Gold Rush: Soaring Prices, Unscrupulous Precious-Metals Dealers, Right-Wing Paranoia -- We've Been Down This Yellow-Brick Road Before

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Now the firm supplies many of the retail shops in the United States, Canada, Great Britain, and Germany. To avoid competing with its own customers, the shops, Coins N Things doesn't sell directly to the public.

What all this means is that would-be gold buyers have to deal with the retail outlets, which may sell the products for a reasonable premium over gold's spot price — or not.

"We certainly can't dictate to our customers what they sell it for," Thompson says. "However, it is such a competitive market . . . making two or three calls to different people, you should be able to avoid overpaying."

Perhaps the biggest pitfall for would-be buyers is getting talked into buying numismatic (a.k.a. collectible) coins, which are sold at a much higher premium than bullion.

Unscrupulous salespeople shooting for higher commissions often try to steer buyers toward collectibles with fear-based pitches — such as that smaller units of gold (coins like the Swiss 20 franc, for example) will be easier to barter in a post-Apocalyptic world. Another claim is that numismatic coins might be exempt from government confiscation, as they were in 1933 when President Franklin D. Roosevelt banned private ownership of gold bullion.

The Web sites of many gold dealers stress the "privacy" of collectible coin purchases. This is a not-so-sly hint that customers do not have to provide a Social Security number upon selling the coins, but they do upon selling bullion because of the capital-gains tax.

A quick look at Better Business Bureau ratings is always recommended. Monex, for instance, a national boiler-room, gold-selling operation, gets an "F" grade from the BBB.

Many companies, however, are trustworthy. The BBB gives local dealer Richard Smith and his 31-year-old company, Coin and Stamp Gallery at 4216 West Dunlap in Phoenix, an A-plus rating.

Smith met with New Times in a small office at the shop on a recent evening, after the day's business had died down. An off-duty Phoenix cop leaned against a wall next to one of the display counters containing gold and silver coins, eyeing potential customers warily. Coin Gallery's minimum order for gold bullion purchases is 10 ounces — costing more than $12,000 by June's prices.

"Yes, there's a lot of money to be made peddling gold," Smith says.

The problem for consumers is that the retail gold industry is "a vast, unregulated field," says Smith. "There are no special qualifications to get into the business. There are fewer certifications than for cutting poodles' hair. It really becomes a confidence game."

Though Smith, in his late 40s, peppers the conversation with phrases common to the industry — "some people think the dollar is going to toilet paper" — he also pooh-poohs the "end of the world" sales pitch. He's critical of outlets that pitch numismatic coins to would-be investors, noting that the only reason someone should buy them is an interest in history and coins and for their own sake. He's "absolutely" politically neutral, he stresses, because he knows customers come in both red and blue.

"I don't think we're at the mania stage yet," Smith says. "We're not seeing the broad-based selling we saw in the 1970s."

Like Thompson from Coins N Things, Smith wants to believe that day is coming.

Once you've got your hands on gold, you have to figure out where to put it. If you don't store it in your home (where it can be ripped off), you have to trust someone else to hold it for you. A bank safety-deposit box is one choice, but that might not be the safest place if banks lock their doors after any financial holocaust.

Some companies, like Monex, don't always provide customers with their gold right away — they'll store it somewhere for the buyers' convenience. Others promise to sock it away for you in an offshore account.

Don Stott, owner of Colorado Gold in Montrose, Colorado, advises strongly against having others hold your gold. As a former employee of North American Coin and Currency, he knows all too well what can happen.

Stott, 76, started with the Phoenix firm in 1977 during the last big heyday of gold. As he tells it, sales were so good that in February 1980 he took home a $16,000 commission check for one month's work. Yet that was the same month he left the company because of worries it was being mismanaged.

"It was taking longer and longer for people to get their gold," he tells New Times. "I said, 'This doesn't look good to me,' so I just walked out."

He's not sure what happened to about $16 million in gold and silver that customers did not receive when North American collapsed in 1982, a debacle he calls "the biggest scam in the history of Phoenix, just about." Stott has nothing good to say about North American's former principals.

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Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.