Many investors that invest in gold in the stock markets also dabble in trade of physical gold in the form of coins and sometimes even jewelry. Due to the explosion in gold prices lately, a number of gold buying services have popped up promising to give great returns for just putting that unwanted jewelry in an envelope. For the savvy investor, the whole business model should raise some eyebrows. The industry is unregulated and the inability of ordinary consumers to fairly price the gold they own makes it a breeding ground for “legal” fraud. If you talk to the companies, they will claim they are providing a valuable service with satisfaction guaranteed. In most cases, satisfaction is guaranteed is just a marketing ploy as they know less than 10% will ever complain about the service because they have no other service to compare it with. A recent ConsumerReports study showed that a recent test with a gold necklace that had an actual meltdown value of $70 was offered the paltry sums as indicted in the graph below:
It is a matter of time before the industry sees regulation and oversight and for these companies that happen to be publicly traded companies (such as MyGoldEnvelope, ticker MFGD), their long term viability is in question.
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