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CFTC taking action against precious metal investment businesses

Mary Rice — Mon, 23 May 2011 16:33:14 +0000

American Precious Metals LLC offered fraudulent gold and silver investments to customers. Image: Flickr / sirqitous / CC-BY

For the third time in the last few weeks, the Commodity Futures Trading Commission has taken action against precious metal investors. American Precious Metals LLC has been shut down, pending further investigation. Companies have been offering fraudulent investments in gold, silver and other precious metals.

Case against American Precious Metals LLC

American Precious Metals LLC was a company based in Lake Worth, Fla. The company used telemarketers to call and pressure customers into purchasing gold, silver, platinum and palladium investments. The salespeople claimed that the company would store the physical metals for the customer and even finance part of the purchase after a significant down payment was made. In exchange, the company promised several hundred percent returns on the customer’s investment. In essence, the company was offering short-term loans for investments in precious metals — but the company never really had the precious metals. The company also never registered with the FTC or CFTC as an investment business. The charges against the company include violations of the Telemarketing and Consumer Fraud and Abuse Prevention Act, as well as regulations controlling precious metals. All the assets of the company have also been frozen.

Rising precious metal prices

The increasing number of fraudulent precious metals investment scams has been boosted by the quickly rising price of most precious metals. In the last year, the per-ounce price of gold has gone from less than $1,200 to more than $1,500. Silver and other precious metals have experienced a similar price jump. This is partially because precious metals are often viewed as a “safe haven” when worldwide currencies are weakening. Some industry watchers have warned that gold and precious metals are getting close to bubble status, with prices that have expanded beyond their “real” value.

Protecting yourself when investing

Investing can be an activity fraught with dangers. There are do-it-yourself investing tools, and you can purchase precious metals and store them yourself. No matter how you choose to invest, always work with companies that have been vetted by the Better Business Bureau. You should also never invest in any precious metals company that you cannot independently verify with the FTC or CFTC.

Sources

FTC.gov (PDF)
Futures Mag

Gold prices touch $1,500 as some question inflationary pressures

Mary Rice — Tue, 19 Apr 2011 18:21:27 +0000

Gold prices are going up, and today they hit a record $1,500-per-ounce price. Image: Flickr / theredproject / CC BY-SA

Like all commodities, gold prices fluctuate. Today, after quality of United States debt was questioned by Standard and Poor’s, gold commodities hit a record high, $1,500 per ounce. This continues the upward trend in gold prices, though experts are split on the meaning of this milestone.

Spot price of gold hits record high

The price of gold has two major markers. The commodity price of gold is the general market price of purchasing shares of or stock in gold, usually known as “exchange-traded products.” It is also possible to purchase gold coins and gold bullion bars. Coins, which are more difficult to counterfeit, are usually sold at a higher price. Gold certificates are a middle ground, a promise that the gold indicated on the certificate is available and belongs to the owner. The spot price of gold is tied to the commodity price. Today’s spot price of gold hit $1,500 in U.S. dollars, an amount that gold has never hit in the past.

Worries of speculation in the gold market

Every time financial markets go through a downturn, the price of gold tends to spike. Investors often view gold as a hedge, a “safe haven” of investment. The idea is that gold will always maintain or increase in value, unlike currency. Since the value of currency of the United States was decoupled from gold, demand for gold has been going up. Gold is seen as a “hard” currency that will always maintain its value. Some financial experts are concerned that some individuals are using short-term financial solutions or installment loans as a way of buying into the gold market that may or may not be worth the investment. Speculation, over-investment and a possible bubble could mean that gold prices, like the prices of all other investments, could drop at any time.

Be wary of gold-investment advisers

Gold, like every other investment, comes with certain risks and rewards. Gold has historically been a strong investment, but dips in prices are possible with fluctuating demand, central bank policies changing and inflation levels of various currencies fluctuating. Some gold-investment advisers are pushing gold as the “only smart investment in today’s economy.” Many of these advisers are also selling gold investments. Gold can be a good investment, but as with all investment options, it should be balanced with other financial options.

Sources

Wall Street Journal
Kitco
Gold News