4
Apr

Gold Dealers Who Sell 1.5 Ounce Silver Coins Are Ripping You Off – Actual Case Study

When it comes to gold dealers, not all are the same. This article will expose a tactic one gold dealer, Lear Capital, has used to charge very high commissions for bullion silver and gold coins they sell, sometimes leaving you having to make 30% or more just to break even. The way to tell the difference in whether or not to buy from any gold dealer, is to see who is advertising on TV as that is where most of their clients come from. If they can afford the costs to advertise on TV, they are going to sell you high commissioned coins as that is the only way they can afford the advertisement costs which can be as much as $8,000 per 30 seconds (I would have to sell a lot of gold to make $8,000 but you’ll see this is nothing for these companies soon). It should be your first red flag, no matter what radio personality is supporting them. How do I know this? Because I was instrumental in a case against one of these gold dealers that was ripping off clients.

Back in 2012, Goldline International was placed under injunction and ordered to change sales practices. I had met with the Santa Monica city attorney and his co-attorneys twice prior to the judgement. Below is what the city attorney found;

Notice the last sentence that sentence on where consumers found these gold dealers; TV ads. And also notice that the coins sold were worth little more than bullion to begin with.

The Biggest Scam by Gold Dealers Today; 1.5 Ounce Silver Coins

This leads us to what I call the latest scam which is the 1.5 ounce silver coins and gold 1/4 ounce coins. They go by various names from Polar Bear to Arctic Fox or Snow Falcon, and change from year to year to keep the scam going. The claim is they only make so many of them, and thus because they are limited in production, their value will grow more than regular bullion coins.

In 2010 when I wrote my book Buy Gold and Silver Safely, 2  years before the Santa Monica city attorney got Goldline, I exposed gold dealer tactics. I sent my book to the New York House of Representative’s office as they were looking into the gold industry (technically finding a way to go after Glenn Beck) and they turned my name over to the Santa Monica City attorney who I met with twice before they finally settled for $4.5 million for past clients who were ripped off and an additional $800k for future claims.  In 2018 I updated my book to include the 1.5 ounce silver coin ripoff. But before that, I was very active in exposing these gold dealers and their tactics.

First off, I was contacted by Eileen Ambrose from AARP and interviewed for an article titled Should You Buy Gold? I gave her some other ideas for the article about how gold dealers rip off clients, but she did not choose to use them but just quote me on my thoughts on metals. Then in August 2016 AARP put out an article about gold dealer scams called The Golden Fleece, but left out the biggest scam of all, the 1.5 ounce coins. While it was good they went after other companies that the Santa Monica City attorney was already suing like Merit, they only rehashed the Goldine settlement, and made one good point about it from a client of Merit who got ripped off; “Someone wants to buy $10,000 worth of gold. If I sell them bullion, I make $50. If I switch them to supposedly rare and more valuable numismatic coins, I make $1,000. It doesn’t take a genius to figure out where to lead customers.”

I reached out to AARP and the author of that article Doug Shadel on Aug 15, 2016 shortly after it came out and tried to expose the 1.5% ripoff of these silver coins sold as collectibles and also mentioned proof coins as part of the ripoff and never heard back. So it’s time for a horror story from one such client who bought the 1.5 ounce silver coins from Lear Capital. At the same time I reached out to Eileen Ambrose again who had transitioned to the well respected Kiplinger, but didn’t hear back. It seems that this type of story is not newsworthy, but I know it is to investors in precious metals.

Case Study on the Scam

First let’s start with the fact that this man who was a client of Lear Capital invested $897,478.20 total, $224,285.10 in 1/4 ounce gold Snow Falcons (429 of them) and $673,193.10 in 1.5 ounce silver Snow Falcons, 16,202 of them. The date was 3/30/2016. The client of Lear Capital has given me permission to use his name. Below is the actual confirmation of the sale of metals to him from Lear Capital for his IRA.

In fact, at the bottom of the statement, it even states; The fee is the difference between our cost and the ask/sale price on IRA Precious Metals that can average thirty-three percent. The fee between our market cost and the ask/sale price on this transaction was 33 percent. Based on this fee, your metals will need to increase approximately 49.25% to break even. 

At the time of the sale, the spot price of gold and silver can be seen in the following chart. I also put the amount of gold and silver he could have bought next to the amount he did buy.

Metal Type Price of Metal per ounce at time of purchase from Lear Capital Date Oz’s bought Lear Cost Cost per oz Equivalent bullion ounces that could have been bought at current spot with premiums. Difference in ounces Difference that could have went to the purchase of more gold and silver coins and bars.
Gold $1,236.25 3/30/16 109.75 $224,285.10 $2,043.60 179.25 69.5 $85,919.38
SIlver $15.38 3/30/16 24,303 $673,193.10 $27.70 42,127 17,824 $274,133.12
Total $897,478.20 $360,052.50

 

Pretty alarming isn’t it? He could have bought 70 more ounces of gold AND 17,824 more ounces of silver by just buying pure bullion bars and coins.

What happens when the client calls into complain? They are sent to a special person who deals with this who reminds them they were on a recorded line agreeing to the high commissions and that it takes 3-4 years for your investment to pan out. No one gets their money back but at times I have heard offers of some more silver to just go away. More of the 1.5 ounce coins.

I developed a couple of years ago some videos to warn investors about buying these types of coins. Unfortunately, most who find the videos learn about how they got ripped off and call me after finding out the truth. A lot of them. No one asks the question that should be asked of all gold dealers;

If I buy these coins from you today at the current spot price, and sell them back to you immediately at the same spot price, what will you give me for them? They don’t answer quickly, run!

Another issue with these coins is they are not liquid. You have to find a buyer for them. And what will you get for them? A little less than the spot price of silver if you are lucky. Some of these dealers will buy them back at a very reduced rate if they need supply to sell to more unsuspecting buyers.

Just wait till the price of silver really gets going. These gold dealers will be all over TV trying to confiscate your wealth.

It Potentially Could Have Got Worse 

When he found out that his investment was down so much, a representative from Lear Capital reached out to him and presented him with an “IRA Metal Exchange” where he could take the silver he was down on “because silver “simply have not performed to forecast or expectation” and told him silver would have to go up to $41.55 to break even. Recall the price of silver actually had moved higher as of 7/17/2018. He put forth a scenario where silver could fall to $10 or even $4.80 an ounce in 1980 and said it is better to move the silver into gold bullion and gold would move to $2,000 to $3,000 an ounce. No mention that gold fell in 1980 and later of course.

Here is what the representative presented and in the process, confiscate

The buyback today on his original investment if he invested in bullion gold and silver would be (after commissions for sale);

Silver; $632,747.54

Gold: $231,393.83

Total: $864,141.37

Loss: $33,336.83

Interesting that the representative called the silver coins “collectible numismatic silver coins.” There is nothing collectible or numismatic about them. They are pure bullion.

But worse that he tried to stick him with another big commission by installing fear about the price of silver moving lower.

 

 

It Unfortunately Did Get Even Worse

Unfortunately, the story doesn’t end there except for Lear Capital. This gentleman was talking to other gold companies before us on what to do and he was convinced to take this remaining balance out of Lear Capital and put it into proof coins. This means another loss of 15% to 30% depending on the gold dealer. I warned about that in my 2010 book as well as an article in 2013 The Problem With Buying Gold And Silver Proof Coins In Your IRA

This Article Is Not A Knock On Gold and Silver 

Even if this gentleman invested in bullion gold and silver you see he would be down on his investment. Not a lot but still down. Gold and silver are poised for a big move up and I am one of the gold dealers in the U.S. who have not called for the dollar crash, hyperinflation and put all your money in gold and silver. I recommend a 10% allocation for physical metals into bullion silver and gold bars or coins and use this as insurance moving forward as a hedge against lost purchasing power. A 1964 quarter exchanged for the scrip of the day can still buy you a gallon of gas today as it did then because it is 90% silver. A 1965 quarter that has no silver content can buy you 25 cents of gas today. The best time to buy is on dips as they always come and cost average into an allocation. There will be at a minimum a reversion to the mean and most likely new highs when the national debt catches up to

If you are looking for gold and silver coins and bars, our motto in this industry is simple; we look at everyone else’s price and undercut them and guarantee the lowest cost.

But when a trusted TV source or personality is touting to buy from a company they put their trust in, know they are paid for this and most of the time these companies are not in your best interest. The case study above proves it.

Believe me, these companies that are doing this, and there are a lot of them, are going to get hit at some point just like some did by the Santa Monica City Attorney. And if you are young reading this, it’s most likely your parents who are falling prey to these wolves in sheep’s clothing.

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About Doug Eberhardt

Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534

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