Gold 'Investments' May Not Pay Off, Consumer Group Warns

Consumers may consider gold and precious coins to be an effective investment hedge against inflation, but recent investigations by federal, state and local enforcement agencies suggest that some gold dealers may be leveraging recessionary fears to steer consumers into buying gold and precious coins at inflated prices.

That's prompted the National Consumers League (NCL) to throw its support to H.R. 6149 -- the "Coin and Precious Metal Disclosure Act," which the nation's oldest nonprofit consumer organization says would do much to give consumers an accurate picture of the risks associated with buying gold and precious coins.

Questionable sales tactics

In a letter to Rep. Bobby L. Rush (D-Ill.), Chairman of the House Subcommittee on Commerce, Trade, and Consumer Protection, NCL Executive Director Sally Greenberg conveyed the nonprofit organization's concerns about the proliferation of gold coins being marketed to consumers as investments, particularly in the midst of a difficult economy.

"Purchasing gold may be a useful way for consumers to diversify their investment portfolios. However, we are disturbed by reports of gold dealers pressuring customers to purchase collectible coins at prices inflated far beyond market value," wrote Greenberg. "Further, it concerns us that salespeople working for a prominent gold dealer were found by the Securities Division of the Secretary of State of Missouri to be offering financial advice to consumers without being licensed as investment advisors."

H.R. 6149 is designed to address these concerns by requiring disclosure of relevant fees and the purchase price, melt value, and resale value of coins and metal bullion.

NCL contends that these disclosures will help consumers more effectively evaluate gold investment opportunities.