If you are a goldbug or if you believe gold is a bubble, one thing is for certain… Investors have to be careful to avoid pitfalls, and the biggest fear is that there are scams out there.  FINRA has gone so far as to release a warning and supporting white paper on the matter called “”Gold” Stocks—Some Investments Mine Your Pocketbook” today.

The aim is to target gold stocks with wild claims.  They are advertised all over the internet and they often note, “Could turn $10,000 into $384,600.”  The other big claim is that a small company with vast reserves will end up being the perfect buyout target.  FINRA furthers goes on to point out that gold stocks tied solely to the rise in gold itself is a red flag, as is the threat of inflation and/or an economic meltdown.

Think this is not possible that there are scams out there?  FINRA noted that the SEC charged six individuals in June 2010 with running a Ponzi scheme that bilked more than 3,000 investors out of $300 million.

By the way, FINRA is ONLY covering the investment aspect of gold.  It has not addressed the issues of counterfeit gold coins, gold-plated coins being sold as pure gold, the ‘alternative to gold’ schemes, and a dozen other ways that are aimed to bilk you out of your cash. What about collectors getting nailed by inflated gold prices for coins that will never be melted down for gold because of their historic importance?

Is there a coincidence that gold is down over $80 today?  Gold futures were above $1900 an ounce in recent days, but now gold is back around $1780…

JON C. OGG