By Anthony LoRe
The rising price of gold is making a lot of headlines in 2016 as investors flock to more safe havens.
On February 9th of this year, investors poured the most amount of money ever into gold bullion securities, according to an article in the Telegraph. Whenever gold panics start, you can be sure scam artists will be close by.
Throughout my time as the lead appraiser with Provident Loan Society of New York, I have seen many consumers come in with gold items they thought were expensive, only to be disappointed.
Sadly, many of these consumers thought their gold coins or gold jewelry would be worth more money later as an investment, but they didn’t research their gold items close enough. In other situations, the customers overpaid for gold coins that had a high mark-up from the start.
Investors should remember not all gold is treated equal when it comes to investments. There are many variables that can change the value with your gold purchase.
For example, 14 Karat gold and 18 Karat gold are worth different amounts based on the amount of gold they contain. 14 Karat gold is 58.5 percent gold, while 18 Karat gold is 75 percent gold, making it worth more money.
Some scammers have been known to attempt to sell a lower quality of gold for the price of a higher quality gold, disguising 14 Karat gold as 18 karat gold. Consumers will not be able to tell the difference between the gold and can easily be tricked unless they have it appraised.
Jewelry is one of the hardest items to assess from a gold investment perspective because the amount for the design is factored into the original cost. There are many gold necklaces or gold bracelets with high markups that reduce the amount of return on your investment.
Provident Loan Society provides short-term loans on all precious metals so we frequently see consumers who are trying to trade-in gold coins for money. Consumers should be aware that most gold coins also come with markups on both the sale and purchase of the gold coin. In other words, investors will likely pay a 5-10 percent commission to the seller when they buy a gold and pay another 5-10 percent when they sell the coin. That 10-20 percent markup can quickly take away from your return.
During times when gold is flying high, consumers will see TV commercials or newspaper ads, promising great returns on bullion gold. Investors should be leery here of the hidden fees that are frequently disclosed after the gold bullion is purchased.
Many of these bullion gold sales require investors to pay for storage fees, which is why you should always ask about any storage fees before purchasing gold bullion and factor it into your overall cost and future return.
Gold can provide a safety net for investors concerned with uncertainty in the world. Precious metals can also provide an opportunity for loans in times of stress. Provident Loan Society, which lends money against precious metals, sees an increase in loans when consumers realize they can get more money for their jewelry than in times when gold is priced lower.
Gold is the best performing commodity in 2016 and one of the only major assets to post a sizable gain this year, according to CNN Money. Compare those returns to the stock market for this year, and gold as an investment shines even brighter.
Just remember, before you buy gold as an investment, not all gold is treated equally. Make sure you do your homework before choosing it as an investment.
About the Author
Anthony LoRe is the lead appraiser for the not-for-profit organization, Provident Loan Society of New York, which provides short-term loans to New Yorkers with jewelry as collateral. He has spent more than 2-decades appraising jewelry by using guidelines set from the Gemological Institute of America.
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