Is this "Gold Investment" a Scam?

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winstonteo
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Is this "Gold Investment" a Scam?

Post by winstonteo »

I recently found out a friend who is in this profitable Gold business is leveraging his earning/profit further by doing the following method:

The Gold he owns, he use it to pawn at the pawnshop giving him extra cash to buy additional gold from the gold company. So from the owning of example 1kg gold, he could now purchase and own say 300g more, making it 1.3kg holding.

Based on the 2% monthly returns and the process of maturity date and exchange period, he can now earn additional profit by buying and selling (pawning) it at the pawnshop.

I realize this could be self-destructive due to GREED , and i believe becos of the system, many others Gold traders agent would be doing the same as well while reaping more profit meantime.

If Gold bubble really burst, many Gold trader and investors will be at a LOST, especially those who play such dangerous game.

I wonder how destructive will it cause the disturbance of the Gold market if people are doing like that? Any opinion?
Dennis Ng
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Re: Is this "Gold Investment" a Scam?

Post by Dennis Ng »

winstonteo wrote:I recently found out a friend who is in this profitable Gold business is leveraging his earning/profit further by doing the following method:

The Gold he owns, he use it to pawn at the pawnshop giving him extra cash to buy additional gold from the gold company. So from the owning of example 1kg gold, he could now purchase and own say 300g more, making it 1.3kg holding.

Based on the 2% monthly returns and the process of maturity date and exchange period, he can now earn additional profit by buying and selling (pawning) it at the pawnshop.

I realize this could be self-destructive due to GREED , and i believe becos of the system, many others Gold traders agent would be doing the same as well while reaping more profit meantime.

If Gold bubble really burst, many Gold trader and investors will be at a LOST, especially those who play such dangerous game.

I wonder how destructive will it cause the disturbance of the Gold market if people are doing like that? Any opinion?
Singapore is a very small market. All these people can lose all their money and it won't affect the global gold market much. Gold prices are set internationally, not by Singapore.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
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Re: Is this "Gold Investment" a Scam?

Post by Dennis Ng »

Waterman wrote:
Dennis, your comments are really frank and unpleasant to the ears, but there are good truth!

Unless i have a house to stay and another one for collecting rent, if not the increase in property price don't have any meaning. The house i stay in is increasing in value over the years, but unless i sell it and take cash, if not, i can only enjoy the increase in value "on paper".

But if i sold the house, i will have to buy another one to stay. If i want to keep portion of the cash from the sale, i will have to buy another smaller house, or one further away from the city.

Where is the meaning for this value increase? For those who still think that their home is an investment asset, it is really a NOT.

Kudos to you, Dennis.
Hi Waterman,
I don't say words to please people nor I do say words unpleasant to offend people.

My only guide to what I say is my Conscience, nothing else really matters to me, including other people's views/comments about me. I'm someone who will NOT hesitate to tell the Truth even if the Truth hurts and nobody wants to face the Truth. And you can count on me to continue to tell the Truth.

At a public talk at Bras Basah Complex last Sat (10 Mar 2012), I explained the "Gold investment schemes" currently offered by some companies do NOT make sense at all. For example, one day I checked and found out that one company offers to sell Gold per gram at S$94. While on the same day, one can buy 1 gram of Gold from UOB at S$75, so one overpays by 25% when they buy from this company. And then the company offers to pay "investors" 2% per month, or 24% a year...so guess where the "interest" of 2% comes from?

It's a well known fact that Gold does NOT pay interest. So any company or individual telling anyone that Gold pays interest is simply NOT telling the Truth.


Then a person from the Crowd retorted back to me:"but the company promise me to buy back Gold from me at the same price they sold to me!

Well, how do they do that? I explained further. They know that when they sell gold to 100 people, most people would just "re-invest" and continue to "earn 2% per month' and NOT take out the principal they invested with the company. So if they sell gold at S$94 to 100 people, and only 10 want to get out and request to be paid S$94, of course the company can do that.

But if imagine all their customers (100 of them) request to be paid back, what will the co do? Will they honour their promise? Are they in a Financial Position to honour their promise? What will they likely do? They are likely to just close their business.

So far, in Singapore, 2 companies that offer gold Investment (one is known as The Gold Label) and another I can't remember the name, already closed down...

The member of the public at my talk "retorted back":" but this company I invest Gold with has been around for 3 years and still around"...

My reply: well, you can hope that this company will still be around in 3 years, but I think high chance that it might no longer be around, as 2 other companies have closed down. If they pay you 2% per month, you must pray that the company is around for the next 50 months so that you can get back your capital 100% in full.

And my parting words to the crowd was: go check MAS Investors' Alert list, this company you mentioned (I won't mention names) is already in MAS Investors' Alert List, so MAS already warns you, if you insist to invest with the company, then should anything go wrong, don't blame MAS for not warning.

Click below for MAS Investors' Alert List:
http://www.moneysense.gov.sg/check_our_ ... l_IAL.html

This person then walked away and said:"we have different opinion, I have a different opinion on this."

Is this a case of having different opinion? Or is it a case of this person refusing the Face the Truth even after I shared the Truth?

Was I trying to offend him or was I just trying to share the Truth?

Well, at least the minimum I know is that my Conscience is clear and I've done my part to warn the public.
Cheers!

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
yhendra
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Re: Is this "Gold Investment" a Scam?

Post by yhendra »

The company has been around 3 years. Hmmm, See Gold Price chart below.

From end 2008 the price has increased a lot.
Of course, during this period, there is buffer for the company in the event an "investor" sell his/her gold at 'initial invested price' to re-sell the gold at higher price (plus about 20% markup some more to the new "investor"!)

Those people who bought around Aug 2011 onward, do you think the company willing to buy back at the original invested price, after paying some "dividend" back to the investor?
What if the gold price drop further??

From this chart alone, and the recent stock market rise, people may want to sell their gold to get the money and invest in shares?
Gold my drop back to around US$1,500.
This represents 20% lost from the high US$1,900. So again, is the company willing to buy back the gold from its investor??

Image
Cheers!
Hendra
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serenecsc
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Re: Is this "Gold Investment" a Scam?

Post by serenecsc »

yhendra wrote:The company has been around 3 years. Hmmm, See Gold Price chart below.

From end 2008 the price has increased a lot.
Of course, during this period, there is buffer for the company in the event an "investor" sell his/her gold at 'initial invested price' to re-sell the gold at higher price (plus about 20% markup some more to the new "investor"!)

Those people who bought around Aug 2011 onward, do you think the company willing to buy back at the original invested price, after paying some "dividend" back to the investor?
What if the gold price drop further??

From this chart alone, and the recent stock market rise, people may want to sell their gold to get the money and invest in shares?
Gold my drop back to around US$1,500.
This represents 20% lost from the high US$1,900. So again, is the company willing to buy back the gold from its investor??

Image

Have anyone heard of XX XXXX Trading Pte Ltd?
They are somehow similar to XXX Pte. Ltd where XX XXXX will sell gold bullion to customers and the customers are entitled to sell-back the purchased gold bullion back to the company. XX XXXX will honur the buy-back option regardless of the fluctuations in gold price. Illustration:
Customer buys at S$8,500 for 100grams (cost price is S$7,000). Upon the purchase the customer will be paid "interest" on a quarterly basis at 1.5%pm, i.e. S$$127.50 x 3 mths =$382.50 (for 3 mths). Hence per annum, total interest earned will be $$1,530. At the end of 1 year, customer will sell back to XX at S$8,500. Hence the interest earned after keeping the bullion for 1 year will be 18%pa.
The risk: if the company is bankrupt, the loss will be $8500-7000 = $1,500. (since the customer is holding the gold, he can sell it to the market, assuming the mkt price is $7,000)
However, downside is $1,500 and upside is $1,530..not 2xs.
But as compared to keeping in the bank as deposit, interest is currently very low. Any comment? Scam? like XXX?
racoon12
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Re: Is this "Gold Investment" a Scam?

Post by racoon12 »

Hi

Goto "http://www.moneysense.gov.sg/en/Underst ... -List.aspx" where it is a Government website for the "Alert list" for advise. Hope it can help anyone in someway.

Million thanks
Lim CK
aldray
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Re: Is this "Gold Investment" a Scam?

Post by aldray »

Hi,

Actually you guys got this wrong on gold paying interests or dividends. These companies are trading companies, not an investment company or a gold mining company. They are paying you 2% out of making 20-30% from the sales difference paid upfront, where the money can be either used for speculations or buying more physical gold. The things you are not aware is that the gold these companies buy in huge volumes (in tonnes) and gold price are significantly lower than the market spot price.

An illustration is any of these companies assuming sell you a Pamp 100g gold bar at $9505.6, where UOB bank sells you at $7312.00. The difference is $2193.6 or 30% difference. First of all, these companies can buy pamp gold at price even below bank rates due to high volumes; e.g its like buy 5 get 1 free. So, what I am saying is that 2% is nothing to these companies, they can afford to pay you even more %. The business they are doing is taking your money to buy gold and at the same time creating a gold market.

It was after a few years that I met a gold trading industrial sifu that he unselfishly shared with me how these companies make money.
aldray
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Re: Is this "Gold Investment" a Scam?

Post by aldray »

You need to know what is Market Spot Price versus FOC price for commodities, then this will make some more senses why these business can earn alot of money.

To everyone, it sounds like 2% per month is alot, but with my FA eye open after my new sifu shared on gold trading combine with existing TA eye from Dennis, both eyes opened and saw that 2% per month is really not alot in this business.
aldray
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Re: Is this "Gold Investment" a Scam?

Post by aldray »

I suggest that this topic if to be continued due to interest, moderator to open a new topic in Graduate section as this information is openly accessible by public. :mrgreen:
aldray
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Re: Is this "Gold Investment" a Scam?

Post by aldray »

If you still don't understand, think about commodities like rice in a supply-chain model, how the money exchange hand and how many times the money exchange hand.
learner
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Re: Is this "Gold Investment" a Scam?

Post by learner »

serenecsc wrote: Have anyone heard of XX XXXX Trading Pte Ltd?
They are somehow similar to XXX Pte. Ltd where XX XXXX will sell gold bullion to customers and the customers are entitled to sell-back the purchased gold bullion back to the company. XX XXXX will honur the buy-back option regardless of the fluctuations in gold price. Illustration:
Customer buys at S$8,500 for 100grams (cost price is S$7,000). Upon the purchase the customer will be paid "interest" on a quarterly basis at 1.5%pm, i.e. S$$127.50 x 3 mths =$382.50 (for 3 mths). Hence per annum, total interest earned will be $$1,530. At the end of 1 year, customer will sell back to XX at S$8,500. Hence the interest earned after keeping the bullion for 1 year will be 18%pa.
The risk: if the company is bankrupt, the loss will be $8500-7000 = $1,500. (since the customer is holding the gold, he can sell it to the market, assuming the mkt price is $7,000)
However, downside is $1,500 and upside is $1,530..not 2xs.
But as compared to keeping in the bank as deposit, interest is currently very low. Any comment? Scam? like XXX?
I reproduce this news article below (which was copied and pasted in this thread by Dennis last time):

-------------------------------
http://www.todayonline.com/Singapore/ED ... Alert-List

SINGAPORE - It is a new form of investment that emerged here last year, but the lucrative returns on gold investment schemes - from 4 per cent every three months to 9 per cent after six months - are proving irresistible to many investors.

It is believed to have already attracted thousands of people who have sunk in millions of dollars.

Yet, even as more gold investment companies sprout here, one firm, The Gold Label, has already landed on the Monetary Authority of Singapore's (MAS) Investor Alert List (IAL), prompting some investment experts to caution people against this new product.

The IAL warns consumers about unregulated persons who are not licensed or authorised by the MAS.

The Gold Label, which was incorporated in April last year and is believed to be among the bigger gold investment companies here, was included on the IAL on Nov 28.

The company sells gold at 25 per cent above the market price. Investors hold their gold for six months before selling it back for the entire principal sum invested.

Profits come in the form of 3-per-cent interest on the day of purchase, and at the three-month and six-month marks, making a total of 9 per cent.

According to checks with the Accounting and Corporate Regulatory Authority Singapore, the company's directors filed a notice on Oct 8 this year declaring its inability to continue business by reasons of its liabilities.

Three days later, it filed another notice of the appointment of provisional liquidators for voluntary winding-up.

To The Gold Label's investors and even its own agents, however, nothing seemed out of the ordinary until some clients went to its Battery Road office on Monday to receive their payouts.

Staff of the firm - which has some 1,000 clients according to its former agents - dropped the bombshell that it was facing cashflow problems and would delay their payouts for nine to 12 months.

Some of these investors, who pumped in thousands to hundreds of thousands each, have since gone to the Commercial Affairs Department.

One of them, undergraduate Gladys Siahaan, 22, who invested $22,000, told Media-Corp: "It's quite ridiculous for them not to honour their contracts with investors.

"Their business is going on as usual, people are still buying, but they say they can't afford to pay us back."

The Gold Label's general manager for operations, Ms Joanne Lim, would only say that there is "no doubt that there's a cashflow situation within the company" but the company is "trying its best to help clients".

In response to MediaCorp's queries, an MAS spokesperson said consumers are "strongly encouraged" to deal only with persons regulated by MAS.

"MAS aims to safeguard the interests of consumers by ensuring that only competent and professional persons are allowed to provide financial services," the spokesperson said.

"The laws administered by MAS also require disclosure of information on investment products being recommended to consumers.

"If consumers choose to deal with persons that are not regulated by MAS, they forego the protection afforded under laws administered by MAS."

Sometimes, all that glitters ...
by Teo Xuanwei
Schemes offered by two other gold investment companies - looked into by MediaCorp - vary slightly, but they also promise lucrative returns over very short periods.

XXX sells gold bullion and coins 2-per-cent lower than the prevailing market value. After 30 days, an investor can sell back the gold at the market price on the day of his purchase, or choose to hold on to the gold, according to information on its website.

Gold Insignia gives investors gold bars with a value equivalent to 70 per cent of the invested sum.

It promises 4-per-cent interest every three months and investors can sell their gold back anytime at the market price.

Former NTUC Income chief executive and consumer rights advocate Tan Kin Lian said such gold investment schemes could be operating on the basis that money from later investors is used to pay the earlier ones.

He also urged for greater regulation, saying: "The Government should make it illegal for any company to operate an investment scheme without getting a licence from MAS. They should not be allowed to collect deposits or investments and promise a high return, when they do not have the assets to back up their liabilities." Teo Xuanwei


-----------------------------
yhendra
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Re: Is this "Gold Investment" a Scam?

Post by yhendra »

aldray wrote:Hi,

Actually you guys got this wrong on gold paying interests or dividends. These companies are trading companies, not an investment company or a gold mining company. They are paying you 2% out of making 20-30% from the sales difference paid upfront, where the money can be either used for speculations or buying more physical gold. The things you are not aware is that the gold these companies buy in huge volumes (in tonnes) and gold price are significantly lower than the market spot price.

An illustration is any of these companies assuming sell you a Pamp 100g gold bar at $9505.6, where UOB bank sells you at $7312.00. The difference is $2193.6 or 30% difference. First of all, these companies can buy pamp gold at price even below bank rates due to high volumes; e.g its like buy 5 get 1 free. So, what I am saying is that 2% is nothing to these companies, they can afford to pay you even more %. The business they are doing is taking your money to buy gold and at the same time creating a gold market.

It was after a few years that I met a gold trading industrial sifu that he unselfishly shared with me how these companies make money.
Hi aldray,

I don't get the intention on your postings and subsquent ones.

Do you agree about the method they do by promising "return" or "dividend" on gold?
It's literarily for me is a kind of Ponzi Scheme, where earlier "investors" or buyer are paid with their own money or money from late investors.

Dennis mentioned that Gold does NOT give dividend.

If you compare it with other commodities, say rice. You buy rice, it doesn't give you dividend.
If you say it is trading, yes. You buy low and sell higher to get profit minus operating costs.
It is a normal supply chain process.
But, when you sell to the end user or customer, you do not promise any dividend or returns.

Would you mind to clarify your postings, in order not to confuse others.
Thanks!
Cheers!
Hendra
Like to share and give opinions.
However, please do your own homework!
You have been given the tools and the knowledge, try to fish yourself, so you will never be hungry again....
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learner
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Re: Is this "Gold Investment" a Scam?

Post by learner »

8)


Before one dreams happily of the potential profit for such a gold-bar program, one ought to work through the potential loss first.

Risk management should be the priority.


When gold prices are on a downtrend,
1. More customers would prefer to sell back their gold to the gold-bar company upon maturity of holding period
2. Company would tend to be in a loss situation (since the price the company agreed to buy back gold will be at a higher price than the market price and they could not resell the gold to others without making a loss... plus also the accumulated 2% regular returns they need to pay customers)
3. Company would tend to face a cash-flow problem since it needs to pay more customers to buy back the gold and to pay out the 2% regular returns they promised to customers.
4. Company thus faces a temptation to wind up (so as they do not need to honour their agreement to buy back gold from customers)
5. Company really choose to commit suicide

If all the above happens,

loss of each customer equals the original 20% to 30% premium indirectly paid to the company when customers purchased the gold-bars in the past and also the drop in market price compare to the price at the time of purchase. So if gold price drops 15%, total loss will be 35% to 45%.

Next is to estimate the probability of such a situation occurring. One clue is to look at those other gold-bar companies that have already died to assess how real is such a possibility. Another clue is to look at the historical movement of gold prices.

Of course different people have different risk profile. But one must at least first understand what is the risk of loss (i.e. the statistical expected loss) before he is in a position to say whether or not his risk tolerance can accept that level of risk.

If one is not discouraged by the estimated risk of potential loss, then one proceeds to estimate the statistical expected gain (a function of both the probability of gain and the amount of gain).

Too often people are blinded by the well-painted potential gains that results in them developing a blind-spot to the potential loss.
(or that their lens are being overly coloured by the bright rainbow colours of potential gain that results in them using those bright rainbow colours to colour over the black of potential loss)



Regards,

learner
aldray
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Re: Is this "Gold Investment" a Scam?

Post by aldray »

I posted my reply in Fundamental Analysis section.
chuajinyi
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Re: Is this "Gold Investment" a Scam?

Post by chuajinyi »

Agree with Dennis sifu.
Ladies and gentlemen, Do not be blinded by greed.
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