Advertisements promoting gold dominate the airwaves, touting it as the ultimate investment, the place to be in these times of financial and economic uncertainty. Although it is true that gold has been valued in all civilizations for some 6,000 years, will the respondents enjoy the benefits that the ads promise? Probably not.
Most of the firms sponsoring the ads promote gold coins at grossly inflated prices. At one time, a prominent company acknowledged marking up their gold bullion coins thirty percent but sometimes had markups of seventy percent. Another firm has been known to markup its coins one hundred percent.
How is it that these firms can convince investors to buy at such inflated prices when the normal markup on gold bullion coins today is two to three percent, depending on the coins and the quantities? Several factors come into play.
First, the ads are based on fear, and the telemarketers reinforce that fear by talking about alarming topics that dominate the news, such as the exploding national debt, increasing deficit spending and a dollar that is being printed with reckless abandon. The possibility of war with Iran or North Korea is often used to scare callers.
By focusing on frightful topics, the telemarketers get callers to react emotionally, instead of logically. Instead of buying gold as an investment, callers are moved toward buying protection against Armageddon.
Should the callers be astute enough to ask about the American Eagle gold coins, the world's best-selling gold coins, or the South African Krugerrands, the world's best-known gold coins, both of which carry very low premiums over the value of their gold content, the telemarketers unload their big guns and start talking about "gold confiscation."
In 1933, in the midst of the Great Depression, by executive order President Roosevelt made it illegal for Americans to own gold bullion or gold bullion coins. The order stood until December 31, 1974. Telemarketers call Roosevelt's act a "confiscation," but it was a "call-in" of U.S. gold coins.
Americans turning in their gold coins were given U.S. paper currency of equal face value. Still, Roosevelt's "call-in" was a dark moment in American history, and it haunts the gold market to this day. In the back of the mind of the most optimistic gold investor lies the fear that someday the government may again call in gold "if things get bad enough."
After instilling the fear of loss, the telemarketers introduce the notion of "non-confiscatable" gold coins: old U.S. gold coins, or modern U.S. proof gold coins or old European gold coins. The telemarketers assert that these coins are "non-confiscatable" because Roosevelt's 1933 executive order exempted "gold coins having a recognized special value to collectors of rare and unusual coins."