LOGIC CAN SAVE YOU MONEY!

Due to our involvement in the physical gold market, I often come across companies or individuals who complain to me that they have been victims of fraud.

Most of the time the complaint comes from potential buyers who travelled to Africa or South America believing that they could buy gold cheap and ended up being ripped off.

In certain countries the authorities watch these buyers arrive with their cash and simply laugh and do not take preventive measures.

“Yet another person who will lose his shirt!”

But in the eyes of the authorities they feel that these buyers deserves what they get as they travel to a country they do not know or understand and think that they are smarter than anyone else and will therefore make a fortune. 

They clearly left logic and common sense back home.

The fact is that large discounts in gold do not exist and all these offers that are posted on LinkedIn and other internet sights are all fraudulent.

However on occasions sellers get duped. 

Recently several sellers across West Africa were defrauded.  The buyers were bidding prices that were equal to or higher than the LBMA price at the time. 

Logic should have kicked in and a warning light should have gone off.

Why would a buyer pay more than the LBMA when the gold in question is only 92% pure, he still has to transport the goods, refine the metal and then sell it ?

In order to do that you need to buy gold at a discount that takes into consideration purity difference, transport & insurance costs, refining charges and the need to make a small profit.

Yet these buyers were paying LBMA prices (this is the price for refined bars that are 99.99% pure) for raw gold that was only 92% pure. 

In the history of gold there have been rare occasions where VAT or tax loophole can explain such a situation. Today authorities have closed down those circumstances.

Yet none of the sellers took the time to think about why these prices were wrong: 

Greed had taken over and logic had disappeared.

 They transacted and they were even happier when the buyers paid them in cash. Another warning sign ignored!

There was a problem and the deals were all floored:

Unfortunately for the sellers part of the cash was false. The so-called buyers were in fact fraudsters and were using fake notes mixed in with real ones.

Only much later did the sellers come to realise what had happened but it was too late. The fraudsters had vanished into thin air leaving a real problem behind them as now fake notes were circulating in the economies of the different countries.

In both cases several steps could have been taken to avoid these frauds:

First of all it is essential to implement a solid Due diligence and Know Your customer “KYC”) process and procedure 

Please read: KYC &Due diligence: the first step to real business

The second step is to apply simple basic logic. 

If a deal is too good to be true there is a very good reason for this:

It is too good to be true!

Too many people this will appear obvious. It is however surprising to see how many adults convince themselves that they have found the deal of the century and carry on even though all the warning signs and signals are clearly there to be seen. As we are dealing with physical gold we occasionally call this "gold fever" and when a person is infected rationality simply disappears. 

Removing greed and applying logic can go a long way in helping a person or a company avoid fraud.

In gold there are some basic simple facts:

? Nobody gets rich quick!

? For raw gold, big discounts to the LBMA do not exist.

? For refined bars, these bars are sold at a premium to the LBMA.

So when a seller offers you gold (but that is also true for any commodity) at a discount to the price that makes no sense, walk away!

When a buyer bids you too high for gold, he is either money laundering or trying to defraud you so again walk away!

If you use this logic and apply good KYC and Due diligence you might be able to do a deal and keep that shirt on your back.

You will then be able to look at another deal and fight another day!

www.siriuscommodities.com