6 Gold Bar Scams: Avoid Fraud And Protect Your Money

Outsmart Fraudsters by Recognizing Common Scams

Jane Pardo | Updated December 30, 2023

Gold is a much-coveted precious metal many investors want to have. And scammers take advantage of that.

With the increasing demand for gold during economic downturns, fraudsters exploit unsuspecting targets and use cunning tactics to fool people.

That’s why we made this quick guide to help you learn about gold bar scams and avoid suspicious financial offers. Be a savvy investor with our must-read gold investing tips.

A gold scam involves enticing people to provide money in exchange for gold products, such as gold bars and coins, or financial returns. However, victims end up not getting their money’s worth.

Here are some of the most common gold scams you must be aware of and how to avoid them:

1. Counterfeit gold bars

Fake gold bullion bars are made of cheaper metals, like tungsten and brass, and plated with gold to pass the acid test. Well-made counterfeits even weigh the same as authentic gold and have fake refinery logo stamps, making them hard to detect.

  • Avoid buying physical gold products through online listings, classified ads, and websites like Craigslist and eBay. Swindlers use these third-party platforms to prey on novice investors eager to get the lowest premiums.

In 2012, a 10-ounce gold bar was found to be fake at a Manhattan jewelry dealer. The bar was filled with tungsten, which weighs nearly the same as gold but costs significantly less. The discovery raised alarm in the gold market because the counterfeit was professionally done, suggesting a potentially wider problem.

2. Advance payment gold scam

In this gold financial scam, the scammer usually poses as a gold seller pressuring the buyer to swiftly send an upfront payment. They entice unsuspecting investors with an unbelievably low spot price. Fraudsters also often pretend as very eager buyers with lots of money to spend.

Once they receive your money, you can no longer contact them as they’re off to find another victim.

  • Never send money without ensuring the other party is completely trustworthy and legitimate. Do not trust a private seller if you can’t verify their identity, credibility, and reputation.

3. Partial gold delivery scams

Bait-and-switch swindlers lure in people with partial delivery of gold where a buyer receives some of the gold bars they ordered. This gives investors a false sense of legitimacy.

However, the buyer never receives anything after that. Or in some cases, they get counterfeit gold bars with shiny real gold plating and fake non-gold core.

  • Scammers tend to instill a sense of urgency, usually claiming limited supply or the most affordable low-risk premiums that will yield exceptional returns.

4. Gold bar storage fraud

Scammers pose as gold bullion sellers, and they offer to stash your gold bars in a secure vault until the price goes up.

They promise to sell your gold when its value increases. But the catch — the gold doesn’t even exist!

5. Defunct gold mine investment scam

Scammers tell investors they want to raise money to open and operate a defunct gold mine. They promise high returns and a stake in the mine’s proceeds.

Unfortunately, there’s no gold mine, and the fraudsters disappear into thin air after pocketing people’s money.

The story of Bre-X is a notorious example of a defunct gold mine scam.

6. Pump-and-dump scheme

Instead of physical gold transactions, this classic fraud focuses on a public firm involved in gold mining.

Fraudsters aim to drive up the price of a publicly traded stock by aggressively promoting it. Then they unceremoniously dump their shares, enjoy huge profits, and leave investors with stocks worth far less than before.

In the 2010s, a scam involving a publicly-traded gold mining company called Petaquilla Minerals unfolded. Fraudsters pumped up the stock price with false claims about its gold mining operations in Panama, and then sold off their shares for a profit, leaving other investors with big losses.

Where to buy gold bars to avoid scams

Steer clear of dubious sellers lacking credibility and a good reputation. I recommend the following trusted sources if you’re interested in stacking gold:

  • Financial institutions (banks): Ideal for new gold stackers who want a sense of security, although banks typically have higher premiums
  • Legitimate online bullion dealers: Best for new and seasoned investors who want a wide selection of gold products
  • Reputable local bullion dealers (physical store): Recommended if you prefer to personally inspect gold bars to ensure authenticity before buying

Thoroughly research a bullion dealer before making any transaction. Read recent online reviews to discover the personal experiences of other gold buyers. Take note of common gold buying issues, particularly shipping, quality, and customer service.

Final thoughts

Now that you know the most common gold investment scams, be sure to take extra precautions to ensure every gold transaction is safe, secure, and legitimate.

Remember that experienced scammers have a pattern of luring in people with offers that are just too good to be true, fooling even the most sophisticated investors.

Always check the current spot price of gold. So if something sells for far below that amount, you’ll know better than get ensnared in a trap.

Written by Jane Pardo

Jane Pardo

Jane Pardo is our senior gold & silver expert. Jane lends insight into precious metals investing, collecting, testing, and maintenance.