The beginning of this year has witnessed a remarkable surge in the price of spot gold, setting new historical records as it soared past the $2,940-per-ounce mark—a staggering increase of over 11%. This meteoric rise in gold prices has not gone unnoticed by investors, many of whom are eager to capitalize on these gains. However, some have resorted to dubious methods, such as using credit cards to buy gold in a bid to turn a profit, only to discover that this strategy comes with significant risks.

In this volatile environment, a new trend has emerged among certain groups who dub themselves “gold miners.” These individuals are active on social media, discussing a technique for cashing out through credit card purchases of gold. They advocate a method where users buy gold using their credit cards, then quickly sell it to precious metals recovery platforms for cash, touting it as a low or even cost-free way to “trade gold” and make substantial profits.

These gold mining groups gather prospective "miners" by posting on social media, subsequently leading interested parties into specific chat groups where they regularly share "gold-snatching" strategies. In these groups, members typically find two types of participants: those who aim to make profits by quickly selling their purchased gold bars to reclaim their investment and earn cash, and those who act as intermediaries, transferring their gold purchases to the group leaders in exchange for a commission.

One group member from Jiangsu shared an intriguing perspective with our reporters, suggesting that by using certain banks' interest-free installment loans or redeeming points to offset interest charges when buying gold, investors can minimize their costs. The expenses involved would mainly revolve around the transaction fees for selling the gold.

For example, most credit cards come with at least a 30-day grace period. If an investor buys gold when its price is relatively low (say 800 RMB per gram) and then sells it once it rises to 850 RMB per gram, they stand to benefit not only from the price difference but can also use the earned money to pay off their credit card bill, potentially leading to additional profits.

Various platforms and gold shops now allow customers to use credit cards from multiple banks to purchase gold. For instance, Chowsang Sangmau supports installment payments via credit cards from major banks like China Construction Bank and Postal Savings Bank, and often offers discounts, such as a reduction of 220 RMB on purchases over 5,000 RMB. Similarly, the Jiangdong self-operated store of China Gold allows payments via credit cards from a range of banks.

Banks have also joined in on the action by initiating gold repurchase schemes. For example, the Agricultural Bank has recently published a gold repurchase strategy, reporting it has established close to 3,000 outlets nationwide for these transactions. Investors noted that this has made the cashing out process much smoother. “Both gold brand stores and banks provide comprehensive buying and selling channels, making it easier to liquidate gold,” a member of the infernal group from Henan stated to our reporters.

However, despite the apparent allure of gold trading on credit, the underlying risks cannot be overstated. The idea of purchasing gold on a credit card with the expectation of selling it later for a profit seems appealing; however, it is fraught with pitfalls that can lead to considerable losses.

A bank official expressed skepticism, stating that engaging in credit card gold trading is inherently risky, with investors often facing various fees beyond the price of the gold itself. When purchasing gold bars, buyers typically incur an additional fee of around 10 RMB per gram on top of the exchange rate. When redeeming, they might receive 2-4 RMB less per gram than the market rate. Hence, the actual cost can amount to approximately 12-14 RMB in fees, making this a steep investment.

The volatility of gold prices poses further threats. For instance, if someone buys gold and its price subsequently declines, they may find themselves in a position where they need to sell quickly at a loss due to the approaching credit card repayment deadline. “If the gold price falls and has not rebounded by the repayment date, investors may be forced to sell at a loss, leading to cashing out at unfavorable prices,” a representative from a commercial bank's credit card division warned. Despite the recent upswing in gold prices, predicting future trends remains a gamble.

The reliability of gold repurchase platforms varies significantly, which may further impact investors' ability to realize expected returns. Presently, the gold repurchase market is rife with irregularities, including wide discrepancies between repurchase prices and market values, varying fees, and predatory practices by some dealers that raise the bar for repurchase thresholds.

A brand jeweler expressed concern over common pitfalls investors face in the gold recycling process, noting that issues can arise regarding weight and purity. For example, some vendors might manipulate weighing scales to show lower weights, citing reasons like wear and tear on the gold. Others might initially quote a high price but then reduce it significantly, claiming insufficient purity during the final assessment.

Moreover, experts have indicated that engaging in credit card gold cashing might cross legal boundaries once a certain threshold is reached. Lawyer Deng Guosheng from Zhaoqing emphasized that those involved in facilitating such transactions could inadvertently become part of a network of concealment for illicit gains, thereby endangering their own financial security.

In conclusion, while the allure of gold investment during a price boom may seem tantalizing, the intricacies involved reveal a murky landscape filled with risks and potential legal consequences. Investors should approach such strategies with a healthy dose of skepticism and caution, ensuring they fully understand the implications before diving into the world of gold trading.