If you've been offered this opportunity to get rich from gold, run in the other direction, says Tony Levene.
“Not all that glisters, [is] gold,” wrote 18th century poet Thomas Gray (author of anthology favourite Elegy in a Country Churchyard) in his Ode on a Distant Prospect of Eton College.
Today, however, he might have written “Not all that is gold, glisters”. For now that gold has become a commodity to invest in, rather than a precious metal for jewellery, it can form the basis of all sorts of trickery.
I'm not talking here about those adverts on daytime television or in your local giveaway newspaper that encourage you to turn your “unwanted gold” into “wanted cash” - even if those few TV commercials I've had the misfortune to see are cringe-makingly awful. I never cease wondering, however, at those who entrust their granny's wedding ring via the post to a firm of which they know nothing. Who can tell if the price is fair?
So although those firms do give cause for concern, today's warning is not about them. Instead, it centres on a new attack on your wealth – gold bullion cold callers.
Gold bullion cold callers
One hyper hyped-up caller phoned me earlier this week. He told me his name was Billy. He then launched into his script – gold was the most amazing investment ever as the price just kept rising and rising. But at the same time, it was the safest investment the world has ever seen because no one ever lost in gold.
I told him that I doubted both of those statements as gold had plunged some $300 an ounce from its peak around $1,920 over the past few weeks – about 15% before any other costs such as storage and insurance are factored in. So the price certainly did not keep rising forever so it could not be the safest investment around. Anyone who was suckered in at the peak will currently have lost a lot of money.
I had expected Billy to come back with the “market is taking a pause for breath” or “it's a healthy and realistic price now the speculative froth has been blown off” style of arguments. But no. He simply denied that the price had ever been higher than it was on the day of his call.
Silly Billy. Where have you been these past weeks? Or at least that's what ran through my brain. What came out was a spluttered “maybe I'm wrong so could you check that for me?” Perhaps Billy didn't like being interrupted in full sales flow or he could not bear doubt.
Whatever his motivation, he slammed the phone down – the call, unsurprisingly, came from “number withheld”.
The real reason for the call
What was the point of this cold call? As a rule investment cold callers (always remember legitimate FSA-regulated firms are not permitted to cold call) sell something that's cheap at a very high price. So landbankers buy a field at £10,000 an acre and convince investors to pay £100,000 – a thousand per cent mark-up. Boiler room share operations pay fractions of a penny for the virtually worthless shares they push and sell them for pounds.
But if you want to play the gold price, you can buy gold futures where the gap between buy and sell values is just 0.2%. Bullion sales offer a slightly greater gap, maybe five to ten percent. Either way, these are slim pickings for a boiler room operation.
Now, either Billy's firm, which was set up in early September but already , according to its online offering, boasts “institutional investors”, doesn't realise this – in which case they are so silly that they can safely be ignored, or they've found another way of stripping money from investors.
The latter is more likely. And the clue is that the firm goes on endlessly about “bullion warehouses outside the taxman's reach.”
Beware glistening gold ‘certificates’
However many gold bars, ingots and coins with the claimed 99.9% purity that you buy, you will never see them because you are persuaded that the worst thing is to take personal physical delivery. All investors get is a piece of paper detailing their holding in some offshore tax haven.
Now anyone with a computer and a colour printer can turn out “certificates”. They can also present meaningful photos to show your precious metal – again, these are really easy to do.
Firms like the one Billy works for can then simply disappear as fast as they came onto the scene, leaving investors with worthless pieces of paper.
By the way, I'm still waiting for a genuine lovemoney.com reading investor to show me they've made a genuine fortune thanks to a phone call out of the blue from an organisation they've never heard of.
Follow me on twitter: @tonylevene1