There are several ways to buy gold: gold bullion, gold stocks, gold futures, and gold coins. Investors have often perceived gold as a “safe haven” in times of uncertainty. Evening and late night TV has numerous commercials aimed at members of the Great Generation to buy Gold Coins to protect their retirement.
Unfortunately, many have lost significant value of their investment in gold coins, after entering an investment they felt was safer than others in their portfolio.
While purchasing shares in a Gold Mining Company offers consumer protection under Securities Law; purchasing gold coins alone is not considered a security transaction.
While Gold Bullion is a traded commodity with a daily listed price based on weight, gold coins are subject to numerous variables that can affect price.
Lawsuits have been filed by elderly customers and their heirs against gold coin companies after those seniors took out home equity loans, or sold investments such as stocks, certificates of deposit, or bonds to fund purchases from advertisers.
Later they discovered that the local gold coin dealers were only offering 40% of the initial purchase price when attempts were made to sell the coins on the open market.
The markup from the companies selling the coins can be over 50% of the coin’s value.
Disclosures in the contracts could provide legal protection to the selling company via clauses with statements such as: “you could lose money if you have to sell these coins in the short run, say a year or two” and “longer holding periods, such as 5-10 years or more increase the chances a coin’s value can rise.”
Bottom line, be careful. Gold Coins purchased at 100% markup may not be the safe haven one expects and precious metal investing involves overall greater fluctuation and potential for losses.
This article is for informational purposes only and is not a complete summary of information needed to recommend any investment. Consult the appropriate professional to determine how this information applies to your unique situation.
About the Author: Charles Marsala is a Financial Advisor with Benchmark Investment Group with Securities offered through LPL Financial, a member FINRA/SIPC. He can be contacted at Charles.Marsala@lpl.com