Before you buy

The Federal Trade Commission has this advice for anyone planning to buy collectible coins: Research, research, research.

• Ask for the coin's melt value, the intrinsic bullion value of the coin if it were melted and sold. Read trade magazines like Coin Dealer Newsletter or Certified Coin Dealer Newsletter to determine the wholesale value of the coins.

• Examine the coins in person. Photos and conversations with the seller won't cut it.

• Ask for the coin's grade, and whether it was certified by one of the major grading services: Professional Coin Grading Service (PCGS) and Numismatic Guaranty Corp. (NGC). Verify the serial number of the certification with the service that supposedly issued it.

• Get a second opinion about the grade of the coin.

• Get written copies of the coin dealer's return and buyback policies, and note their restrictions.

• Consider the tax implications. Certain gold products, classified by the government as collectibles, may care higher income tax implications.

The FTC says buyers of bullion or bullion coins -- whose value depends on their metallic content --also need to get smart. "Being uninformed can have serious consequences," the agency says.

The most common bullion coins are the Amercian Gold Eagle, the Canadian Maple Leaf, the Australian Gold Nugget and the African Krugerrand.

The U.S. Mint has two types of bullion coins. Proof coins are minted for collectors and are usually sold by the U.S. Mint in protective displays. Uncirculated coins are sold to authorized buyers based on the current spot price, plus a premium charged by the Mint. Their metallic content is guaranteed.

Foreign coins may not meet the same standards. The prices of these coins depends most heavily on their melt value rather than their grade.

The FTC advises:

• Shop around. Most banks offer gold bullion, often at lower markups than dealers.

• Get an independent appraisal rather than accepting the seller's.

• Factor in associated costs, such as insurance, safe deposit box or other storage fees.

• Walk away from sales pitches that minimize risk and those claiming that written risk disclosures are unnecessary formalities.

• Refuse to "act now," regardless of the consequences.

• Ask for a guaranty or certificate of authenticity for the bullion's precious metal content. But beware: such certificates can be faked. Research the company behind the guaranty before you buy.

• Be wary of false claims. Some sellers overprice their coins, lie about the melt value or try to sell bullion coins as rare collectibles.

• Ignore sales pitches that make claims that particular precious metals are likely to increase in value. Be especially cautious of leveraged investment scams premised on these pitches. Here's how they work: A seller offers bullion at a fraction of its cost, with a lender paying the balance. The lender holds onto the bullion as collateral.

If the metal increases in value, you sell some or all of it to pay off your loan. But in the meantime, the seller may levy costly fees and commissions that wipe out the initial investment.

And if the value of the metal drops below a set margin, you may have to put in more money or sell the metal to pay off the loan. "Either way, it's very likely you'll lose some or all of your investment," the FTC says.