Precious Metals Offers: Price Risk, Financing, Storage, and Dealer Markups

Gold or silver can be presented as a refuge from uncertainty, but the transaction can still contain price risk, financing costs, dealer premiums, and problems proving that the metal exists. This guide examines common precious-metals sales arrangements and warning signs identified by the CFTC. It helps buyers distinguish the market value of a metal from the total cost of the offered package, especially when the seller finances the purchase or promises to store the metal.

Adapted from public-domain educational material published by CFTC. Fynoptic has organized and edited the material and added introductory and practical guidance. Sources were reviewed on October 28, 2026; original publication dates, where available, are listed below.

Gold Isn’t Always a Safe Investment

Maybe you’ve seen the commercials on TV, videos on the Internet, or received something in the mail. They predict economic instability and use graphs of past performance to “prove” gold, silver, or some other precious metal is not only your safest bet but is destined to double or triple in value.

The truth is gold and other precious metals are highly volatile and past performance is not a good predictor of future returns. If sales pitches also include a lot of doom-and-gloom or high-pressure sales tactics, they could be setting you up for fraud.

All that Glitters

Banks and other big investors do buy gold, other precious metals, and commodities like oil, to hedge against inflation and other economic risks. Some investment advisers may even recommend that individual investors put small percentages of their diversified portfolios in precious metals too. But that doesn’t mean that gold or silver or other metals are “safe” places to park your wealth.

Like other commodities, precious metal prices rise as demand goes up, so when economic anxiety or instability is high, the people who typically profit from precious metals are the sellers. Premiums, fees, and commissions can also drain the profit from your purchase. If you are financing your purchase, and not physically receiving the metal, check to see if the seller or firm is registered with the National Futures Association. If they’re not registered, they are likely breaking the law and you should submit a tip to the CFTC right away.

In 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act effectively banned most over-the-counter retail contracts involving gold, silver, and other metals. No commercial entities are allowed to enter into off-exchange commodity transactions using loans or margin. However, the law doesn’t apply to metals transactions that result in physical delivery within 28 days of the purchase.

Firms selling and delivering precious metals to retail customers within 28 days also do not have to be registered with securities regulators.

For example, from a recent case, the CFTC ordered an individual and his firm, Southern Trust Metals, Inc., to pay more than $2.5 million in restitution because they claimed to purchase physical precious metals that were allegedly held in depositories in London or Hong Kong. It was reported that customers were told they could purchase additional metals with loans offered by the company. In reality, no metals were purchased or sold and the defendants didn’t provide any loans. Instead, they transferred customer funds to engage in margined derivatives trading. These practices are illegal but are not uncommon.

Trading Metals

There are several ways you can buy and sell precious metals. You can buy bullion or coins from a bank or other dealer. You will pay the spot price plus a markup or “premium.” You’ll want to compare premiums from multiple sellers to make sure you’re getting the best price. For you to make a profit, the spot price would need to increase enough to cover the premium plus any other costs associated with selling the metal. You can learn more about what to consider when buying coins and bullion at the Federal Trade Commission’s website.

Hedgers and speculators also buy precious metals on the futures markets. Hedgers use the markets to lock in future delivery prices. Speculators try to make money on trades and add liquidity to market.

You buy futures contracts using margin, which means you can control a large contract position with a relatively small amount of cash. For example, gold trades in 100 ounce contracts. If you want to buy a December gold contract worth $420,700 ($4,207/ounce x 100 ounces) you would need to maintain a margin value of $20,400. This amount of leverage could mean big profits if the price of gold goes up, but it could wipe you out if prices drop. Here’s why: For every $1 the price drops, you would lose $100. That money comes out of your margin account and must be replaced. The spot price would only have to fall about 5 percent to wipe out your initial $20,400 investment.

Precious metals prices are predominantly determined by supply and demand, but can also be impacted by other external influences. These can include inflation expectations, the strength of the dollar to other currencies, geopolitical events, and related commodity market activity such as the price of other precious metals or other commodity prices. Also, there are often substantial fees associated with opening and maintaining an account. These do not include commissions, which could reach upwards of 15 percent on the leveraged amount. Costs can add up quickly.

Warning Signs

• Be very suspicious of unsolicited calls and demands to act now. No reputable firm or broker would need to deploy high pressure tactics. In fact, if you receive a cold-call, just hang up.
• Be wary of offers made on television, radio or on the Internet, especially if they use a name that sounds like an official government agency.
• Be suspicious of claims of big returns for very little risks, or that offer guarantees or agreements that limit your losses.
• Watch out for offers that require you to only pay a small percentage of the total purchase price, or that allow you to pay with a loan financed by the company.
• Beware of claims that the metal you purchase will be stored for you in a bank or other facility.

Precious Metals Fraud

The following information is designed to notify you about tricky promises of easy profits from rising prices in precious metals such as gold, silver, palladium, and platinum. Below is information about these offers and simple ways to spot offers that could be scams.

Signs of a Possible Fraudulent Sales Pitch

• Lead you to believe you can profit from current news already known to the public.
  “Since that mine disaster, you are certain to earn big returns on your deposit.”
• Made by people who call themselves “metals dealers” or “merchants”.
• Advertised on radio, television, or online.
• Contacts you asking for personal information such as your name, phone number, and email and home address.
• Calls received from a broker or salesman from the company to promote the precious metals purchase.

Possible Persuasion Tactics You May Experience

• Dangling the prospect of wealth and enticing you with something you want, but can't have.
  "This gold purchase is guaranteed to rise double what your current investments are doing."
• Trying to build credibility by claiming to be with a reputable firm or to have a special credential or experience.
  "Believe me, as a senior vice president of XYZ Metals Merchant Inc., I would never sell an investment that doesn't produce."
• Leading you to believe that other savvy investors have already invested.
  "This is how Bob down your street got his start. I know it's a lot of money, but I'm in and so is half our club.”
• Offering to do a small favor for you in return for a big favor.
  "I'll give you a break on my commission if you buy now—half off."
• Creating a false sense of urgency by claiming limited supply.
  "There are only two units left and the Asian market is about to open, so I'd sign up today."

Frequent Sales Arrangement That May Indicate Problems

• Claiming you can make a lot of money with little risk by purchasing through a “financing agreement”.
• Structured so you only pay a small percentage (between 15% and 25%) of the total purchase price.
• Full price paid by a loan, that the company arranges, to finance the rest of your purchase.
• Claims that the company will store the precious metals for you in a storage facility or “bank”.

Frequent Problems

• Often do not use your money to purchase metals at any time.
• Do not actually arrange for loan financing with an independent financial institution, but charge phony interest .
• Do not store metal with an independent bank or storage facility, but charge storage fees.
• Fraudulently fail to point out that because you are not paying the full price for the metals, you will have to send the company additional funds if prices move unfavorably.
• Often use your funds to pay themselves commissions, leaving little for you.
• Usually do not make you the promised profits and lose all or a significant portion of your money.

Precious Metals Sales Warning Signs

• States that precious metals transactions are not regulated by the CFTC or the National Futures Association.
• Agreement that does not identify the financial institution or bank that will be loaning the you money.
• Agreement that does not identify where the physical metal is located.
• Claims to deliver the physical metal to an overseas storage facility.
• Difficulty in verifying the company’s license.
• A salesperson that cannot provide a way to prove their licensure from a government agency.
• A salesperson offering highly complex purchasing techniques for unusual success.
• Missing documentation that seems necessary.

Before Investing in Precious Metals, Ask, Ask, and Ask Some More!

• Contact the CFTC at 866.366.2382 or the National Futures Association to check the company’s registration status, business background, and disciplinary history.
• Ask how the financial professional is qualified to provide you with this service.
• Ask how the product meets your financial needs.
• Ask how the financial professional is paid for his/her service.

If you have questions, are aware of suspicious activities, or believe you have been defrauded, please contact the CFTC quickly. Call the CFTC or file a tip or complaint.

Putting this into practice

Get the metal's description, total price, financing charges, storage terms, and resale arrangements in writing. Compare the package with independently available market information. If the pitch depends on urgency, guaranteed safety, or metal you cannot verify, pause before sending funds or borrowing to complete the purchase.

Sources and further reading

• Gold Isn’t Always a Safe Investment — CFTC
• Precious Metals Fraud — CFTC