Precious metal investments are surging in popularity — and for good reason. They’re commonly sold as a hedge against inflation and stock market volatility and as a financial refuge in times of general economic uncertainty. Although these physical assets and the investment products that hold them (such as some mutual funds and exchange-traded funds) can be appropriate for certain investors, precious metals may also pose fraud risks for you and your business.
Favored By Investors & Criminals
Gold and copper prices recently hit all-time highs. Silver and platinum prices are also elevated in 2025. Most people are familiar with the use of precious metals for making jewelry, but they also have broad industrial and manufacturing applications, including in renewable energy products such as solar panels and electric vehicles. Some countries back their currencies with gold reserves.
Criminals also favor them. Members of organized crime have long used precious metals to launder ill-gotten gains. The assets are easy to transfer and smuggle, difficult to track, and are bearer instruments, meaning that, like cash, individuals in possession of these commodities own and control them.
Plenty Of Schemes
But there are other ways for criminals to profit from precious metals. Recently, a Delaware man was sentenced to 65 years in prison for misappropriating $76 million from commodity investors who paid him to store their precious metals. The scheme has been called the largest theft from a depository of precious metals in U.S. history.
Unfortunately, scammers are inventive when it comes to precious metals fraud. Some deploy the classic tall tale about an unremarkable piece of land that will yield “guaranteed riches” with its untapped gold mine. Then there’s the frequently seen going-out-of-business sale of “below cost” gold coins. It’s important to know that legitimate dealers liquidating inventory would never slash prices below a commodity’s market price.
In other circumstances, shady operators encourage people to drain their retirement accounts to buy precious metals at huge markup prices. The profits, of course, go directly into the dealers’ pockets. Sometimes, as with the Delaware scheme, victims are left with nothing.
Keeping Clear
Most precious metal dealers are required to create and follow an anti-money-laundering program. Certain provisions of the Patriot Act and rules of the Office of Foreign Assets Control also apply to precious metal dealers. To help gauge the honesty of dealers you do business with, confirm they’re in compliance with all regulations.
The Commodity Futures Trading Commission further warns buyers to beware of dealers who:
- Claim to have insider knowledge, such as relationships with reputable precious metal firms
- Assert that other successful investors made their money with the asset
- Offer a break on their commission if you buy immediately
- Suggest that “supply is limited”
Volatile Assets
Keep in mind that even sound precious metal investments (including sector funds offered by respected investment companies) can be extremely volatile and lose money in certain years. Solid financial advice from reputable professionals is critical to avoiding both investment fraud and unnecessary risk. Contact us.