Not-So-Golden Touch: The Risks of Investing in Gold

Despite what those late-night infomercials may pitch, as a precious metal, gold really carries no greater intrinsic value than other investment options. In fact, the World Gold Council reports there were over 400 million pounds of gold in various forms of circulation as of 2015, mostly in jewelry, investments, and industry. If gold does not hold any integral value on its own, how can we explain not only the human drive to own it but also the predilection for gold investment-related fraud?

Considerations for investing in gold

Investing in gold certainly has its attractions. Beyond the social prestige of simply owning more of the shiny stuff, its value has been trending up 10% since a year ago. However, there are sobering reasons to believe that such an increase will inevitably be followed by a fall, based on current investment market conditions. Unlike other equities or stocks based in real world commodities, gold does not have a built-in earning per share. Gold simply exists, and while its value may fluctuate, it cannot be woven into more gold without being converted into more liquid forms of assets. Nevertheless, investors flock to gold, touting the following recent pieces of geopolitical evidence to support the wisdom of their choice:

  • New gold vaults in Europe: Two firms plan to offer space for more than $112 million in gold.
  • Bitcoin and other cryptocurrencies have pushed down confidence in sovereign currencies, making gold more appealing.
  • The world’s largest gold market, China, is experiencing significant growth—over 2 million pounds in 2017 alone, up 50% from 2016.


Ongoing fraud and deception

It may not be possible to ever completely dissect the logic of why people are so obsessed with acquiring massive quantities of the yellow metal. What savvy investors can do is take reasonable precautions before investing in gold. The most common types of gold investment fraud that persist involve:

  • Overcharging. In 2012, the Goldline company repaid $4.5 million to customers after consumers were sold gold coins at more than 55% over the market value.
  • Investing in mines. While some new mines are located and produce for investors, proprietary methods, minimal extraction efforts, huge reserves promised, or any platinum metals found indicate the mine is most likely fraudulent.
  • Gold future contracts. As with any futures investment, success is never a guarantee.
  • Owning coins. Like futures investments, owning coins on the promise that the value will increase goes substantially beyond mere falsehood into fraud.

Buying, owning and investing in gold are not in themselves risky. It is the dishonest practice of an investment professional or broker that can turn the gold in straw, leaving owners the poorer for the experience. The Frankowski Firm has years of experience representing investors who have lost money as the result of investment fraud. If you or someone you know has lost money as a result of such a scheme, please contact our investment negligence attorneys at 888-741-7503 or complete the contact form to schedule a consultation.