In the last few years, we’ve seen an explosion of businesses and websites offering to take your unused jewelry off your hands.
Presumably, we all have a stockpile of gold bullion sitting in our garages, and the only thing holding us back from fast cars and women is slipping all that old, dirty and useless gold between a folded sheet of thin paper and mailing it to a stranger.
Similarly, there are innumerable companies offering to help you invest in gold.
Both are nearly always scams.
And there are several problems with this whole setup.
First of all, the hook. Companies claim that because of inflationary pressures, the price of gold is being driven through the roof. So, you should invest in gold because the price is going up.
And that’s true. Inflation is a natural process, and it’s just something we have to account for when we go to put money away. Keeping gold, or commodities like it, can help to circumvent the loss of your investment value.
I want you to stop and think about what they’re saying for a second. Money, they claim, is worthless, and the value of gold is going through roof. So, send us your money and we’ll give you gold, the good stuff.
Only minutes later, you see commercial offering to send you cash for your gold.
If all were well in our world, the two companies would do business with each other and we’d never have to get involved.
Clearly something is up.
Now, if they really thought gold was more valuable than cash, why would they want cash?
Like the television scams selling (by their claim) ultra-valuable collectible coins, if they really thought Buffalo coins or blocks of gold were more valuable than cash, they’d never consider selling them to you. Never.
If this weren’t enough, and this will be our second point for those of you counting, it is extremely irresponsible to send precious metals unsecured through the mail to a stranger.
They can, for example, receive the watch, necklace or ring, melt it down and sell it, and claim they never received it. In place of your new fortune, you may receive a letter claiming your item was “lost in postage,” with no hope of retribution or justice.
Services like the U.S. Postal Service’s Delivery Confirmation provide some protection against these kinds of scams because they require someone to sign for the delivery, giving you proof the valuables were indeed delivered.
It’s important to remember these people run a business, and they’re out to make as much money as possible. How much money they make is directly related to how much they pay you for gold, so there’s a very strong incentive for them to pay out as little as possible.
Markets like this one take advantage of what economists call asymmetrical information. All that fancy, econ-noise jargon means is that someone in the deal doesn’t know as much as the other guy, which is probably you.
The used car market was the same way for a long time until the proliferation of the Internet and sites showing the fair market value of vehicles opened up all the same information to buyers and sellers going into the dealership.
Unfortunately, few people know the fair market value of gold and are thus extremely susceptible to being taken advantage of.
There is a right way to sell your valuables, and if you do decide to sell your gold, bring the items to a respectable dealer, compare prices, consider sites like eBay and do not, by any means, send anything valuable without taking advantage of services like Delivery Confirmation.
By the way, I have a bundle of grapes that will soon be worth 100 times their current price. Send me some money now, and I’ll pass a few your way.
Devin Graham is a 21-year-old business management senior from Prairieville. Follow him on Twitter @TDR_dgraham.