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Buying Gold – Caveat Emptor!

Buying Gold – Caveat Emptor!

With the dollar continuing it’s slide and investors becoming more worried about the global economy, gold and other seemingly dollar hedges have increased in popularity. However, when buying the yellow metal in particular, investors need to be diligent and carry out their research. If we can learn anything from the past, it is surely from the gold storage scheme that ripped people off to the tune of $59 million in 1983.

It was Dan Rosenthal, who at the time ran The Silver and Gold Report that lifted the lid on a company called Bullion Reserve of Northern America. The group was run by a Los Angeles gold and silver dealer named Alan Saxon who claimed to be holding $60 million worth of customers gold in allocated accounts that were locked away, 200 feet deep in underground vaults managed by Perpetual Storage Inc. near Salt Lake City.

After requesting an endorsement to his subscribers, Rosenthal agreed to promote Saxon’s cause temporarily until he received a certified audit of the gold in storage. The cert never came however and after much debate, Rosenthal arranged to visit Perpetual Stock to see it for himself. Upon his visit, Rosenthal knew within minutes there was a problem.

“They should have had between $60 and $100 million dollars worth of metal…I looked and said:” This is a real problem”. I saw maybe $3 million worth of gold” After close physical inspection, with laborious checking and logging of the bars, Rosenthal went to Los Angeles to confront Saxon. “I expected him to be jumping to give me answers and he just bulls***ed me” Rosenthal recalls.

Upon his return home and after deep deliberation, Rosenthal decided he could no longer recommend Bullion Reserve of North America and advised his subscribers that if they had any money with the group, they should withdraw it. When Rosenthal’s report hit the press, all hell broke loose. According to Rosenthal, other dealers rallied around Saxon and he received death threats while thugs tailed him.

However, six weeks later, Alan Saxon was dead. He had run a hose from the exhaust pipe of his motorcycle into the sauna of his luxury condo in Venice, California. He apparently started the engine and then sat in his jeans and socks while the sauna filled with carbon monoxide. When his body was found, so was a tape recording. The recording cited Rosenthal’s expose and Saxon’s mounting business losses as the problems that drove him to kill himself.

When accountants examined the books of the company, every word Dan Rosenthal had said was proved true. The FBI came in later but it was too late to save the customers who had been taken in by Saxons glorious promises.

So, for today’s investor, the message should be clear: “All that Glistens is not Gold”. Take the time to find out as much as you can about any dealers you are buying from for there are no guarantees.


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