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Goldline, lawmaker do battle over gold coins

Rep. Weiner charges Goldline ‘grossly overcharges’ for gold coins

WASHINGTON (MarketWatch) –- Rep. Anthony Weiner clashed with a senior official from Goldline International Inc. in a politically charged hearing Thursday in which the New York Democrat charged that the Santa Monica, Calif.-based precious metal dealer ‘grossly overcharges’ for their gold coins.

Weiner, who has conducted an investigation into Goldline and gold-sellers, formally unveiled legislation he has drafted that would regulate gold-selling companies including Goldline to disclose to consumers the reasonable resale value of precious metals -- particularly gold coins -- they are selling. He argues that Goldline’s average markup was 90% above the melt value of their coins, with the largest markup on any coin being 208% above the melt value.

Rep. Anthony Weiner

Weiner also took aim at Goldline’s endorsers, which include prominent conservatives Glenn Beck, Mike Huckabee and Fred Thompson.

“The TV gold industry is lead by one company, Goldline, which focuses its energy on fear, lies -and rip-offs,” Weiner said. “Goldline gets people scared about the economy and their future, then they transition to a lie saying buying certain gold coins acts as a hedge against economic downturns and then the consumer is profoundly ripped off almost irrespective of how high the gold market is.”

Julius Bazan, a neurologist from New York, testified that in 2009 he was pressured by a Goldline salesman into buying gold coins instead of gold bullion. Bazan added that he bought $140,000 in gold coins from Goldline and when he decided to sell it six months later the investment was only worth $85,000 even though the price of gold had not changed significantly.

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“It felt like legalized robbery,” Bazan said. “Since the price of gold had not moved significantly, and had even increased slightly, I was astounded to learn the market price of these coins was about the same $85,000 on the very day that I had paid $140,000 for their purchase.”

Even as Weiner presses for more disclosure at Goldline, gold futures have soared in recent days to new records, fueled by fears of deflation after the Federal Reserve signaled it may inject more cash into the financial system to support the U.S. recovery. See MarketWatch's Gold topics page.

The Fed’s comments have largely been interpreted to mean that it will likely take further quantitative-easing measures late this year. Gold GCZ10  for December delivery hovered around $1,297 an ounce on Thursday on the Comex division of the New York Mercantile Exchange. Read about gold futures

Goldline Executive Vice President Scott Carter refuted criticism of the precious metals dealer, arguing that, in the highly competitive precious metals industry, consumers have numerous sources to compare gold prices. He added that Goldline discloses in a document it sends to potential purchasers that they can take a 35% loss if they sell it back immediately.

However, Rep. John Sarbanes, Democrat from Maryland, argued that even if these costs are disclosed in Goldline documents, the sales person in a conversation with potential buyers of gold coins doesn’t ‘affirmatively’ explain to purchasers the significant difference between what they are paying and what they would receive if they sold it back immediately.

“In the sales pitch, the oral discussion that is had, it is not the case that they [potential buyer] are made aware of the spread issue,” Sarbanes said.

Legislation is ‘unworkable’

Carter said Goldline believes that the legislation is “unworkable” and may result in “inaccurate information’ being conveyed to the consumer.”

His comments were backed, in part, by Rep. Ed Whitfield, Republican from New York, who argued that the price of gold fluctuates daily, and it would be problematic for Goldline sales representatives to provide accurate resale values. Whitfield added that Goldline points out that gold prices are volatile and that if purchasing coins for investment purposes it should be for a long term investment, preferably for five or ten years.

Carter added that, generally gold has been a great investment over the the long term, even though it can fluctuate.

“Even though spot gold prices have increased every year in the past ten years, like any asset, precious metals can rise and fall in value,” he said.

He added Goldline typically recommends that gold coins and bullion should not be any more than 5% to 20% of an individual’s portfolio and that it should be held for five to ten years.

“Dr. Bazan did not comply with the [diversification and holding period] recommendations we advised,” Carter said.

Politically charged atmosphere

The Goldline hearing was also politically charged, with accusations by Weiner that Goldline hired conservative Fox News talk show host Beck to sell its precious metals in advertisements at the same time as the commentator employs his credibility to “drum up public fears during financially uncertain times,” driving the public into buying gold.

Glenn Beck


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“Glenn Beck for example has dedicated entire segments of his program to explaining why the U.S. money supply is destined for hyperinflation with Barack Obama as president,” Weiner said. “He will often promote the purchase of gold as the only safe investment alternative for consumers who want to safeguard their livelihoods. When the show cuts to commercial break, viewers are treated to an advertisement from Goldline.”

In addition to Beck, Goldline has hired former Republican presidential hopefuls Huckabee and Thompson to help sell its precious metals.

“There is an ethical situation that emerges where if you are reporting the news as Beck does and making economic doomsday scenarios, but also trying to sell people gold as a hedge against the economic doomsday,” said Weiner spokesman Ben Fishel.

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