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Is Goldline A Scam?

Gold has always been seen as a nice safe store of value. When the world is in crisis, people turn to gold for stability, which is why the price of gold is around $1,200 an ounce these days. I’m not an investor but one important lesson, repeated by savvier investors, is that gold itself may be an investment but it’s true value is as an independent store of value. Should your home currency ever be deemed worthless (in the case of hyperinflation), you could take your gold to another country and convert it into their local currency. If your government were to collapse, you could go elsewhere and still have purchasing power.

You can see how gold has value when the world is in crisis right? That’s given rise to a lot of companies that are looking to make money from the increased popularity in gold. I’m sure you’ve seen ads from Cash4Gold, looking to pay you top dollar for your unwanted jewelry, but there are also companies on the other side. Companies who have gold and are looking to sell it. One of those companies, made popular by their spokesman Glenn Beck, is Goldline.

People want to know – is Goldline a scam? Representative Anthony Weiner of New York seems to think so. [3]

Is Goldline a Scam?

The short answer is No. Unlike Cash4Gold, which has been shown to employ questionable sales tactics [4], Goldline is a legitimate seller of gold.

However, that doesn’t mean they’re the best place to buy gold. Fortunately gold, like any other commodity, is traded on the open market and you can get a spot price for it. You can use this spot price to determine the true market value of the coins you’re buying to see if it’s a good deal. When the cost of the coin is significantly higher than the gold value, you are overpaying to own gold. The gold coins might have artistic or numismatic value, above and beyond the metal value, and every business has to add a premium for profits, but at some point you are overpaying.

That’s the principal complaint about Goldline.

Bid-Ask Spread

In an open marketplace, the bid is the amount someone is willing to buy something for. The ask is the amount someone is willing to sell something for. Market-makers, the people who “put” sellers and buyers together, can generate a profit off the bid-ask spread – they buy it at one price and sell it at a higher price. In the Consideration for Investors section [5] of the Account & Storage Agreement, Goldline explains that the bid/ask spread on semi-numismatic and numismatic coins is 30-35%! That means Goldline is making at least 30-35% off each sale… that’s a pretty healthy profit margin.

Goldline is, by their own admission, overpriced.

Here’s a video from the Dylan Ratigan Show on MSNBC that looks at Goldline (includes Representative Weiner, Peter Schiff)

Here’s another video of Peter Schiff explaining why Goldline is overpriced:

Protip from the video: If you want to invest in gold, buy gold through an ETF.

Goldline isn’t a scam, they’re a savvy business. They recognize that people are panicking and they are putting out a product that people think they need. They’re advertising on programs, and using pitchmen and women, that bombard their viewers with doom and gloom (perhaps rightly so). Who is to say the numismatic value of these gold coins isn’t 30-35%? 🙂

Is this any different than someone selling bottles of water at $2 outside a ball game or a concert?

(Photo: bullionvault [6])