Gold Futures Index (GOLD)

[Pro-Life]

The five worst ways to buy gold
June 17, 2009

http://timesbusiness.typepad.com//money_weblog/2009/06/the-five-worst-ways-to-buy-gold.html

The tripling of the gold price since 2004 has predictably led to something of a stampede for the metal among private investors.
But in their hurry to gain a slice of the precious metal, they do not always take the most sensible route, says Adrian Ash, of BullionVault, the gold bullion exchange.

Below he outlines five of the worst ways to buy gold:


1. Buying gold coins in auctions on eBay

Mr Ash says the prices can outstrip the true value of gold - the ‘spot’ gold price - by 25 per cent even for the plainest coins. Rarer coins are sometimes bid up to an even higher premium. Mr Ash says you should check out the seller ratings, the full item description and the shipping fees.

2. Chasing after ‘rare’ gold coins

The US authorities have given warning that investors should beware of dealers charging exorbitant fees for coins that turn out to be anything but rare. In 2004 a British telesales company was shut down for selling gold coins at 700 per cent of true market value.

3. Newly minted ‘collectible’ coins

As with supposedly ‘rare’ coins, so-called ‘collectible’ coins can cost a lot more than the value of the gold they contain. Mr Ash says the Royal Mint charges mark-ups of 40 per cent plus. The new ‘Countdown to London 2012’ series, priced at £1,295, costs almost twice the value of the coin’s gold content.

4. Rank over-pricing

Many reputable-looking companies can charge way over the odds for gold, says Mr Ash. “Mail-shots, websites and radio advertisements are now selling gold to UK investors at 15 to 40 per cent above the true ‘spot’ market value. One newly-launched company is selling one ounce bars for more than £800 (spot value £600) and kilo bars for £25,000 plus (spot value £19,400).”

5. Unallocated gold storage accounts

When a bank sells you gold but holds it in safe-keeping, the account is often unallocated. This means you do not actually own any gold. Instead the bank owes you a certain amount of the metal. This makes you a creditor of the bank.