With so much interest in the gold and silver market, most financial professionals are getting flooded with questions about how best to gain exposure to precious metals. Unfortunately, this has created a fertile market for dishonest firms with big advertising budgets.
Since many financial professionals have little experience purchasing and taking delivery of a commodity asset, here’s a little buying guide so you can help your clients avoid the major tricks and traps in the industry right now.
The Numismatic Bait and Switch
The most important concept for new gold and silver investors to understand is the difference between bullion coins and numismatic coins.
Bullion coins are those that derive their value almost entirely from their metal content. If a bullion gold coin is priced at $1,800 per ounce, it’s because it contains close to $1,800 per ounce worth of gold.
Numismatic coins derive their value from being rare or collectable. If a gold numismatic gold coin is priced at $3,600 per ounce, it probably still contains only $1,800 worth of gold; the rest is a premium for the coin’s aesthetic qualities.
If your client wants to invest in precious metals, he should be buying bullion coins or bars only. Numismatic coins are only for those looking to build a coin collection for sentimental or historical purposes.
The Confiscation Con
One of the main techniques a metals broker will use to switch customers from bullion to numismatics is to talk about President Roosevelt’s “confiscation” of gold—and then claim that only their coins are exempt. This is baloney.
The reality is that no gold was forcibly confiscated in the 1930s. However, to debunk this claim on its face, all you have to know is that almost all numismatic coins sold by scams dealers do not even qualify as “rare and unusual” under the terms of Roosevelt’s order. Most are simply old coins that were minted en masse by historic empires. They are genuinely old, but about as rare as a Members Only jacket.