Gold at a discount: a bargain or a risky promise?

Gold is currently a particular focus for many investors. In times of inflation, economic uncertainty as well as geopolitical tensions, many investors are looking for safe forms of investment. Many people consider gold to be a “safe haven”. This perception is contributing to an increasing demand for new business models relating to purchasing of gold.

Purchasing gold at a discounted price under the “pay now, receive later” principle is being offered increasingly frequently via online platforms, social media or intermediaries. They promise that you can buy gold more cheaply if you pay the purchase price immediately, but if the delivery of the gold only occurs at a later date.

Providers often explain that they are able to pass on price advantages due to special purchasing conditions, purchases large amounts, or due to efficient storage. Sometimes additional incentives are offered, such as bonus gold or temporary special offers. In order to attract new customers quickly, some providers also use structured distributions systems or referral-based models, which provide benefits for existing customers if they refer other people.

Advertisements frequently create the impression of the it being a particularly safe and simple way for investing money, and that you just need to be patient until your gold is shipped. They often fail to say that gold itself does not generate any regular income, such as interest or dividends, and that the gold price may fluctuate considerably. The gold price doesn’t automatically increase. The actual risks are usually not adequately explained. These include the possibility of the risk of a total loss of the invested money.

Buying gold is presented as buying a typical commodity. In actual fact, investors are exposed to a significant risk that depends on the provider’s economic prosperity. If the provider falls into financial difficulties or becomes insolvent, in many cases no claim exists for the delivery of the gold. Furthermore, it is frequently not possible for investors to prove whether physical gold is actually purchased and stored safely. In some cases of fraud, gold is not bought, but client’s funds are used for the fraudster’s own purposes.

Many such business models, especially ones involving trading with physical gold, are not subject to effective control under supervisory law. Investors should therefore be aware:

Purchasing gold at a discounted price is not a low-risk form of investment, but a model that has significant and frequently under-estimated risks.

Anyone wanting to purchase gold, should check traders carefully and compare offers. Reputable gold traders are characterised by transparency. They quote prices clearly that are close to the current gold price, sell certified bars or coins and not resort to tempting offers or pressurise people to buy.