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Lawmakers Take Steps to Protect Gold Investors

Gold
Jose Luis Pelaez | Iconica | Getty Images
Gold

As gold tops $1,300 an ounce, lawmakers in Washington are aiming to ensure that consumers don't get trounced by bad gold deals.

A House bill would arm consumers with more information about gold trading. Gold dealers' sales representatives would have to disclose to consumers the purchase price, melt value and the resale value of the coin or bullion they are buying.

At House subcommittee hearings Thursday on the advertising tactics of gold dealers, regulators discussed investigating some companies for using aggressive sales tactics to sell overpriced gold coins.

"Under a bill in Congress, gold dealers would have to disclose to buyers the purchase price and the melt and resale values of the coin or bullion."

Some Democratic lawmakers have singled out Goldline International, a frequent advertiser on conservative cable networks, as one the most egregious in its claims.

At the hearing, Rep. Anthony Weiner (D-NY), said: “The television gold industry is an industry, and is led by one particular company that has built up the industry on fear, lies and rip-offs.”

But Scott Carter, Goldline's executive vice president, defended the company’s comprehensive disclosure of information policy.

"Indeed Goldline believes its disclosures represent the best practices in an industry of more than 5000 precious metals and rare coins dealers," he testified. "These disclosures include clear examples and explanations of the risks and costs associated with acquiring precious metals—information which we provide throughout the sales process.”

Goldline does have an "A+" rating from the Better Business Bureau. However, the Federal Trade Commissionhas received 15 complaints against the company in the past 4 1/2 years, from consumers who say they bought coins that were not only "poor" investments, but had also been heavily marked up.

The reality is that gold dealers' mark-ups on coins can be significant. While the allure of this gold rally may tempt you to jump in, analysts say that to guarantee good value and investment, don't pay more than between 2 and 5 percent for a gold coin.

Juliet Mendez contributed to this story.

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