’t keep up with.

These wolves feed on the ignorance and trusting naiveté of their customers. What saddens me most is that the victims are usually intelligent, solid, trusting people who merely don’t know anything about the gold and silver market. Unscrupulous conmen simply lie to them about what they are selling and their losses amount to hundreds of thousands of dollars.

THREE CASES

In the last four months I have come across three cases of this modern rarity scam.

CASE #1

In 2015 a widow had invested in an IRA through a California company. The company sold her obscure Canadian one quarter ounce gold Artic Fox coins at 206% of their gold value. For every $1 worth of gold, she paid $2.06. They also sold her Canadian half-ounce silver Eagles at 295% of their gold value, and a 50 gram gold Combi bar at only 123% of its gold value. Although gold has gained 60% and silver 37% since she bought this, her $380,000 investment has lost $52,209 or 19%.

CASE # 2

In December 2022 a retired couple bought from a California company one-tenth oz gold Britannias, one-quarter ounce gold Australian Spotted Eagle Ray coins and 1.5 ounce Eagle Ray silver coins. For the gold coins the company charged them 160% and 167% of the gold value. The silver they sold them at 184% and 201% of their silver value. Marking to market at $1,808.80 gold and $20.81 silver, their $438,000 investment has lost $177,654 or 41% since last December.

CASE #3

In 2021 a retired couple bought from a California company Canadian 1.25 ounce silver Canadian eagles at 320% of their silver value. Their $105,358 investment has lost $79,013 or 75%.

HOW TO PROTECT YOURSELF

I have warned and will keep warning y’all about the dangers of the gold and silver business. Here are a few rules for filtering crooks out of your life.

1. You must know your dealer. Check with the BBB in their area, and the consumer protection division of the state attorney general’s office. Get business references; no dealer in the world will or should give you customer references. How long have they been in business?

2. Location, location. I know that there are many fine, honest gold and silver dealers in California and Florida, but most of the frauds and crooks set up in those states. Why, I don’t know, and I am certainly not tarring every dealer in those states with the same brush. I have dealer friends in those states.

3. Celebrity endorsements. If the company advertises on TV using celebrity endorsements or on conservative talk shows, watch out! These endorsements are the kiss of death. That advertising is very expensive and the low commission rates most legitimate dealers charge (3.5% to 1% over wholesale) just can’t support that expense. The advertisers make it up by grossly overcharging.

4. Does it pass the stupid test? Do their recommendations make sense? Are they recommending high premium specialty “modern rarities” they claim will outperform simple gold and silver bullion products? Does it pass the Stupid Test? Divide the cost of what they are selling by the content. That tells you cost per ounce. Then divide by the spot gold or silver price to find the percentage premium. If they are trying to sell you something with a premium greater than 10 percent (in a very few cases 15%) over spot gold or silver, run, don’t walk. Check prices on the same items from other dealers.

Warning: It may not be easy to figure what price per ounce they are charging and they plan it that way. They use odd sizes like 1.25 oz or 1.5 ounce silver coins packed in oddly numbered lots with one group price. This is the equivalent of stating speed in furlongs per fortnight. Divide cost by gold or silver content for cost per ounce. Persevere until you get the cost per ounce, and then divide that by spot gold or silver to determine what percentage premium over spot you are paying.

5. Lowest prices anywhere. Another conman warning sign: selling coins cheaper than anyone else. A reader writes, “I fell into that trap long before I became aware of you. I tested out a seller, Hannes Tulving ² and bought a few Austrian Coronas for essentially spot. I received them, bought a few more, and received them. Then I bought $25,000 more. They never arrived despite my numerous entreaties over weeks and finally my threats to go to the authorities, which I eventually did. The last I heard Hannes Tulving was in federal prison. I did get a settlement from the court for about 20 percent of my investment.”

This is an old trick. In 1980 Krugerrand Corporation in Miami took out full page Wall Steet Journal ads offering “Krugerrands at spot” when they were commonly selling for 6.5% over spot. When the Feds finally opened their safe shown in the ad pictures, they were wooden bars painted silver or gold.

The coins aren’t cheap if you never get delivery of them.

6. No high pressure. If the salesman pressures you day after day with a high pressure sales talk and a lot of slick chatter to explain away apparent difficulties with his product, find another dealer instead who will respect you and give you sufficient time and information to make a well-informed, prudent decision.

7. Avoid management, leasing, and trading schemes. Never store your metals with the dealer you buy them from. Avoid any trading scheme that promises to make your metals grow by trading, leasing, or managing them as long as you leave them with the trader. These schemes are nearly always simple Ponzi schemes. Latest one of these to blow up is Argent Asset Group LLC and First State Depository, LLC. ³

8 Religion. Sad to say, crooks often traffic on Christianity, assuring you theirs is a “Christian company.” Truth is, if they are Christians, they won’t need to tell you about it or wear religious lapel pins. Their honesty and integrity will show it,

There are wolves in the market: beware! — F. Sanders

1 The Great Gatsby of Gold Took Their Millions—and Vanished

An $18 million scam. In 2016 Tulves was sentenced to 30 months in Federal prison and order to pay $10.8 million in fines and restitution.

2 Coin dealer jailed, but victims of his nearly $18 million scam may not get their money back

3 CFTC brings fraud charges against Argent Asset Group, First State Depository Company