How to identify a good gold bullion company?
Before buying gold and silver for the first time you need to find a good bullion company. In general most of the bullion traders are ok but as there's more and more players coming into the market we would recommend that you do proper due dilligence before buying gold and silver online. As a great believer in the yellow metal we are interested that you have a good first experience.
The following information talks about the most important checks before buying and what CelticGold does to ensure a smooth business.
1. Check on Corporate Details: Registration, VAT ID, ownership, capitalization, Imprint/Legal Disclaimer and Terms and Conditions
Every website should display the above corporate data; with most websites a direct access to the corporate data is shown in the footer. This means scroll down to the bottom of the page to access corporate registry information. We have done extensive research looking at other US and European bullion dealers and we have come accross several companies where this information was missing, incomplete and/or not matching.
If you see this with any business: It‘s a warning signal!
The corporate registration can be checked in most countries in English. You should check that the corporate data matches the official entry. Sometimes it‘s a bit tricky to find the official company register as there are data providers who advertise and charge money. The national corporate registries are free of charge and allow you to check the entries on corporate name and registration numbers. Next step is to check the VAT ID and make sure it is linked to the company and valid as well.
The registered director should match the displayed director in the Imprint on the website . In addition the Terms and Conditions should match the corporate entry matching the registration number.
For example: CelticGold is the name of the company displayed on the website. The company under this name is registered in the Commercial register in Germany with number HRB9192. And the terms and conditions state that the business that is being done on the website celticgold.eu is with the company called CelticGold, registered HRB9192.
We came accross bullion companies where the Terms and Conditions do not match the corporate registry. So this is a very simple way of cross checking if a company is legitimate.
Capitalization, date of formation and Ownership: In some countries you can form Limited companies with no capital at all but the registry shows for example 1,000 Euros.
The capitalization is mostly not-important when the figure displayed does not match any real capitalization.
The next step is to check the ownership.
Is it private owned company?
Is it a subsidiary of a big corporation?
Who is liable if something goes wrong?
When was the company registered in the commercial register?
Usually the longer a bullion company is on the market the better; but this is not to say that a newly founded company is a negative sign. Obviously if you find a new company than the scan should go a bit deeper to varify that the company is legitimate.
In Germany you need to actually come up with the written capital in the corporate registry. And the CelticGold branch in Estonia is fully owned and operated by the German headquarter. This means CelticGold Inc. is fully liable to what happens in Estonia. Find more information in „About CelticGold“ on our website. (click About CelticGold).
Who is the insurance provider?
Is this information transparent and available?
When it comes to insurance we need to look at two different aspects:
a) Shipment insurance - we cover these aspects in point 5) Shipments and
b) Storage insurance
In general your goods should be insured with both services against theft and damage. If the bullion company stores with high security facilities the insurance is paid to the company who runs the facility.
For example Prosegur in Germany is insured by Mapfre and Prosegur confirms to us every year that the vault is insured. This is part of the standard procedure.
What payment options are possible?
How much is the handling fee for Paypal and Credit Card payments?
Most customers request instant and electronic payment methods because this is the way of internet payments. This is fine and the fees these payment providers charge are minor when running a retail business.
In the bullion industry margins are tiny and therefore bullion traders decided to
a) charge an additional handling fee or
b) display different prices for bank transfer and electronic payment providers
The question is: How much is the additional handling charge?
Some dealers charge up to 5% more for Paypal and Credit Card payments.
This is mostly not the fault of the bullion company as processing fees will vary depending on transaction volume for electronic payments. We always recommend to use the bank transfer when you trust your bullion dealership as this is the cheapest way to send payments.
When buying for the first time use Paypal as this offers maximum customer protection with a small order to test the company. However it is best to compare handling charges beforehand.
There are bullion companies that charge less than the above quoted 5%. If you decide to pay via electronic payment providers then be sure to check on these numbers before you buy so your not surprised by these additional charges.
4. High Security Order Handling and Storage Provider
When trading precious metals most bullion companies have their own high security premises or rent a secure space with one of the global high security vaults.
However, some companies advertise with the big names such as G4S, Viamat and Prosegur but actually don‘t have a contract with one of these companies.
We have come accross this. The second way of operating a bullion business is simply to operate it from home or a private flat. Some of the German bullion companies operate this way.
It is simply cheaper as involving a high security provider costs money and it increases handling charges per order; these additional costs can be saved when operating from „home“ and therefore prices with these bullion companies are a bit lower.
At CelticGold we partner with Prosegur in Germany and G4S in Estonia. All orders are handled and packed with four eye principle and CCTV recording.
Is my shipment insured?
The most economic way to ship gold is through one of the main carriers such as FedEx and UPS and to have an additional valuables insurance that covers the unlikely loss of the shipment.
Any other form of shipment such as private courier and door-to-airport are much more expensive. We have come accross bullion companies who claim to insure the parcels but the pricing of the „insured“ shipment does not allow for an insurance premium.
Our insurance broker who deals on a European basis said that it is very difficult for new companies to qualify for insurance because insurance companies will not take on the risk. We noticed that some large bullion companies who shipped insured in the past have now added a separate button charging 0.6% for insurance in the shop checkout.
CelticGold‘s insurance premiums rose 30% in the last two years; this is simply linked to the general trend but we remain below an industry average of 0.25% to 0.5%.
A 10,000 Euro shipment costs the bullion company 25 Euros calculating an average premium of 0.25%. Re-think „free shipping“ when buying 1 or 2 ounces of gold when the dealer has 5-10 Euro margin on the coin and ships the coins free of charge within the EU.
Some huge bullion companies that have a large capitalization and „insure“ the shipment out of their own pocket which is fine.
But it is a warning signal if the company has low capitalization and ships free of charge with incredible good gold prices. Some smaller dealers will go out of business if they claim to ship insured and even one package containing a few gold coins goes lost.
This is why we recommend checking on capitalization before buying. CelticGold‘s insurance is with Generali in Germany, one of the biggest insurers in Europe.
It is said that websites are created easily out of nowhere. This is for sure valid for blogs and normal websites. As a corporation we unfortunately don‘t share the same experience.
Websites and the running costs are quite expensive when done in a professional way. Website projects can easily go into several houndreds of thousands of Euros. Usually the user can determine the difference from a low-cost to a professional website first sight.
A website that looks and functions nice and provides the above quoted informations usually gives a good indication on whether the business is legitimate or not.
Find here a few additional checks for websites that can be done:
Are the SSL certificates valid?
Is the site free from Malware and Spam?
When checking out is the area SSL secured for maximum data protection?
Some websites display logos, the so called trust badges from third party providers such as McAfee.
Click on these logos to have a validation. This is what these logos are for.
Research found that most users trust these displayed logos and do not cross check the information. This of course allows con artists to create an impression of security which is not there. Better be sure.
Prices displayed are calculated on a basis of the „spot“ price plus premium. The spot price is the price of the commodity silver and gold. The premium is the markup the dealer charges.
The premium includes the mints, wholesale and bullion company margin incl. transportation and insurance to the point of sale. Some of the prices you will see are too good to be true.
In case that the bullion company has bought back from private clients or has any other source in the secondary market prices can be close to the spot price.
In the current market environment in January 2014 premiums for 1oz coins range between 4% and 6%; depending on the country and company you buy from.
In Germany there‘s a saying: We all cook with water.
And this is very true in the bullion industry. As the product is totally comparable and the price of the underlying commodity transparent you will be able to identify the premium with 50 different bullion companies across Europe very easily.
After doing this you have a good idea on where prices are. You will see that prices with most companies are relatively close together because „We all cook with water.“
This means we have all running, insurance, handling and transportation costs. If you see an offer that is way below the industry average; then this is a warning signal.
The only exception is silver as there is VAT in all countries on the silver product except Estonia. When you see silver coins which are supplied in Estonia then the prices you will see are real even if they are 10-20% lower. But this is simply linked to the zero VAT situation.
8. Product Information and Grading
A good bullion company will provide product information such as
Country of Origin
The grading shows the state of the gold and/or silver product. Some dealers sell circulated coins which have a grading of fine or less and therefore the product is of a lesser quality than a „mint-state“ product.
There are different gradings on coins that vary between the US and EU. Find here a link to Wikipedia about gradings
At CelticGold we display the grading on every product. All offered products are „Extremely fine“ or „Mint-State“ which is new. Extremely fine coins are not of much difference to mint-state coins but they have been traded and in circulation before. You will hardly notice the difference between an Extremely fine coin and a Mint-State coin when buying from CelticGold.
9. Customer reviews
Some companies use a third party provider to show reviews; some companies display customer feedback on their website. Whichever way the company goes; you should be able to read about experiences and the company should offer to arrange contacts to customers. We have come accross fake reviews and it doesn't matter which feedback provider the company uses.
One bullion company copied the full testimonial from our website and posted it as theirs with Trusted Shops. But the customer bought never from them.
Trustworthy, eh? We have emailed Trusted Shops to ask them how they handle fakers but haven't received a reply from them.
Read more about the different methods of organizing reviews in „11 new Testimonials published“
Summary on „How to identify a good gold bullion company“
The consumer‘s mindset is programmed to convenience and expects a smooth service. But better be sure as it‘s sound money you buy with currency and we recommend to be sure about your bullion company.
The above check points guaranty an in-depth research about the company you intend to buy from. It is vital to have a good feel before buying. In general most of established bullion companies are very good but do your due dilligence. Check on corporate details, costs and internet security and you are set up for a smooth buying experience.
Remember that gold and silver is the only sound money we know of and the long term fundamentals show a raise in wealth for all gold and silver owners.
|Older CelticGold Market Report 19th January 2014||Newer CelticGold Financial Strategies 2014|