Gold prices are on the rise — and so are scams

Rising gold prices— the precious metal was up 16.5 percent in the first quarter— have given renewed life to some old scams using new technologies. Just lastweek, a manwas arrested in Kansas and charged with selling fake gold bars on Craigslist.

Michael Fuljenz, president ofUniversal Coin and Bullion, a member of the ProfessionalNumismatists Guild’sAccredited PreciousMetalsDealers program, says counterfeiting of popular coins, including the one-ounce silver and goldAmerican Eagles aswell as ingots, has become a problem, with many forgeries coming from China.

The fakes use metals such as copper, nickel and zinc with a gold or silver coating. The counterfeiters may increase the dimensions of the bar or coin slightly to compensate for the different metalweights. In a new twist, counterfeiters are nowusing sophisticated packaging to fool gold buyers, who knowthey shouldn’t open blister packs or special coin holders.

With theU.S. Treasury Department more focused on threats of terrorism, many of these scams fall under the radar. Here’s what you should knowbefore buying coins or bars of gold and silver.

Only buy froma reputable dealer. Not suprisingly, it is not necessarily the one blaring cableTV commercials atmidnight. You can find that dealer at thewebsite of the AmericanNumismatic Association (Money.org). Click on “find a dealer” and search by location and specialties. Or visit PNGDealers.org, thewebsite of the ProfessionalNumismatists Guild, where you can search for accredited dealers.

Don’t pay too much. Gold coins that are not collectors’ items because of their rarity are known as bullion coins. They are priced based on the price of gold in the cash tradingmarkets on the day of purchase. You shouldn’t pay more than 5 percent over the “spot” (London) price of gold for one ounce bullion coins or bars— although smaller bars and coins could cost a 10 percent premium. You can find the spot price of gold throughout the day atwww.Kitco.com.

Take delivery of your gold and store it securely. Don’t fall for offers of “free storage” of your coins (with the exception of IRA custodians noted below). Have the coins sent to you by insured certified mail, and then store the coins or bars in your own safe deposit box. (Yes, I knowthat if you’re preparing for the end of theworld, the banks will be closed. But you’ll have some advancewarning of that kind of disaster, and in that case, a loaf of bread or a five-gallon bottle ofwater will beworth more than gold.)

Beware when selling your gold. It’s as easy to get ripped offwhen selling as when buying. Unscrupulous dealers quote low gold prices, so you must check spot prices. Some may not give you full value for rare coins whose value you don’t know, so get two appraisals before selling. And a dealer may take your gold and then his check bounces.

Bullion coins and barsmay qualify for IRAinvestments. You can buy a limited variety of gold and silver bullion coins for your IRA, aswell as some bullion bars. But they must be held by an independent IRA custodian trustee.

Do your homework and make sure you get the real thing, not fool’s gold. And that’s the Savage Truth.

Terry Savage responds to questions on her blog at TerrySavage.com.