CFTC: 10 Things to Ask Before Buying Physical Gold, Silver, or Other Metals


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CFTC: 10 Things to Ask Before Buying Physical Gold, Silver, or Other Metals
CFTC: 10 Things to Ask Before Buying Physical Gold, Silver, or Other Metals


The Commodity Futures Trading Commission (CFTC) and the Financial Industry Regulatory Authority (FINRA) are issuing this joint advisory to inform investors about fraudulent schemes targeting investments in physical precious metals, especially those involving self-directed individual retirement accounts (SDIRAs).

Scammers often target older adults and retirees with gold or silver IRA frauds because they typically have more funds saved in their retirement accounts compared to younger investors. Additionally, those nearing or in retirement may seek stable investment options to preserve wealth for their later years or to leave as a legacy for their heirs.

Precious metals prices can be volatile, and scams that overemphasize safety, inflate the value of metals, and overcharge for fees and commissions can drain retirement savings, especially for those who might not be able to return to work. The CFTC has charged multiple companies over the past decade with defrauding customers through overpriced precious metal sales, totaling more than $500 million.

Before considering a rollover into a gold or silver IRA, ask yourself these critical questions:
1. Should I respond to unsolicited offers?

No. Avoid responding to cold calls, unsolicited emails, junk mail, late-night commercials or people selling at public events or at your doorstep. These are common tactics used by scammers.

2. How can I find a reputable dealer?

If shopping online, verify the dealer's physical address, operational history, and check online for complaints or criminal allegations. Always check reviews and most importantly complaints on organizations such as the Better Business Bureau.

3. Is the precious metals salesperson registered?

We are not financial advisors or tax advisors -- we do not provide financial advice or tax advice -- we are here to offer information and assistance specifically related to your interest in physical precious metals.  We encourage you to speak with a financial advisor or tax advisor for any applicable information we do not provide.

4. What is a gold IRA?

Gold IRAs are SDIRAs designed to invest in precious metals. While you can roll over funds from other retirement accounts without penalty, once the money is in an SDIRA, you're responsible for managing the risks and compliance with complex IRS rules.

5. What is the spot price and spread?

The spot price is the immediate cash price for metal, and the spread is the difference between the dealer's buy and sell price. Higher spreads mean it's harder to profit from your investment. Be wary of high spreads and avoid deals with hidden or excessive fees and commissions.

Because precious metals are a physical asset there will always be a premium involved. To understand more about how this is calculated, read this article.

If the spread is too high, as in most frauds, it’s impossible for buyers to ever profit. In one case, a customer rolled over a $300,000 IRA, and the dealer allegedly took $150,000 in fees and commissions

6. What fees and commissions will I be charged?

Request all fees, costs, commissions, and the retail price in writing before signing any agreements or handing over money.

  • Ask how much you would receive if you had to sell back the metal tomorrow. What’s the dealer’s buy-back price?
  • Ask the telemarketer, “lead trader,” or others you talk to how they are paid. Are their commissions and fees included in the spread?
  • Ask how the company earns its profit, especially if it appears to be giving away precious metal or offering other big freebies.
7. What other costs should I consider?

Consider storage, insurance, administrative fees, and possible taxes or penalties. Fraudulent dealers have charged for storing non-existent metals, so check your SDIRA statements to ensure you're not being scammed. Custodians also charge fees, and SDIRA fees are typically higher than traditional IRAs.

Normal Fees:

Storage - $100-150 per year

Maintenance - $95 per year

8. What's the difference between bullion, numismatic, or semi-numismatic?

Bullion refers to investment-grade metals, while numismatic coins are rare collectibles. Fraudsters might overcharge by claiming collectible value, which often does not exist or try selling you a coin that is made specifically for that company that you can't see anywhere else.

9. Are there other ways to own precious metals?

Besides physical metals, there are financial products like commodity exchange-traded products (ETPs) and commodity pools that offer exposure to precious metals prices. They are fully regulated and can often be added to traditional IRAs.

10. What should I do if I'm unsure?

If you’re uncertain about an investment in a gold or silver IRA, seek advice from a tax professional or financial advisor. The IRS has complex rules for retirement accounts, and mistakes can lead to penalties or loss of tax-deferred status.

Be cautious when investing in precious metals, especially with self-directed retirement accounts. Scammers often take advantage of complex rules and the trust of older investors to commit fraud. Stay informed and ask questions before committing your retirement savings to precious metals.

For the full article - read here

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