If you DO buy PMs, make sure you take physical possession of them, not just some scheme where the dealer gives you a piece of paper telling you that you own the PMs that are in his possession. This guy had over $110 million of his investors’ money and a vault filled with paper IOUs.
Categories: Crime
12 Comments
Lord of the Fleas · July 4, 2023 at 1:21 pm
And depending on circumstances (such as the reputation of your dealer, etc), you might also be prepared to do proper assays. Even major banks, and central banks, have been scammed with gold-plated tungsten bars. It’s shark-infested waters out there…
Dog Ruckus D · July 4, 2023 at 1:58 pm
Blows me away people still fall for the paper PM scam. How many times can this trick work? I know, don’t ask, I won’t like the answer.
EN2 SS · July 4, 2023 at 2:11 pm
Me being a poor peon, I’ve never understood buying PMs and NOT putting my hands on it/them. Apparently above a poor peons ability to understand.
It's just Boris · July 4, 2023 at 4:36 pm
Ouch.
I see the attraction for having your precious metals stored elsewhere – insured, and safe from theft or other localized-to-your-house catastrophe like a fire or flood.
But even assuming the counterparty is on the up-and-up, how do you get them delivered, or even get access at all, if things go sideways on a regional to national / global scale? That’s when one is more likely to absolutely need a physical commodity other than cash for value exchange. I think DM made this point already in the original posts, but it bears repeating: if you can’t access your store of value, whatever it is, it is worthless to you.
Steady Steve · July 4, 2023 at 5:46 pm
Absolutely. I cashed in an old IRA that was allegedly holding some 1oz gold eagles. As soon as the check cleared I purchased some from a dealer I trust and put them in the safe. No “storage” fees anymore. It was suspicious that they would only reimburse by check and not ship the coins.
chiefjaybob · July 4, 2023 at 7:20 pm
Ann Barnhardt might be a nutter, but more than once I saw her post about commodities: “If you can’t roll around naked on it, you don’t really own it.”
Toastrider · July 4, 2023 at 9:27 pm
It’s like NFTs and cryptocurrency, only more annoying!
oldvet50 · July 5, 2023 at 6:02 am
Even if you purchase the physical items like gold or silver, if you have it delivered and/or used a credit card, you are now possibly a future target. You should go to a brick and mortar location where you are not personally known to the proprietor and use cash (while you still can) so there will be no record of the transaction. Use a fireproof safe for storage, but if the value is in the metal and not because it’s rare coins, even if a fire turns the coins into bullion, the value will still be there.
Divemedic · July 5, 2023 at 6:43 am
Local brick and mortar stores are more expensive, making the premium over melt value even more of a penalty, so there is that.
Woody · July 5, 2023 at 1:22 pm
If stored in someone’s vault, you can’t stop the Gov’t from seizing the gold to make others whole or claiming it’s results of criminal activity.
Han Shot First, He Was No Fool · July 6, 2023 at 12:25 am
Absolutely … but try telling that to Comex.
Seeking Alpha — “Comex now has 28 paper claims for each physical ounce of registered silver”
Right, so for those of you who are just tuning in … what is Comex?
It’s The Primary Options Market(tm) for trading precious metals.
Comex and CME Group hold precious metals in several vaults across the world, and you can look at the numbers for what’s (supposedly) being held at each vault.
As for what this means, it would be like the pre-Bretton Woods US Treasury having created options on the gold at Fort Knox to the tune of 28 times what they have on deposit. (Fiat Buxx without the extra steps, imagine the efficiency of the markets! 🙂 )
So not even the world’s largest commodity precious metals trading group is immune.
Dog Ruckus D: “Blows me away people still fall for the paper PM scam.”
Everyone still wants to believe that Liberty Reserve could be a viable operation instead of a money laundering scheme if only the right people run it.
EN2 SS: “I’ve never understood buying PMs and NOT putting my hands on it/them …”
It’s a problem when you are using physical metals to secure large lines of credit, among other things.
Ten tonnes (10k kilos) of pure silver is worth about $7.43 million USD at spot right now.
At roughly 0.953 cubic metres if stored as a single object (haha funny joke), it’s not super bulky (lol), but it does take up a lot of space, has far from typical weight distribution requirements, requires insurance and other expenses, and is just not conducive to being moved around.
This means you don’t move it and you leave it at an exchange (such as Comex) or at a bank with private vault space, the latter inevitably having direct storage costs associated with it.
Now this guy with $110 million USD wasn’t entirely in silver, but that would be over 14 cubic metres of silver, weighing well over 150 tonnes.
Maybe this guy decided to save on vault costs by leaving the metals with other depositors or exchanges.
But if even just one of them can’t produce the physical silver, there’s a huge problem.
And that’s how this kind of problem gets to be so big.
Steady Steve: “It was suspicious that they would only reimburse by check and not ship the coins …”
The truth may have been that they were an undeclared options trader, that their “metals” also consisted of claims, and were really “stored” at Comex. (Feel lucky.)
oldvet50: “Even if you purchase the physical items like gold or silver, if you have it delivered and/or used a credit card, you are now possibly a future target …”
US Mail Registered service has monetary limits for how much they will want to deliver via their postal carriers.
From experience, that varies by location, but you should expect to need to arrange delivery and a pick-up location with the USPS for anything over $50k, even if it means you’re going to a Post Office yourself to present ID and claim your twenty-plus ounces of gold.
It’s worse for US Mail Registered International service: I’ve had to pick up sub-$5k packets from a Post Office on arrival from Singapore that a postal carrier could have delivered by hand.
Would you prefer direct delivery to a bank safe deposit box in the US?
Careful how you answer that: there are some states where probate of a bank safe deposit box happens to be mindblowingly insane, and so if anything happened to you around arrival time …
I know there are people here looking for fits-all solutions.
The problem is that there are no fits-all solutions, in other words, and only a few fits-most solutions, with the latter being a matter of scale.
If your trading volume is so small that the USPS delivers boxes with red labels on them direct to your hands, then that’s flexibility that generally doesn’t scale.
In forex this low volume is referred to “retail forex” and in precious metals is referred to as “retail metals”.
You’re paying a retail premium on top of a physical metals premium, a numismatic premium, a fractional premium, and so on and so on and …
oldvet50: “… even if a fire turns the coins into bullion …”
Worse: at a high enough temperature to cause them to melt, they turn into impure metal that has to refined again.
“Retail bullion refiner” is not a concept I’d like to think about needing.
Aesop · July 6, 2023 at 6:36 am
“There’s a sucker born every minute.” – P.T. Barnum
“No one ever went broke underestimating the intelligence of the American public.” – H.L. Mencken
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