One way to invest in gold bullion is to buy Krugerrands online. It's fast and easy, but there are some pitfalls to avoid. As with any large purchase, it pays to do your research and be an informed consumer. The most common concern when buying bullion online is fraud. We are going to focus on eBay, as is probably the best known online auction site (and a great source for Krugerrands), but most of this advice also applies equally well for purchasing gold coins online from a dealer, or even a classified ad. You can find some very good deals- and of course like every public market, there are some things to be wary of.
Know Exactly What the Krugerrand is Worth
There are several ways to determine how much a Krugerrand is worth, the easiest would be to check the current Krugerrand price here on Gold Krugerrand Ferret. At the very least you need to know the spot price of gold, you can see the spot price for gold on our gold Krugerrand price page, or in any financial newspaper. Remember that Krugerrands trade above spot, the difference is called the premium, which is assessed for mintage, shipping, handling, and profit. This assumes you are buying a regular Krugerrand for its bullion value, and not a proof Krugerrand, which is valued for additional processing during the mintage.
The Federal Trade Commission recently put out a guide on bullion coins - with some interesting information for consumers. One item in the report that may not be familiar to novices is "Melt Value" for Krugerrands. This is an easy one- the weight is stamped on each Krugerrand (for example 1 oz), you simply look up the value for 1 troy ounce of gold and you have your melt value.
Interesting Fact: Krugerrands are actually 22K- they are mixed with copper for durability, but are a bit heavier to make sure you get the full amount of gold, so a 1/2 oz Krugerrand has 1/2 oz of gold.
Begin Your Purchase with an Investigation of the Seller
If you are going to bid on a coin on eBay, check out their feedback score. In addition for looking for positive feedback, also take account the number of transactions. For example, we would be much more likely to buy a Krugerrand from a seller with a 98% satisfaction rating and 1000 ratings, than a 100% satisfaction rating and two transactions. The longer they have been around on eBay, the more accurate the feedback.
If you are going to buy a coin from a dealer, go ahead and check them out at the Better Business Bureau. You may also want to check them out at Industry Council for Tangible Assets (ICTA), to which many gold dealers belong.
Ways to Validate Krugerrands Before the Sale
There are a few ways you can increase your confidence that you are, in fact, purchasing a genuine Krugerrand. The eBay policies on coins and precious metals are very specific; for example a replica or copy coin must be marked as such. So your first check is to read the auction carefully. Also, be very wary if the Buy it Now price is set well below spot. Would you sell a Ferrari for the price of a Honda? If it's too good to be true, it probably is.
Look for a certificate from the SAGCE (usually included with proof coins and the red leather case), or coins professionally graded by NGC or PCGS. Peter from PCGS provided the following information about coin grading advantages:
There are many benefits to having your coins graded. Namely, graded coins have more stable pricing which promotes confidence in the buying and selling of graded coins, because both parties have an approximation of what is fair. As a third-party grading company, we do not buy, sell, or appraise coins. The Authorized Dealers may be able to assist you in obtaining the information you are seeking and you may locate a dealer in your area by visiting the attached link: http://www.pcgs.com/dealer/index.chtml. Moreover, you may be interested in the information offered within the price guide: http://www.pcgs.com/prices/ and coin facts http://www.pcgscoinfacts.com/ links to further research your coins.
If you do decide to have your coins graded, PCGS accepts coins through its network of Authorized Dealers and members of the PCGS Collectors Club. You may send your coins to a PCGS Authorized Dealer in your area who will then submit them to PCGS on your behalf. A list of Dealers is available on this website. If you wish to submit your coins directly to PCGS, you may join the PCGS Collectors Club. Please visit the various links on our website to learn more about how the coin grading process can enhance your coin collection. Once a member the cost of grading can be found here: http://www.pcgs.com/grading_list.chtml
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Collectors Universe, Inc.
Another neat way you could increase your confidence in the authenticity of an eBay Krugerrand is a new service offered by a company named We Go Look. Here's how it works. We Go Look has over 7,000 independent contractors in all 50 states, called "Lookers". You set up an account on We Go Look, and then coordinate to have a Looker in the area meet the eBay seller. They can take pictures, ask questions, and take measurements. If you have a Fisch (see more below), you could even have the Looker run the tests for you. It's almost like having a friend right there, who can go take a "Look" for you. They also provide the same service for other big ticket items, like cars, houses and boats.
Ways to Validate Krugerrands After the Sale
Due to the expense, most Krugerrands are not professionally graded. In the absence of a coin dealer, or a graded, slabbed coin, a simple set of four tests can aid in the detection of fake Krugerrands.
You can buy the Fisch Krugerrand tester which tests all of these options for you. Or you can perform a manual check yourself using the mint's Krugerrand specifications, a digital caliper, and a digital scale.
Shipping, and How Not to Lose $1000 on a Claim
Many people don't know it, but there's pretty much one way to ship gold bullion. Registered and Insured from the US Post Office. Why? Because it's signed for and tracked at every stop between the shipper and the buyer. If it's lost, file a claim, and you can get the full value back. Ship it USPS Express? Publication 122 limits the Post Office liability to $15. How about FedEx and UPs? Nope, according to their riders, they're not liable for bullion losses. So be careful, and insist on the right shipping, or it can be a very costly mistake.
Fraud and Scams
Be alert for the warning signs of fraud. The most common forms currently involve a requests to switch payment from PayPal (which offers buyer protection, see below) to a cash transfer service, such as Western Union. Don't do this, it's almost impossible to get your money back. Also, do not switch payment to a foreign location, where asset recovery is much more complicated. Often the scammer will claim to be an intermediary for the seller, and want a "commission". Another common scam is to claim to be going abroad for a couple of week, and request the money be sent to foreign location. Unless you're dealing with a well known dealer, limit your transactions and cash transfers to the United States.
Actions to Take if Things Go Wrong
The vast majority of eBay transactions go just fine, but sometimes things go wrong. If you have a problem, your first action is to contact the seller, and give them a chance to make things right. If that doesn't work, it's time to open up a dispute. eBay has contracted with Square Trade, to handle their dispute resolutions. Here's the link to open up a dispute. Paypal also offers a dispute resolution system. Finally you can contact the Internet Crime Complaint Center (IC3), which takes Internet crime complaints from either the victim or third parties.
You can safely buy Krugerrands online as long as you exercise a bit of care and take the time check the facts.