Don’t be hoodwinked! What does that even mean?

Yesterday I had a client call me to warn me about something that he experienced from gold dealer, it was something he considered a little “shady”.

There are a lot of things happening in the world that we need to cover and I am working on a couple posts that you do not want to miss, I’ll post them soon. There’s a number of things that could blow up (literally and metaphorically) any day now that we to talk about.

When the markets start moving after a long time of sideways trading (as we have seen lately) some dealers don’t see as many clients as they need. Some decide to go the route of dishonesty in hopes to secure some clients in a competitive market. This isn’t anything surprising. The good news is that this normally back fires, and rightfully (hopefully) so!

It looks like the markets could be about to break out, when it does that is when the scams and cons come running in droves. There are many cons and scams to be on the look out for, I have an entire radio show episode dedicated to this very topic. Today I want to talk about a “technique” that was used on a regular PCE client, in hopes of stealing him away from the real best price.

To keep it short, there have been gold dealers who have been known to profit by way of taking advantage of peoples lack of education regarding the buying and/or selling of metals.  As you know, if you have read these posts, perused the website and/or listened to the radio show, my goal is to educate you as best I can. Why? Numerous reasons, one being that I too was taken advantage of when I first started investing gold and silver. Another is that I have found over the years that my best clients are the ones who have a solid foundational knowledge of metals investing, they are the ones who keep coming back to Pacific Coin Exchange. Yet, another, I’ve been a teacher for nearly 17 years, I simply love to learn and share.

Yesterday my client called to let me know what he had just experienced. What he experienced was another local dealer, allegedly, trying to pull a fast on over on him to “earn his business”.

At first he was hesitant to tell me that he was shopping prices.  That’s easy, never, ever be hesitant to look for a better deal! The odds are you won’t fond one, if you do chances are I’ll be able to at least match it, however, in most cases I can beat it. There are those rare exceptions.  Ultimately, I want you to be happy, if that means referring you out to another gold dealer if I know you’ll get more money and treated right, I’ve done it many times.

Here’s what he experienced, his story. He said that he has been reading these post and other sources and decided that he wanted to purchase a substantial amount of gold before the jump in price. He’s been working with me for nearly three years, however, he heard of a place that he was told had lower premiums than I do at Pacific Coin Exchange.

I’ll keep this short (and yes, I have his permission to post his experience, it was actually his suggestion, which I truly appreciate). Here’s a brief lead in, gold and silver (all precious metals) have premiums, which is what you are charged over the current spot price of the metal.  Many are taught to ask a gold dealer “how much over spot are you selling this coin for…”, which is a great question.  That is what he asked this particular company (over the phone) and that is where the alleged hoodwinking began. He liked the answer he was given, and was preparing to drive to them to purchase some gold, that is until he noticed something that just didn’t seem right…

To keep the numbers simple, lets say for the that the gold coin he wanted they claimed they were charging $40 over spot, my price was $49 over spot. Immediately he thought, “dang, I’ll save $9 a coin!”  That’s a good deal!  Then he said that he noticed something…he had been looking at the Pacific Coin Exchange website on and off through out the morning, I have the spot prices updating regularly on the home page, he had seen the spot price of gold over and over, but never really paid much attention to it. He had seen the spot price enough for the number to unintentionally be stuck in his head. When you see things over and over, if you pay attention or not you have tendency to remember by means of simple visual repetition (even if it is deep peripheral vision – it has to do in part with the reticular activating system or RAS part of our brain, our minds are amazing).  Something made him look at this companies spot price, which was posted on their website. He looked at back at this companies website and noticed, literally, a $9 and some change difference.  That raised a red flag, so he called them back.

He said that he asked the lady who answered the phone call about the $9 difference, he said that she seems startled by the question, talked around it for a moment and eventually said it must have been due to a delay in updating.  That makes no sense, a $9 dollar difference in the actually spot price is due to a delayed update? Gold never came close to the price the spot price had stated. He politely questioned that excuse, she couldn’t answer, so she passed him over to a gentleman who proceeded to say that it was in higher because they post the gold futures market price. Again, that doesn’t make sense either, even if it was true, physical gold dealers do not sell daily using the futures market he claimed they were getting their price from.

Fortunately, though unfortunate for this other business, my client knows about the futures markets and looked it up, while still on the phone, he never found a futures price that matched the price they were advertising.

Then he asked where they get their spot price from, the gentleman sounded a bit hesitant to say, but ended up giving the name of the company.  My client looked them up and sure enough that company posted the same spot price as was showing on the Pacific Coin Exchange website. Funny thing, I know that company very well, I’ve done business with them plenty if times over the years, I use the same company to get my spot price as they use.

What they were trying to do was (in mine and his opinion) increase the spot price to make their over spot price look lower than it really was.  Most people don’t think compare spot prices between companies, you just assume the spot price is the spot price, which is it, with very, very few exceptions, none of which would really apply to every day gold buying.  They jack up the spot price so that they can quote a much lower over the spot price, which makes them sound cheaper.

Here is an easier to follow example: lets say spot, the true spot price, was $1260. They added $9 to the real spot price, showing a $1269 spot, add in the $40 premium that gives them a price of $1309 per ounce.  My spot price showed $1260 (the real spot price) and I charge $49 over for that same coin, add $49 to the real spot price of $1260, that gives you the price of $1309. In this example we are both charging the same price for the coin, $1309, the difference is that they are counting on you not verifying their spot price, they will say we charge mere $40 over spot, which is true based on their exaggerated spot price. You then call me and I’ll say I charge $49 over for that same coin, who are you going to? You are going to go to the $40 over spot folks and forget the $49 over person (worst yet, you may think the $49 over person is over charging!).  That’s the scam.

Fortunately, this client, having worked with me, knows there’s no one who beats me by that much, not consistently. So he questioned it and found the $9 difference was in the spot price.  Needless to say he came to Pacific Coin Exchange and as fate would have it, I was actually $2 cheaper, so he actually saved money (as usual) coming to Pacific Coin Exchange, even after being told another by the other company that they were $9 cheaper than I was.  See how this works?

Please be careful out there! Do your research, know what you are looking for and then know what to look for!  My radio show was dedicated to helping people understand just that! If you want to a refresher course, click here to listen (or listen again) to the archived Financial Fortress radio show!  As I say, the more you know the more you grow!  In this case the more know the more you save!

As always, feel free to call, email or stop by and see me if you have any questions!

 

 

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