Tuesday, September 19th, 2017 MST

How to select the right gold/silver dealer

Summary

  • All gold/silver dealers are not equal
  • Bankruptcies and over-priced coins
  • Do not choose your gold/silver dealer on price alone
  • Techniques that telemarketers use
  • How committed is the dealer to hard money?

All gold dealers are not equal

First-time gold/silver buyers often make the mistake of thinking that all gold-silver dealers are the same. Nothing could be further from the truth.

Buyers should thoroughly research any dealer they are considering sending money to because the gold/silver industry is not regulated; persons with multiple bankruptcies or even criminal convictions have some of the best looking websites–and the smoothest talking brokers.

There are a couple of ways to find out more about the dealers that you’re considering. One, go to their website and click on “About US,” which should give the principals behind the company. Then google the names followed by the words convictions, bankruptcies, and lawsuits.

A point in case: Tulving Company for years offered some of the lowest prices on the Internet. Unfortunately, investors lost $40 million when Tulving Company filed for bankruptcy in 2014. Investors who chose to go with Tulving’s low prices instead of companies with solid reputations lost $40 million. What good did it do those investors to “save” $2 an ounce on their gold purchases when they didn’t get their gold — or their money back?

Had investors googled Hannes Tulving bankruptcies before sending money, they would have found an LA Times article about prior Tulving bankruptcies in 1991.

Another way is the check reviews at the Better Business Bureau (BBB) for the area in which they are domiciled, remembering that one complaint probably means that another ten unsatisfied clients didn’t take the time to post negative reviews.

Investors have lost more than $100 million due to bankruptcies and possibly more in outright frauds over the last four decades. During this period, CMI Gold & Silver Inc. is proud to say that we have never had a complaint filed against us at the Better Business Bureau. See our BBB client reviews here.

Another sign of companies hiding something is when their website “About Us” page does not reveal the principals of the company. Instead, they have glowing praise for such things as their commitment to the industry, or fast deliveries or the lowest prices. When choosing a gold/silver dealer, you need to find out about the people behind the company, not their promises and praise for themselves.

Bankruptcies are not the only way you can lose money in the gold/silver industry

Buying so-called collectible, or investment grade, or third-party graded coins is almost a guaranteed way to lose money.

Most dealers advertising on radio and TV (generally referred to as “telemarketers”) mark up their products 30% to 50%. We have seen instances where some coins were marked up 100%.

These companies give really good reasons for investing in gold, such as the growing national debt, huge budget deficits, quantitative easing programs at the world’s major central banks and the potential for another 2008 Global Financial Crisis. However, they then try to switch you to buying the high-margin “investment grade coins.”

The most often promoted high-margin coins are old US gold coins, mostly $20 Libertys and $20 St. Gaudens. Additionally, proof American Gold Eagle and proof American Silver Eagle coins are promoted to investors wanting to put precious metals in their IRAs.

Old US gold coins are not eligible for IRAs, but Proof Gold Eagles and Proof Silver Eagles are. Proof coins have a polished look, the result of being struck multiple times. They have long been produced by government mints for special occasions and sold directly to collectors. Today, the US Mint turns out proof coins simply because there is a strong market for them. That strong market come primarily from telemarketers who promote the coins.

Proof coin prices are more difficult to follow, and telemarketers promote them with claims that they produce higher profits in bull markets. An examination of price histories proves otherwise. In fact, in rising markets proof coins yield smaller percentage gains than bullion coins.

Do Not Base Your Decision on Price Alone

Many first-time buyers think that getting the lowest price is the most important consideration when buying gold/silver. Getting the lowest price is not the most important thing. Getting–taking physical possession–of your gold/silver is much more important than “buying at the lowest price.”

Consider the recent Tulving Company bankruptcy and the $40 million lost by investors who chose to do business with Tulving Company because of their low prices. What good did it do those investors who chose Tulving’s low prices when they didn’t get their gold or silver?

Other techniques telemarketers use to try to get you to buy high-premium coins

1. Overnight delivery
Tulving Company promised overnight delivery and in many cases did use overnight services. However, what they did not tell their clients was that the shipment would not be shipped “overnight” for up to three or four weeks.

2. Next day delivery
By “next day delivery,” many firms mean the next day after they get the product, which in some cases turn out to be weeks. They do not ship the next day after payment is received.

3. Guaranteed buy-back policies
Guaranteed buy-backs are shams. Telemarketers often make vague statements that suggest that by buying from them that their “buy-back programs” guarantee a market when it comes time to sell. In reality, there has been a market for gold/silver for 6,000 years and there will be a market for them in the future.

4. Get you to react emotionally, not logically
Primarily, telemarketers try to scare you so that you do not consider the prices of the coins. They say that bullion coins are confiscateable, while the coins they sell are not. Read Myths, Misunderstandings and Outright Lies for further discussion on this approach.

How committed is the dealer to the hard money concept?

CMI Gold & Silver Inc. believes that gold/silver are the tried and true forms of money that have stood the test of time. Principals and brokers at CMI own the metals personally, and CMI keeps a positive inventory of some $5 million dollars.

Many new dealers are not committed to the hard money concept but are simply using their marketing skills to sell the metals. As a rule, these dealers do not maintain inventories but sell out of wholesalers’ inventories, with orders being “drop shipped” by the wholesalers. A “drop shipment” occurs when an order is placed with one firm, but another firm ships the product. CMI rarely drop ships orders.

The downside to drop shipments is that orders placed with the uncommitted firms result in two firms having the names, addresses and phone numbers of buyers, one kept by the retail firm and one kept by the wholesaler. If the principal of the retail firm decides to leave the industry and sells out to another firm, perhaps a telemarketing firm, those names could be used to solicit orders for high margin coins.

Further, should the retail firm go out of business, the wholesaler could sell the retailer’s list of clients to one, two or more telemarketing firms, thereby spreading the names of physical gold/silver buyers around the country. The buying and selling of lists of people who have expressed an interest in gold/silver has been going on since the 1970s.

In July 2015 Bullion Direct, Austin, Texas, filed for bankruptcy. One of the most valuable assets that the conservators bragged about was Bullion Direct’s customer list. When you choose your precious metals dealer, you want one that has a commitment to the industry and one that has a long track record.

The principals at CMI Gold & Silver Inc. have been committed to precious metals since 1973 and are firm believers that the elimination of gold and silver from our monetary system will eventually lead to massive inflation and higher prices for all goods and services.

We further believe that as more investors come to recognize the role that gold and silver should play in our monetary system, they will buy the metals heavily, resulting in gold/silver prices rising higher relative to other goods and thereby benefiting those investors who have the conviction to buy gold and silver before this recognition becomes widespread.