Are Gold Dealers Regulated?
Regulation of precious metals may appear complex and daunting. But there are certain trends to watch out for.
Some gold dealers can advertise on conservative radio programs to attract politically conservative investors.
Other important criteria of a reliable bullion provider include transparent pricing and risk disclosures.
Gold dealers’ lack of regulation provides them with a competitive edge when marketing themselves to consumers, as they can use celebrity endorsements and client reviews as draws to draw customers in. Furthermore, they can capitalize on people’s fears associated with government-mandated financial products like equities and bonds to draw in consumers.
Safeguard Metals of Los Angeles has been accused of defrauding hundreds of customers out of an estimated total of over $67 million by concealing fees and markups on gold coins held in storage for them, according to both the SEC and CFTC. Leads for their scam came through advertising on conservative radio shows hosted by Sean Hannity and Mark Levin.
This bill would require licensed precious metals and stones dealers to record and retain additional information regarding the properties they buy, such as an electronic copy of any checks or money orders used to pay for purchases, along with descriptions of said property.
Before purchasing or selling precious metals, it is vitally important that you check a dealer’s licensing requirements and avoid investing opportunities which offer unrealistic promises. There are ways you can safeguard yourself against scams; read up on how to do that here.
Precious metal dealers are subject to state and local regulations. To operate legally, they must possess both a license to buy and sell gold bullion as well as an active business license. Furthermore, they must maintain accurate records of transactions as well as an inventory of products for sale – complying with all weights and measures laws at all times.
Most dealers trade at the spot market price, which is determined by market supply and demand for metal. Most have quick and transparent bid-ask price listings online with risk disclosure pages detailing potential losses; almost all dealers hedge their position by buying when spot market prices increase and shorting when it decreases – or vice versa!
Gold may seem like a safe investment option, but there can be dishonest dealers. Before investing your money with any particular seller, be sure to investigate their reputation first and if their rep doesn’t look promising move on to a reputable dealer instead.
Scams in the metal industry include counterfeits, overcharging for metal and empty vaults. One company known as KaratGoldCoin made false promises to store customers’ coins in their private depository but never delivered any to the customer and simply went bankrupt without ever actually fulfilling its commitments.
Swindles in the precious metals industry may not be as common, but it’s still essential to remain vigilant and read contracts thoroughly. Any hidden clauses or unfavorable terms could be an indicator of shady practices; dealers who push collectable coins instead of bullion are likely attempting to scam customers with excessively priced collectable coins that do not correspond with their weight in gold, which should raise red flags about potential scams.
Precious metal dealers and their associated businesses are subject to various forms of regulation. Bullion dealers must report certain sales to the government due to anti-money laundering and countering financing of terrorism (AML/CTF) concerns, including customer purchases of 1-ounce Gold Maple Leaves, Krugerrands or Mexican Onzas sold in quantities of 25 or more from customers; this requirement does not extend to American Gold Eagles or fractional ounce bullion pieces.
Existing law prohibits dealers from paying sellers directly in cash or cashing checks or money orders directly, leading to fines or imprisonment for both parties involved.
Coin dealers and precious metal shops must abide by all securities laws that apply to financial industries advising individuals on investment decisions, which means they must treat customers fairly from providing information through transaction completion and remain transparent with prices and terms.
Categorised in: Blog