What is a Gold Scam?

The benefits of a precious metal like gold is its tangibility and security, as well as the fact that its value often increases during market downturns. This makes gold appealing to investors, especially during times of economic uncertainty. Fraudsters play on this and use tactics to entice unsuspecting people into investing in suspect financial products.

How Does a Gold Scam Work?

Sometimes, it’s as simple as fraudsters telling investors that they are looking to raise money to re-open a defunct mine. In exchange for providing funds to purchase equipment, the fraudster will promise the investor a high return on their money, plus a stake in the proceeds of the mine. Other times, the pitched investment opportunity may involve an aggressive stock promotion or “pump and dump” scheme, which focuses on a public company involved in gold production or mining.

A gold scam could also involve fraudsters offering to sell gold bullion and then keep it for you in a “secure” vault with the promise to sell it as it gains value. Usually, the gold bullion doesn’t even exist.

Watch out for one or more of these characteristics of gold scams:

• An over-representation of the amount of gold found within a mine.
• Over-estimated claims of the share price of gold mining companies, or speculative claims about the value of a mine based on its proximity to a proven reserve.
• Pressure campaigns involving email, social media posts, phone calls, or direct mail that include speculative claims about the future price or value of a stock or a gold company.
• An invitation to visit a property, but only during set times and under careful supervision.
• High-end brochures, a slick website, or pictures used to demonstrate a mine or an investment’s value, with little other evidence provided.
• Fraudsters may allude to so-called “specialty” markets that only they can access.
• A plan to recover sunken gold from the ocean floor or buried treasure from a secret location.
• Under the guise of buying gold, investors pay a fee and are paid to recruit others who pay a fee.