Last Updated Jun 7, 2010 7:20 PM EDT

A record run-up in the prices of precious metals such as gold, silver and platinum over the past decade have turned commodities into one of the nation’s hottest investments. That’s got every body talking about investing in gold.

Gold is particularly popular because its nearly relentless rise in price started just about when the stock market soured in 2000. And with stock prices still acting manic-depressive — way down one day, only to recover somewhat the next — investors are nervous enough to go looking for alternatives.

But gold and silver are not as easy and familiar to buy as mutual funds. Some experts believe that investors are being regularly ripped off by precious metals dealers, who take advantage of gold buyer’s naivet.

What are the worst ways to buy gold?

Buying rare coins. Internet and hard-sell telemarketers will tell you that the best way to make a killing in the gold market is to buy their rare doubloon or coin. Don’t be fooled. Most of these coins are neither rare nor real. Investors lose millions buying counterfeit coins each year, experts maintain. Consumer protection attorneys in several states, including Florida. Texas and New York. have issued warnings and indictments involving rare coin scams since precious metals first began to run up in price. The scams continue to proliferate.

If you are buying gold because you want gold as an investment — in other words, something that you plan to resell some day — buy the common coins not the rare ones, suggest Barry Stuppler, president of Stuppler & Co. a precious metals dealer in Woodland Hills, Calif. The easiest coins to trade are the one-ounce Canadian Maple Leaf, the American Gold Eagle and the American Gold Buffalo. South African Gold Krugerrands are also popular and in great supply with some 54 million in circulation, adds Ash. That means they’ll trade close to the spot price for gold and be easy to sell.

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Paying a Premium. An alarming number of people pay a huge premium over the spot price of gold, said Adrian Ash, head of research for the Bullion Vault. A reputable dealer will charge just 5% over the spot price, which is the wholesale value, he added. Don’t pay more.

How do you find the spot price? You can go to Bullion Vault’s live update ; or check out prices at Kitco .

Buying bars. You’ll pay a smaller premium if you buy a bar of gold, which often contains 400 Troy ounces of gold, says Ash. The problem, Stuppler counters, is that you must invest more money and find another investor willing to buy in bulk when you sell. Stuppler thinks one-ounce coins are easier to trade and store.

Through a web site. Many of the web sites that promise to trade your gold have little history and may not even offer a street address. So where are you going to find the dealer when your gold bars don’t arrive, or turn out to be made of lead? If you want to buy gold, look for a dealer that’s a member of the Professional Numismatists Guild. which has a strict code of membership that can give you some assurance that you’re not dealing with a crook or a fly-by-night operation, Stuppler says

The gold trade is hot on eBay, too, says Ash. But investors often pay far more than the spot price because they get caught up in the bidding — and they may end up paying additional fees for shipping, too.

With unallocated storage. When a bank sells you gold and continues to hold it for you, it’s usually in unallocated storage, says Ash. In the event of a bank failure, you’re then a creditor of the bank, not a depositor who gets the benefit of FDIC insurance. You should expect to have to pay to store your gold, either in a safe deposit box or with some sort of custodian, both experts contend. If you don’t want to pay annual storage fees, you can buy a home safe from Costco for about $120, which is roughly what you’d pay for two or three years worth of safe deposit fees at a bank.

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