I’ve mentioned in the past that I sometimes can get gold at spot price, no premium. How does that work? Can it work for you? Depends. Its all about self-interest. Today, while I was jawboning with a local dealer, a fella came in and wanted to sell some 1/4 oz. gold coins. My buddy explained that he would buy it for melt at 95%. He’ll then send it to be melted down and they’ll pay him 97% of spot. That 2% difference is his profit. Now, I enter the picture and tell the dealer, I’ll pay you 100% of spot. So he goes from 2% profit to a 5% profit* (2.5x what he would otherwise have gotten) and I get gold at spot price. Pretty straightforward.
The most obvious question is why wouldn’t he just buy the gold at 95%, throw it in the display case, and sell it at spot (a 5% profit) plus the premium (which can get fairly high depending on the form the gold is in…the smaller the piece, the higher the premium.)
Well, the answer is: risk. If he buys the gold and throws it in the display case with 25 other gold coins, every day it doesn’t sell is a day where the market could go..anywhere. Sure, maybe in a month he makes a $100 profit from the change in metal prices. But he might also lose $100 if the price goes down. Why take the risk when you can get the sure thing, and get 5% all day long, all week long, from someone like me?
Will that work with everyone selling metals? Probably not. But if you say “Hey, any gold you were gonna send off for melt and take less-than-spot for, I’ll give you spot. Cash.” Again, won’t work with everyone but if you have a relationship with a seller, maybe someone you’ve done business with a bunch of times over the year, they might take you up on it.
Having said that, I almost never buy gold at anything other than spot. Gold is already expensive..paying spot and then an additional $50 for a Krugerrand or Gold Eagle just doesn’t make financial sense for me. And it doesnt make sense for the dealer to leave money on the table by selling to a melter at below-spot when someone is there, cash in hand, willing to pay spot.
So, go ask. Might work, might not. If he says no, there’s no hard feelings and if he says yes you’ve gotten a deal.
As an aside, I was there in the shop talking to my ‘gold guy’ when one of you savages called and asked if they could get some metals at spot like that Zero guy on the blog did. Nice try. As I said, it really helps if you throw this idea at a dealer you’ve done business with in the past who knows that a) you’re a good guy and b) you pay in cash immediately. Dont ever for a moment think that “can you hold onto it for a week until my SSDI/VA/SS check comes in?” is going to do you any favors. Always have the cash in hand when you make an offer like this. What the dealer wants is to make a ‘turnaround sale’. He buys it for 95% and six minutes later turns around sells it for 100%. Deals like that are fast money in the pocket for him, his risk exposure is barely measurable, and he did better than he originally planned when he was going to send it to be melted down. And now he doesn’t have to deal with the hassle of packaging, shipping, wire transfers, etc. Everybody wins…and when youre trying to make a deal, thats the kind that will fly. Also, this is very much a face-to-face kind of transaction… the deal looks better for the dealer when he can just hand you the gold and you hand him the cash. Playing phone tag, doing payment over the phone or online, packaging, insuring, shipping, tracking, etc. are all ‘friction’ that makes the deal less and less attractive.
Good luck.
* Mathematically, its not 2%. For simplicity, lets say gold is $3000/oz. He buys it for 95% of spot ($2850). He sells it for 97% of spot ($2910). Thats actually, not a 2% profit, its a 2.1% profit on $2850. Selling it to me at spot isn’t a 5% profit, its a 5.26% profit. Why? because the profit is based on what he paid (return on investment, if you please), and he didnt pay spot, he paid less than spot…$2850. Math.
I work at a large coin/scrap shop. It’s been frustrating dealing with the public over the last handful of years. A lot of customers are desperate to pay bills due to higher cost of living. It hasn’t been any easier with good very high and silver moving up this year. Some customers have high expectations which makes it obvious they have no clue on the market and thus shouldn’t be involved in it.
I have no idea which blog I read this on around two weeks ago but someone went nuts in the comments after trying to sell some one oz silver rounds (not even coins) and only getting offed 96% of what it said in the days paper silver was going for.
Everyone is hedging and paying
Under spot price. Yrs ago silver dropped to $12/ozr during Covid and dealers had to be very careful…premiums went up as a great buying opportunity was avail for the public
I was amazed by this, once I learned. Like many places in America, a little while back the “We Buy Gold” stores started popping up all over! A more reputable and older coin-buyer in my town was buying some silver I had, and we got to talking…
The dealer buys at Spot-Minus, sells it Spot-Plus… the difference is their profit. Couldn’t believe they can run a business on that margin (pay rent, electric, salaries, etc.) The trick the dealer told me, is don’t sit on any inventory. The coins/bars I was selling to him, he planned on getting rid of to a particular customer (that likes silver) over the weekend, just a day or two later. He was paying me spot – 5%.
I just bought some silver half dollar coins at .70 cents over spot price. Hard to believe they can make a living at such a thin margin, but I guess they do.
Volume.
Look at grocery stores. Very thin margins, multiplied by large numbers of sales, equals a decent profit in absolute if not relative terms.
Butting into your personal business, but how do you pay the seller? Reach into your pocket? Run to the bank?
I normally carry a few hundred in cash with me, but with gold at $3300 or so, that won’t cover even a quarter-ounce.
If I think Im planning to go to the coin shop that day and try to make a deal, I’ll swing by and grab some cash beforehand. Seems rude, to me, to make a deal and then say “Ok, I just gotta run to the bank…be right back.” And if no deal is struck, just swing by the bank and re-deposit the money.
Gotcha, thanks
At the risk of compromising OPSEC, some people get a fireproof bank bag on Amazon and keep $3-4k hidden in the vehicle. That way there is always some cash on hand. Keep a ‘throw down wallet’ in a door pocket with $25 or so in it, maybe that will satisfy the meth heads and they won’t do a more thorough search.
This may be a silly question. But how do you pick a reputable/trustworthy PM guy?
When you don’t know anyone close to you that does PM’s?
Well, I’d imagine its like anything else…word of mouth. Maybe youve a friend or relative who ‘has a gold guy’, or you’ve heard good things about Steve over at Steves Gold And Silver. You guy in a few times..buy an ounce of silver here and there, ask some dumb questions and see how he responds.
In fact, I was talking to ‘my gold guy’ the other day and he was telling me how he had a rancher show up in a beat-to-crap POS truck, came in wearing tired boots, frayed Carhart jacket, etc, and spent a half hour asking all sortsa questions. “I might be back”, he said after all the questions were answered. A few weeks later he came back in an $80k pickup truck and bought a quarter million of gold. My guy asked him if his first visit was him making giving the impression of being less-than-affluent. Guy said, yes, he wanted to see how my guy treated someone who appeared like they weren’t going to be a ‘whale’ (a big-time purchaser). My guy treated him well, answered all his numerous questions, took the time, and that convinced the guy that this would be a straight shooter to do business with. So…do a couple small little buys from a guy and see how he treats you on the small purchases. While youre in the shop see hopw treats other customers…big and small. And then draw your own conclusions if you want to dumpy $10k with that person.
I started buying silver in the early 2010s. While researching, I ran across a silver forum whose link I’ve long lost. There was a guy named Roger in that forum who kept reminding everyone that silver used to be cheap and will be again.
Everyone HATED Roger, but he obeyed the forum rules. Eventually the mods changed the rules and kicked Roger to the curb. No one likes their parade rained on.
Gold and silver will soon be industrial commodities with valuations about what they’ve always been. Only historical bullion will have special value. There’s just too much of it.
There was a factory in China making replica old American money. There was a full story somewhere about it, including many detailed pictures. They bulk-stamped everything, including my all-time favorite, the Indian head penny. These counterfeits were perfect in every way; only the packaging distinguished them.
Until tech improves, even numismatic investments are a serious problem.
No one will believe that, just like no one believed Roger, so there’s time to unload at a good price.
There are a lot of Chinese coins (silver dollars, etc ) that are fakes. The Sigma testers measure the internal rf conductivity and work pretty good. I think this is a good discussion.