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Scammers target silver investors with fake coins and collectibles

Scammers target silver investors amid COVID-19
Jordan Major

The precious metal markets ended May 2020 with mixed signals. The futures traders kept the gold and silver prices relatively capped on May 28 despite a considerable plunge in the U.S. Dollar Index. Nonetheless, gold and silver prices enjoyed a month-end rally strengthening the bull market.

Silver’s high performance brought the gold-silver ratio back below 100 after registering record-high levels from the coronavirus-induced market crash in March. Some traders try to profit off trends in the ratio though the ratio itself is not available on any exchange.

The traders go long on one metal and short the other. Also, the long-term bullion investors use this ratio to measure the relative value when determining whether to go for gold or silver in their new purchases.

Silver price chart, last 12 months, data.

Currently, silver has the upper hand over gold in terms of near-term momentum and relative value. In the short-term, another spike in the gold-silver ratio may arise. But, if it surpasses the 100-level, it might represent another rare opportunity to acquire some silver cheaply.

Gold price chart, last 12 months, data.

Silver is still attractive even while at the 90s level since the ratio traded in the 30s in 2011. Platinum is also cheap currently. Since 2008, platinum has dropped from being worth twice the gold price to less than half. Just like silver, platinum has also appreciated recently.

Scammers sell fake silver coins

The COVID-19 pandemic and global economic lockdowns have affected markets differently. In that context, scammers have found ways to prey on the hopes and fears of investors and vulnerable people.

Some criminals are peddling phony charities, fake cures for the disease, counterfeit medical masks, and sham investment opportunities. They are finding creative ways of fleecing unsuspecting individuals.

The precious metals markets are not spares since counterfeit coins are showing up in several places.

Fraudulent advertisements for silver and gold coins appear on various platforms, including Facebook, according to the Anti-Counterfeiting Educational Foundation. Several of these scam offers are for numismatic coins.

These fake coins are placed in capsules with phony certifications that seem to come from authentic coin grading services. Awarding a coin with a forged grade can add thousands of dollars in artificial value.

Nonetheless, such schemes cannot affect bullion investors who stick to standard rounds, coins, and bars priced primarily on their metal content. These metals are not priced on their alleged rarity, collectible value, or their fancy certifications.

Dealers can also overhype and overprice even the genuine numismatic coins. Over the years, some of the dealers have faced prosecution for consumer fraud.

On the flip side, sketchy operators and criminals in this space have increased their advertising activities during this health crisis. These unscrupulous individuals aim to lure people seeking the protection of bullion into the market of overpriced and illiquid collectible products.

How to avoid precious metals scammers

The most important way to avoid scammers in the precious metals market is by sticking to the low-premium bullion items. Investors should focus on the actual melt value of the metal contained in the item they are purchasing.

Research from Anti-Counterfeiting Educational Foundation suggests that many phony one-ounce silver American Eagles are circulating in the marketplaces. The fakes have cheaper base metal, and mostly without any disclosure. 

Fraudsters are making realistic-looking phony silver coins aiming to exploit the bullion buyers who seem less careful when shopping for silver. Thus, always avoid disreputable or unknown sources whenever investing in the silver market.

In most cases, rogue operators try to dupe traders by offering lucrative deals. Experts say that anyone with such offers is always trying to scam investors.

Either the product will not be delivered or is a fake one if it gets delivered at all. In other cases, it might be genuine, but the terms and conditions of the sale make it overpriced. Ensure that you go to reputable dealers when acquiring precious physical metals.

The trusted dealer should have rigorous and highly sophisticated testing equipment to verify the authenticity of every metal that passes through their shop.

A few institutional futures traders can push paper prices up or down for gold and silver for no reason. In that context, the Justice Department and the Commodity Futures Trading Commission are investigating price manipulation and other related crimes done by big banks.

Nevertheless, long-term investors should focus only on the supply and demand fundamentals for silver and gold. The physical metal fundamentals eventually outgrow any form of scam in the market.

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