Precious Metals Investors Should Protect Their Assets and Lives

The adage about investors losing their shirts understates the reality for precious metals speculators, who not only can lose their assets but even their lives.

Greed has led unscrupulous people to prey on investors who are too trusting. As a result, investors in precious metals and coins should limit who they tell about their activities to avoid becoming a target of criminals.

With the stock market showing increased volatility lately, the interest in considering alternative investments such as precious metals and coins seems to be growing. Investors who might like the thought of making a so-called killing in the market need to be careful not to end up in the clutches of violent predators willing to steal, torture and even murder.

Rich Checkan, president and chief operating officer of Asset Strategies International, a full-service, tangible asset dealer in Rockville, Maryland, recalled an instance when one of his customers who lived in the South was killed by people who wanted his gold. The perpetrators who the customer told about his collection of gold betrayed him in hopes of stealing it for themselves. The gentleman was tied up, tortured and ultimately killed by his brother, his gardener and another man as they sought to compel the victim to disclose where he stored his precious metals, Checkan said.

The assailants told police they did not intend to kill the owner of the gold, but their torture ended up leading to his death anyway. Checkan, whose company offers precious metals, rare coins and foreign currencies, shared the following tips to help investors in precious metals and coins steer clear of those who would be willing to harm them in pursuit of ill-gotten gains.

How to Avoid Precious Metals Thieves

• Keep information about your precious metals confidential. Imagine protecting the information under lock and key, just like the precious metals themselves.
• To that end, do not make the mistake of bragging about any gold holdings. The murder victim reportedly told neighbors, even those he’d just met, that he was holding a lot of gold in his home. The attackers claimed they only planned a “burglary;” however, when they were unable to find the gold, they tortured the owner to death without him ever divulging where he hid the gold. The assailants claimed they didn’t realize that the victim had died. A neighbor found the man lying unconscious in a pool of blood.
• Make sure all packages are discreetly labeled to avoid bringing attention to the precious metals enclosed. Asset Strategies International does this to protect client confidentiality and privacy.

Beware of Precious Metals Scam Artists

“Some precious metals dealers will cheat investors and advertise modern issue MS70 first-strike coins at an impossibly high markup that investors won’t be able to match when they go to sell the coins again,” Checkan said. “These dealers will go to auctions, bid against each other and drive up the price, so auction records will show the coin selling for an excessive amount. They will then say that investors will be able to turn around and sell these coins for the same amount at auctions, when in reality, the chances of doing so are practically impossible.”

The same coin dealers won’t even agree to buy back the coins they sold at the sale price, Checkan said. The MS70 bullion coins they promote are advertised as the “best of the best,” but the reality is they have the same metal content and value as any other bullion coin with no additional collector value, he added.

“Investors will be hard-pressed to get their money back when they go to sell these coins,” Checkan said.

For example, a complete silver American Eagle MS70 set that contains coins from each year since the coin was released in 1986 can sell for more than $100,000 — just because it has the MS70 grade attached to it, Checkan said. But the metal content of such a set would only put the value of the silver investment at roughly $400, he added.

“When you then try to sell these on the open market, you’ll most likely only get back the value of the silver content, which is around $20, said Checkan, who offered the following warnings and tips to investors.

• Modern issue coins in high grades are a dime a dozen. But, by placing them in coin holders from a grading service, dealers are giving the impression the coins are scarce in hopes of charging a high premium.
• These dealers advertise such MS70 sets as true “perfection” and the best way to invest in these coins, even though it is the pre-1933 numismatic coins that are rare and will never be minted again.
• We’ve had several conversations about people who have spent their life savings only to find out their metal investments were appraised at well below 50 percent of the price they paid. This is a direct result of companies preying on inexperienced investors. 

Avoid ‘Home Storage’ IRAs

Investors who have heard of a “home storage” precious metals individual retirement account (IRA) and been intrigued about using it as a retirement portfolio should know that the Internal Revenue Service (IRS) is cracking down on these types of investment vehicles. The main premise is to create  a limited liability company (LLC) for an investor to store precious metals at home or nearby for added privacy and control, but it violates IRS regulations and may conflict with laws allowing tax-advantaged IRA accounts.

The tax advantage could be lost, and penalties may be incurred with such an IRA. Checkan offered the following warnings.

• The IRS deems “home storage” IRAs as a distribution from your IRA for those under 59 ½, and individuals who participate will be subject to tax consequences and a 10 percent early withdrawal penalty.
• The IRS classifies storing IRA assets in your own home as “self-dealing,” which is prohibited. Indeed, the IRS regards prohibited transactions the same way as full distribution of IRA assets.
• The Industry Council for Tangible Assets (ICTA) produced a white paper outlining the explicit legal consequences for those who attempt either to pass off or engage in “home storage” IRAs.

Other than using reputable coin dealers and buying confidentially to avoid attracting thieves, one of the safest ways to invest in precious metals is through the Perth Mint Depository Distributor Online (PMDDO) program, Checkan said. The PMDDO program lets investors buy and sell gold, silver and platinum securely and directly online seven days a week, 24 hours a day, at some of the lowest premiums in the industry, he added.

Jim Woods, the editor of the Successful Investing newsletter, recommended two gold exchange-traded funds on Monday, April 23, after the Gold Fund Composite (GFC) that he tracks indicated the precious metal was starting a new uptrend. Even though the price of gold has dipped 1.67 percent during the past 30 days, it is up 4.31 percent for the past six months. A recent rise in the GFC caused it to climb above its 125-day moving average and trigger a buy signal.

Specifically, Woods advised his subscribers to buy the Market Vectors Gold Miners ETF (NYSE:GDX), with a 0.8 percent dividend yield, and the SPDR Gold Trust (NYSE:GLD). He monitors the funds and provides his subscribers with weekly updates and includes a recommended exit price for each position.

Amid the stock market’s volatility, world leaders threatening trade tariffs and the Fed’s rate-hike plans, precious metals offer an alternative investment. Investors just need to exercise caution to trade safely, securely and wisely.

Paul Dykewicz is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and dividendinvestor.com, a writer for both websites and an investment columnist with a weekly e-letter. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of a daily newspaper in Baltimore. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz.