CAVEATS

These days there’s a lot of advertising on TV for gold. Oddly enough, most of these firms don’t really want you to buy the actual gold. They want you to buy something else. They would have you buy gold on margin (where you inevitably learn a painful lesson) or gold in a storage program (gold that doesn’t exist). Most often they would have you buy rare coins. The high price of rare gold coins means these coins have no relationship to gold.

Gold Eagles and other one-ounce gold bullion coins sell with a markup of 2% - 3%. Over the years a lot of companies have tried to sell gold as their main product at these low margins. All of them have failed. No company can survive with 2% margins. If you lowered the margins of every business in America to 2%, all would fail within a year or two.

You must be especially careful in the coin and bullion business where 90% of the dealers fail every decade. It’s particularly dangerous when prices get high and dealers have made some money. They often speculate, or go heavily on margin. I’m always amazed when I see someone sending money across the country to an unknown coin shop or Internet dealer who’s probably behind on his car payment. Over the years I’ve heard from hundreds of people who didn’t get their gold and silver. They asked for my help, but in most cases the dealer who stiffed them had no assets left.

A lot of companies also push hard to get you to buy products that are in their best interest to sell and not in your best interest to buy. They also convince people to switch silver and gold into high-priced rare coins which in themselves may be okay, but are not likely to outperform silver.

Years ago, we knew someone who went to a local coin dealer in Chicago and bought 100 Krugerrands. He and his wife drove home and parked in the garage. When they went into the house, the doorbell was ringing. They opened the door and a robber came in with a gun and took the Krugerrands. They had been followed home from the coin shop. This is another reason to avoid small dealers.

It’s particularly important to buy from somebody who will be there when you sell and who will give you a fair market price when you do. For thirty-five years we have always delivered what we sold and repurchased that same material when our customers wanted to sell. Our clients have made billions. I don’t think any other gold and silver dealer in America can say that.