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Can you trust Goldline’s advice?

Consumer Reports Money Adviser: August 2010

Glenn Beck is fond of Goldline’s coins, but there are easier ways to buy gold.

"Trust the people at Goldline," says the Fox TV pundit Glenn Beck in an ad for the gold dealer, because the government could confiscate your gold and pay you less than it's worth. That happened in 1933, he says, so he recommends buying antique gold coins.

We checked out Goldline's products and prices and found that while a few of its deals aren't bad, you would probably do better to hold gold in other forms.

The real deal

Goldline's over-the-phone prices for bars and bullion coins (coins without collectible value) were on par with other dealers in May. Its online prices, however, were about 3 to 5 percent more. A Goldline rep told us that is because you have to pay by check or wire transfer when you buy by phone, which saves credit-card transaction fees.

But its prices for collectible coins are inflated. For instance, a four-piece Proof Gold Eagle coin set was selling for $5,924.63 on Goldline's website in May. The American Precious Metals Exchange offered the set at $3,295. A Goldline adviser recommended buying collectible coins because they're safe from confiscation. He also said you could sell them anonymously—you wouldn't have to report Social Security numbers to the government, as is done when buying most bullion.

If you buy from Goldline you'll face several fees, starting with shipping costs. The company will also store bullion for you, at a cost of 0.75 percent of your gold's value annually. Goldline promises to buy it back for a 1 percent liquidation fee and about a 4 percent discount on gold's price that day.

Consumers don't appear to have many complaints about Goldline. It has an A+ rating from the Better Business Bureau. But in May, Rep. Anthony Weiner (D-N.Y.) released results of his investigation into the company, alleging misleading sales tactics, hidden fees, and inflated prices.

We were also concerned about advice we got from a company rep. Some financial experts recommend keeping about 5 percent of a portfolio in gold as an inflation hedge; the Goldline rep suggested we go as high as 20 percent. To raise the money, he suggested we liquidate IRAs or old 401(k)s.

The bottom line

Financial experts generally advise against holding physical gold and instead recommend buying shares of an exchange- traded fund that purchases gold for clients and stores it in a bank. Buying gold ETFs involves trading fees and annual expenses of about 0.4 percent.

Beck's claims notwithstanding, government confiscation isn't likely to happen. The 1933 executive order was to prevent people from hoarding gold when the country was on the gold standard and there was a concern about a run on the banks, explains Jay Beeton, education director at the American Numismatic Association. And the gold wasn't confiscated; people were paid face value for it. "We're no longer on the gold standard, so hoarding is a non-issue today," he says.

And while you may or may not have your Social Security number recorded when you buy gold, you still have to report the outcome of any sale to the IRS.

This article appeared in Consumer Reports Money Adviser.

   

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