Gold Financing Agreement Scams

Think twice when presented with easy profit promises from buying gold, other precious metals or other commodities

There are companies claiming easy money for investors through the purchase of precious metals using a finance agreement. Consumers need to be especially aware of these scams. Most of the time, these companies lure investors in by offering an opportunity to speculate on the price fluctuations of precious metals or other commodities such as heating oil, without actually taking delivery of the commodity.

A federal agency, the United States Commodity Futures Trading Commission, is in charge of regulating the trading of commodity futures and options in the United States. Part of their responsibility is to take action against companies suspected of fraudulently and/or illegally selling commodity futures and/or options.

In recent years, attention to fraudulent wrongdoers has become more focused on companies that enticed potential investors by promising huge profits with little to no risk for the investor. The CFTC has increased their enforcement action against these companies, especially if no actual delivery of commodities has taken place by the financier.

Image of precious metals

It’s easy to identify the companies we’re talking about, once you know what to look for. The fraudulent pitch often starts out with promoting the purchase of precious metals like gold, silver and platinum. The promotional message is quickly followed by claims that initial small investments could lead to double or triple returns, in a very short period of time, at no or very low risk. Next, an offer by the company to cover most of the purchase price of the commodity in exchange for the consumer’s agreement to put up the rest of the money is made. The company may even agree to store the precious metals and arrange for financing just in case an investor doesn’t have enough money up front for the purchase.

What these companies don’t mention in their advertisements is that they will charge the consumer with fees covering a commission for the purchase transactions, loan origination, interest charges on the remaining balance (accrues over time) and for the storage and shipping of the precious metals they’ve pretended to purchase for their customer. Most of the time these fees aren’t disclosed up front, so the investor isn’t aware of them before agreeing to put down money.

Further characteristics regarding these companies include::

  • Messages minimizing the degree of risk involved with investing in metals.
  • Untruthful statements made regarding the company’s ability to predict prices and/or the direction of the metals market.
  • Discouraging customers from actually taking delivery of the precious metals due to the reality that these companies don’t in fact make the purchase even though they state they will.
  • Fake interest and storage fees charged to customers against their account, which causes the account to decrease so much that investors must either deposit more money to keep the account or lose everything they’ve invested so far.
  • No metal actually being purchased or stored.

Occasionally, companies offering these types of investment cons aren’t located in the United States. And they don’t reveal this fact up front. If you send money to a company claiming to purchase precious metals on your behalf, that’s outside the United States, the CFTC and other US governmental agencies won’t be able to assist you later if it turns out your investment is a fraud. Additionally, laws in foreign countries may not allow the same kind of transparency we enjoy as investors here in the United States. It may even become impossible to verify your investment.

Prior to sending in any money, ask a lot of questions like: Where are all the companies involved with this transaction located? Where do all of the telephone calls you’re likely to receive come from? Where will my money be deposited and kept? Where will the precious metals be stored? How can I reach you and all the other companies involved?

Research any potential commodity purchasing companies by contacting the CFTC (www.cftc.gov), your state’s securities commissioner (www.nasaa.org), Attorney General’s consumer protection bureau, the Better Business Bureau (www.bbb.org) and the National Futures Association (www.nfa.futures.org)

Here’s a brief list of warning signs to look for when approached by companies asking for your investment in commodities purchasing:

  • Guarantees and/or predictions of great profits with little or no risk to investors.
  • High pressure devices aimed at separating you from your money quickly.
  • Unsolicited phone calls regarding investments from foreign salespersons or unfamiliar companies.
  • Reluctance to discuss all fees involved and/or detailed information about the company and investment opportunity.

More Precious Metal Trade Information

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