Buying cold coins? Watch out for gold coin scams

Damn that's pretty. 
Do you want to buy a nice shiny gold coin?

Watch out. There are scammers out there.

First, it's hard to tell which coin dealers are legitimate, because, to be successful, a fraudulent dealer is going to look a lot like an honest dealer. If you're going to invest, do some research on the company first.

Know something about what you're going to buy. If the seller's coin prices seem too high or too low, something's not right.

Be careful to know what a coin is graded. Many people are still surprised that an old mint-in-the-box toy can be worth huge amounts of money compared to the toy that was played with. The coin pictured above is a 2002-W $50 Gold Eagle, worth about $3,000 at a grade of MS-70. But if you can't tell the difference between a grade of MS-70, which means a mint coin that's never been touched, and a grade of MS-60, which is good but not perfect, get an expert to examine the coin. (By the way, the cheaper coin is worth about $1,500, or 50% less than the expensive coin.)

Oh, and if you're going to use an expert, you might want to look for the expert yourself and not use one that the seller recommends.

If a coin is inside a pretty package, take it out of the package, even if it does look pretty in there.

A coin seller might quote things like the "Salomon Index" to show how your coin purchase will appreciate 12% to 25% a year. That index is true, if you were buying the 20 very rare coins on that list. The reality is that most gold coin investments will increase slowly.

My favorite scam: a seller sells you gold coins, but to protect your investment from thieves, stores the gold coins himself, in "escrow." The truth? The gold coins never existed, and now he gets to charge you to hold your imaginary gold.

Finally, don't confuse the price of gold with the price of gold coins. You might see that gold prices are rising blah blah percent a year. But gold coins are worth less than gold because gold coins are not 100% gold, and your gold coins will not increase that much.

5 Sleazy Gold Coin Scams, The Street>>

The gold coin scam, The Christian Science Monitor>>
10 Tips to help you avoid "rare coin" scams, Scambusters>>

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