Beware of fake online gold shops!

The Covid-19 pandemic has not only fuelled the demand for gold as a store of value; the lockdowns also boosted online retail, and gold bars and coins were no exception to this trend. Unfortunately, an increasing number of fake online gold dealers have mushroomed in its wake, and warnings are being issued by precious metal portals such as the German Gold.de and Goldreporter.de.
 

How to recognise fake online gold dealers

To identify fake shops in general, consumers should closely examine both the imprint and quality seal of the online shop in question, as the German public broadcasting corporation SWR’s business and finance editors advise potential customers. Dubious internet address endings such as “de.com” can be an indicator of a fake shop. Also, advance payment can be a warning signal, although it is common in the gold online trade, since the precious metal price is prone to fluctuate between the date of order and the date of shipment. Therefore, the most important characteristic for a fake gold shop is the prices charged: even in the relatively non-transparent realm of physical gold trading, they deviate from the market price due to varying trading spreads, but no more than 4 to 5 per cent. According to Goldreporter.de, gold traders usually see a profit margin on bars or coins of a maximum of one per cent. All prices significantly lower than the trading spread corridor of 4 to 5 per cent are thus indicators of a fake shop.

Gold-backed ETCs: a cost-effective alternative

For investors seeking to benefit from the precious metal’s functions as a hedge against inflation and safe haven, ETCs backed 100 per cent by physical gold are a cost-effective alternative. Instead of 4 to 5 per cent, for example, Xetra-Gold is traded with an average trading spread of below 0.1 per cent. Also, its safe custody is taken care of by the issuer Deutsche Börse Commodities at a fee of 0.36 per cent of the investment sum, and each Xetra-Gold bearer note certifies the investor’s right to delivery of the respective investment in physical gold – albeit subject to an additional fee.

Arnulf Hinkel
Financial journalist