Gold Buyer

[Moo]

Hay forum,
I recently rang a purchaser of gold and they claim that they pay $25 below spot price per ounce of gold, however they did say that they do not assay the gold on site and have to send it off, sounds a bit dodgy to me. Any thoughts or comments appreciated.

 

[goldenchild]

99% payout sounds good. Everything else not so much. I wouldn't deal with anyone that can't do their own assaying. That is a middleman of sorts. And imagine what your payout time will be. I can walk into my refinery walk out in 5 minutes and my money is in my bank account an hour later through wire. Having to "send it off" is too fishy.

 

[Dan Dement]

My question is: Can you operate a business on a 1% margin by paying money on the spot. If you can, I sure would like to learn your business model. When it sounds too good to be true, it is not!

Dan

 

[MiguelRosas]

Dan -

You have to imagine that not only are refiners making more than just the 1% of Gold value - but REAL refineries make money on every element within your scrap.

Our business is strictly a volume based model - without volume you are absolutely correct in saying that it is very difficult to make a living off of 1% - However let's run some simple numbers.

If a Refinery is doing just $1,000,000 a day in business - or 625 pure troy ounces (which for a NATIONAL refinery, is not that much) you are Grossing $10,000 per day.
Now - Let's take 1,050 NON pure ounces and assume that 7 - 10% of this scrap is Silver Content. (or 74 toz) That is another $2,000 a day.

Then we must take into account all the Platinum / Palladium heads, mixes, which is rarely paid out (and more gravy for the refiner). Now this can't be calculated daily like the silver, however after a week or month this also adds up to a significant amount.

We must also not forget the Copper, Nickel, and other alloy metals which are within your scrap are typically sold off to Base Metal refiners.

So at just $12,000 per day in Gross income, you're looking at $240,000 per month or a 2.88 million dollar business. Off just the 1%. ---- but the truth is we are making more than just that. And depending on who your outlet is (like manufactures, mints, brokerage firms, banks, etc.) , refiners sell the pure Gold at a premium above SPOT (creating another income stream)

This is of course assuming you are doing things right, and not shorting assay results, weights, and settlements.....

 

[Moo]

99% payout Having to "send it off" is too fishy.

those were my thoughts exactly Golden but being new and all wasnt 100% remembered another place that have in the past claimed they payout 90% from what I recall do assaying on the spot with acid and pay cash on the spot. Think that may be my best bet.

 

[goldenchild]

And depending on who your outlet is (like manufactures, mints, brokerage firms, banks, etc.) , refiners sell the pure Gold at a premium above SPOT (creating another income stream)

Miguel,

This is exactly what I try to explain to people when they ask how the refineries could possibly make money buying gold so close to spot. Think of all the electronics that are made on a yearly basis alone. Gold is ALWAYS in demand.

 

[MiguelRosas]

Golden -

When I started in this business I couldn't understand it myself, however with my annoying persistance to satisfy my curiosity I just kept asking more and more questions.

Regarding the "Send it off" being fishy - I am very bias and disagree.

Before I joined my firm, and truly before I joined the industry, I saw those "SEND US YOUR GOLD, AND WE'LL SEND YOU BACK YOUR MONEY A FEW DAYS LATER" TV commercials - and I immediately called anyone who did that a complete idiot for believing this "Scam"..... Obviously my opinion has changed.

If you really think about it - how do jewelry stores get their product? How does Apple get new computers to the showroom? Etc. Etc. They are sent through the UPS, Fed-EX, USPS, DHL, Armored trucks, carrier pigeons.... whichever trusted method you prefer. The biggest thing is to have your product insured. Insure it, Certify it - Next day deliver it...

With only a handful of true and reputable refiners the fastest and easiest way to get the most for your money is by shipping your lots.

Personally, I wouldn't settle for convenience. (but like I said, I am bias) 8)

 

[goldenchild]

Miguel,

My issue wasn't with sending off your gold to xyz gold buyers. Sure, sending off your gold to a reputable organization will work. My refinery(the refinery I use) uses delivery services. Hell even cash 4 gold will give you money for your gold albeit nothing near its true value. My issue was with the fact that the organization that Moo was speaking of didn't do their own testing. If you are set up to buy gold from the public I think you should at the very least be able to test your incoming material. As we know the more hands the gold goes through the more opportunity there is for the gold to get "lost".

 

[MiguelRosas]

Ah. Gotcha. I thought you were talking about "sending in" as a generality was fishy. mea culpa.

Yeah, I completely agree - it sounds like that company is a middleman in every sense of the word.
*(Not saying that middlemen are bad people, just that I find it's best to go directly to the source)

 

[Lobby]

What that purchaser of gold, referred to in the 1st post, was doing was managing his risk.

Since he obviously doesn't have the capabilities to perform the analysis himself, he's just sending it off. And accepting whatever the refinery pays him. He has absolutely no risk in this deal. He may not make a lot (depending on his volume), but whatever he makes is gravy (easy money - for our foreign readers).

 

[Moo]

What that purchaser of gold, referred to in the 1st post, was doing was managing his risk.

Since he obviously doesn't have the capabilities to perform the analysis himself, he's just sending it off. And accepting whatever the refinery pays him. He has absolutely no risk in this deal. He may not make a lot (depending on his volume), but whatever he makes is gravy (easy money - for our foreign readers).

I have read pawnbrokers guide and am going to assay myself just havent sold any before and having them have to send it off sounds fishy

 

[Lobby]

What that purchaser of gold, referred to in the 1st post, was doing was managing his risk.

Since he obviously doesn't have the capabilities to perform the analysis himself, he's just sending it off. And accepting whatever the refinery pays him. He has absolutely no risk in this deal. He may not make a lot (depending on his volume), but whatever he makes is gravy (easy money - for our foreign readers).

I have read pawnbrokers guide and am going to assay myself just havent sold any before and having them have to send it off sounds fishy

Good plan.

The risk I was referring to was the "refiner" who wanted to buy it from you. He has none, under the scenario he defined. If you sell to him, you have a lot of risk:

- since he didn't do the analysis, he doesn't know if he got taken by the refiner

- if you don't like the result, all he can tell you is "too bad."


As a gold buyer, I can say it takes a very long time to get good enough with the info in the pawnbroker's guide where you don't make mistakes. I'm not trying to dissuade you, just saying that there's so much trickery in gold jewelry, that not only do the jewelry consumers buy bad gold, so do many gold buyers.