Part 4 – Bait and Switch
If you’re not familiar with the bait and switch tactic used by some coin dealers, it typically starts with an offer that seems too good to be true. You may see an ad for bullion coins or bars at a price that is significantly lower than anywhere else or they’ll send you a coin for free (no obligation to buy).
Of course, claiming your free item provides them with your contact information. And if you call to purchase the low priced, advertised items, what typically happens is the salesperson on the phone starts steering you toward purchasing numismatic or collectible coins. They may even throw in some scare tactics, regaling you with stories from 1933 when the government made it illegal to own gold. They will assure you that if the government decides to do this again, they won’t be able to confiscate the coins they are going to sell you since they are dated prior to 1933.
Not only is the salesperson’s story not true, it doesn’t ring true either. If the government wanted to confiscate your gold, they wouldn’t care what the date is on the coin. Gold is gold. It all melts the same. What they don’t tell you is that the bullion coins you initially called about are typically priced anywhere from 2 to 5 percent over the spot price.
But the numismatic coins they are pushing you towards have very high premiums. Like older numismatic coins, modern collectibles like proof coins also have very high premiums that can range from 10 to 100 percent over spot depending on the mintage. What you’re paying for is their future collectible nature but that is entirely dependent on there being a future buyer who is willing to pay that high premium to buy the coin.
When the market is flooded with collectibles and when discretionary income among buyers is at an all-time low, those buy back premiums don’t exist. Therefore, dealers have all reduced their buy back bids on collectibles in the last few years down to unprecedented levels.
We want people to be aware of this because some dealers out there are still pressing people to buy high premium collectibles with the promise of a high future return. There is no guarantee and that future price depends on what is going on in the world, the market and the coin industry.
True story:
We had a client visit us recently to value some coins that he had purchased two years ago from a well-known dealer who advertises on TV. They were marketing a “limited mintage” bullion gold ¼ oz coin that was only available to purchase from them. The price they were charging for that coin two years ago was $720, a 50% premium per ounce over the spot gold price (then around $1,650). If he had purchased a ¼ oz Maple leaf coin instead, he would have paid around $475. If he were to try to sell that coin today, it would only be worth $656. Gold has gone up 59% since then, but he is still under water because of the extreme markup they charged him.
It gets worse: the dealer sold him 169 of those ¼ oz coins which means he overpaid by more than $41,000. He could have purchased an additional 24 ounces of gold at the time and with the 59% increase in the spot price of gold, he would have more than $65,000 today. Instead, he is still in a loss position. Gold will need to hit almost $2,900 per ounce before he can just break even on his investment.
This is another example of predatory practices that some dealers use to make high commissions on unsuspecting investors, often preying on elderly people or first-time buyers who don’t understand how the metals market works.
Once again, we strongly recommend doing more research before buying gold and silver. We always recommend focusing your investment in precious metals into low premium bullion coins and bars that trade close to the spot price. Paying up for collectible coins rarely pays off!
We are always here as a resource for questions. Our firm has a no pressure approach and no one here is a commissioned salesperson.
Please give us a call if you have any questions about pricing or what is the right product for you.
602-840-5500.
You can also email us at info@apmaz.com.
As we mentioned in our last three articles, we hope that you will consider sharing this email with a few people you know. Having this information could prevent first time buyers from being scammed by unscrupulous dealers.
Stay tuned for our next and last piece in this series – Part 5 – “If you don’t hold it, you don’t own it.”
All my best,
Courtney Svendsen
-Jerry Williams’ daughter and APM Inc. owner since 2013. Proudly taking over writing the news people need to know as it relates to precious metals.