Gold predictions????

[4metals]

If you purchase some PM's, you can write that off as an investment. Any profit you make (capital gains ), are taxed at 33% on PM's

But purchasing karat or any scrap to refine is not considered purchasing an investment product. And any profit on metal purchased is first adjusted by considering the basis cost of the PM involved. Since a refinery is constantly taking in metals the difference between the incoming price and the sell price is small so any 33% tax is on a small number and even that is made smaller by operating costs.

The tax code has to be straight forward otherwise figuring out an exact tax burden for every lot or transaction would be debilitating. That is why a refiners self assessment needs to be reasonable. There is a ton of wiggle room between when a refining product is considered working inventory, work in process, or profit. It all depends on how a refiner assesses it.

 

[Justincase]

But purchasing karat or any scrap to refine is not considered purchasing an investment product. And any profit on metal purchased is first adjusted by considering the basis cost of the PM involved. Since a refinery is constantly taking in metals the difference between the incoming price and the sell price is small so any 33% tax is on a small number and even that is made smaller by operating costs.

The tax code has to be straight forward otherwise figuring out an exact tax burden for every lot or transaction would be debilitating. That is why a refiners self assessment needs to be reasonable. There is a ton of wiggle room between when a refining product is considered working inventory, work in process, or profit. It all depends on how a refiner assesses it.

There is a distinct difference between holding gold as an investment and turning it over as your business.
The one thing that is certain is that the accountants and tax officials have never actually ever run a small refinery.
In the UK, we are meant to be able to recoup all the VAT from any cost associated with the recovery and refinement of gold.
But they only recognise direct costs of "transmutation" not the cost of promotion or client handling that have added far higher costs to the gold than that of processing.
Discussion on this subject can only be undertaken in a VAT tribunal.
I had to spend several months in correspondent with former treasury officials before I found out why.
At the end of the accountancy year, they expect you to calculate "Retained Profit" as well.
Basically, any net increase of your operating capital that has not been taken out as earning.
They even limit the amount of that retained profit you are allowed to reinvest in the business and what you can invest in.
A small startup operation is always going to be behind in resources, and they would hate for you to grow your enterprise instead of paying them taxes.
It is much like someone coming to your garden and harvesting food while your plants are all seedlings, very small mind.
Like wading through thick mud pulling a heave weight.

 

[4metals]

They even limit the amount of that retained profit you are allowed to reinvest in the business and what you can invest in.
A small startup operation is always going to be behind in resources, and they would hate for you to grow your enterprise instead of paying them taxes.

Sounds like you spend more time listening to accountants than listening to refiners. True, rules on each side of the pond differ, but the practicality and accountability of actually running a refinery is something they do not understand and likely cannot enforce.

 

[Justincase]

Sounds like you spend more time listening to accountants than listening to refiners. True, rules on each side of the pond differ, but the practicality and accountability of actually running a refinery is something they do not understand and likely cannot enforce.

The UKs interest is in criminal property and money laundering.
It used to be the prosecution's duty to prove their argument.
Until the Proceeds of Crime Act.
Now you have to be able to explain any assets or income legitimately, or they are automatically designated as the proceeds of crime.
This is extremely lucrative for the government.
You might have heard of the post office scandal we have had recently.
Thousands of sub postmasters falsely convicted and ruined.
Legitimate assets being confiscated as criminal gains.
That is how it works over here.
They would love to detect just one slight irregularity.
They are very good at their job.
It is not as if I have a second income, it is all tied up in my business, I have no other money to hide.

 

[4metals]

Here in the US they have the AML regulations which stands for Anti Money Laundering. Doesn't seem as extreme here as in the UK. But before a refiner can do business with a major refinery they need AML approval and before a smaller collector refiner can do business with any potential customer, that customer also needs to fill out AML paperwork. This all came to be after 9/11 when they realized how much business was done for cash.

Still it all comes down to assays and ounces and a lot of interpretation.

 

[Justincase]

Here in the US they have the AML regulations which stands for Anti Money Laundering. Doesn't seem as extreme here as in the UK. But before a refiner can do business with a major refinery they need AML approval and before a smaller collector refiner can do business with any potential customer, that customer also needs to fill out AML paperwork. This all came to be after 9/11 when they realized how much business was done for cash.

Still it all comes down to assays and ounces and a lot of interpretation.

We are not allowed to pay the public in cash.(Scrap Metal Dealers Act 2013)
Though many do happily operate as "Rouge Traders" under the legislation.
If you have noting to lose it might be worth the risk, but the moment you have any substantial assets that they might feel entitled to, you are best advised to keep your nose scrupulously clean.
If we ever get through a few bottles of good red wine, I might just bore you with some of the insane hoops I have had to jump through over the last fifteen years to be left alone and in peace.
They have been through me like a dose of Milk of Magnesia, it has been of great amusement knowing that there was not a penny out of place or an illegal reaction for them to find.

 

[anachronism]

Sounds like you spend more time listening to accountants than listening to refiners. True, rules on each side of the pond differ, but the practicality and accountability of actually running a refinery is something they do not understand and likely cannot enforce.

I agree. There's too many complications here and Justin possibly needs a more practical accountant. It doesn't need to this involved or convoluted.

 

[Justincase]

I agree. There's too many complications here and Justin possibly needs a more practical accountant. It doesn't need to this involved or convoluted.

Good luck finding an accountant that has even read the legislation, let alone actually understands it and has experience implementing it.
Build your house on sand, and it will fall down when it gets too big.
I built my business to fit the legislation, I did not expect the legislation to bend to my expectations.
Firm foundations to grow on.
I do not play games or indulge in false narratives in personal relationships or business.
And I think the word you were looking for was "Pliable" not "Practical" in regard to your accountants. I most certainly would not trust a pliable accountant.
Different strokes for different folks, I suppose.
I had to start employing my accountants four years ago when the universal credit people accused me of fraud.
My accounts are automatic, run by the same system that operates the banking system.
But one twenty six-year-old girl managed to make accusations with nothing but a pad of scratch paper.
I was given no choice but to retain the services of a national firm of accountant.
They manage the lions share of such accounts, and I am just a small oddity to them.
But without them checking all my accounts and standing up for me, I would have been close-down and stacking shelves at Tesco's.
£250 just for the investigation insurance, but if any agency starts an investigation into my accounts they will come in and stand behind their work.
The sound sleep of knowing all your bases are well covered.
Should have been give substantial support in my first year of full-time operation instead of having to spend thousands of pounds defending myself, but there you go.
Best to have the largest gun when you need it.

 

[anachronism]

Good luck finding an accountant that has even read the legislation, let alone actually understands it and has experience implementing it.
Build your house on sand, and it will fall down when it gets too big.
I built my business to fit the legislation, I did not expect the legislation to bend to my expectations.
Firm foundations to grow on.
I do not play games or indulge in false narratives in personal relationships or business.
And I think the word you were looking for was "Pliable" not "Practical" in regard to your accountants. I most certainly would not trust a pliable accountant.
Different strokes for different folks, I suppose.

Possibly. My business of 28 years included working within a full environment agency permit. The legislation around that is far far higher than any of the matters we have discussed so far. It really is a can of worms that takes a lot of unraveling but a fully legislated recycling plant is a nightmare to run. Especially with multiple shredders, alongside separation tech, and fire suppression and air purity control alongside full weight reporting and accountability.

This accounting stuff you mention is flat out incorrect I'm sorry to say and if your accountant is making you this worried about these things then that's probably for their own benefit. Hence my comment about spreading your wings with the advice you receive because it really doesn't need to be the way you suggest.

Regards Jon .

 

[Ag and Au]

I just grab more PMs when the price gets low, and hold onto them in case one of the 'The Big One' events happens in my lifetime!

How do you guys "season" your gold (i.e., salt, pepper, cajun, blackened)? I'll choose food and water if The Big One pays us a visit.

 

[Justincase]

Possibly. My business of 28 years included working within a full environment agency permit. The legislation around that is far far higher than any of the matters we have discussed so far. It really is a can of worms that takes a lot of unraveling but a fully legislated recycling plant is a nightmare to run. Especially with multiple shredders, alongside separation tech, and fire suppression and air purity control alongside full weight reporting and accountability.

This accounting stuff you mention is flat out incorrect I'm sorry to say and if your accountant is making you this worried about these things then that's probably for their own benefit. Hence my comment about spreading your wings with the advice you receive because it really doesn't need to be the way you suggest.

Regards Jon .

Those industries are not really related, if I ever process enough in one year to require any reporting, I would die a happy man.
Also, it is one thing to operate behind legal screens and LTD's that can always go bankrupt, but I stand completely vulnerable with no place to hide.
My trade has been honesty and transparency all my life, it makes no difference what industry I happen to be working in.
A bit of a habit, I suppose.
I have discussed the matter with the people who worked putting the legislation in-place to check my account's advice was correct. That took calling in a few favours to arrange.
I have no problem working within the defined advice.
It is frustrating when they move the goal posts between literal meaning and their interpretation.
That is the trap, they specifically will not discuss their interpretation and insist you make your own interpretation.
But their understanding is not the same as anyone in the field would think from the legislation.
Only after you have made a mess of all your accounts and by default made false declarations do they pull you aside and pick you apart.
Next, you will be advising me to buy an EncroChat phone.

 

[4metals]

And I think the word you were looking for was "Pliable" not "Practical" in regard to your accountants. I most certainly would not trust a pliable accountant.

Maybe a detailed explanation of practical as it pertains to refining accounting is in order here.

First off, my accountants were CPA's (certified public accountants) and as such they are held to a level of accountability as well, and they were anything but pliable. Let me go through what was involved with their 4 annual in house audits which they felt were adequate to verify my ongoing "self assessments."

To start every job that came into the refinery had a lot number which was a combination of the day it arrived and the customers 4 character identifier. This was followed with the scrap type, incoming weight, after burn or after melt weight, settlement weight. This paper traveled with the lot until it was ready for assay. The assay number was only linked to this sheet of paper in the office. In the assay lab every lot number contained the sample weight and the results for every metal requested. These assay results were kept in stitch bound numbered notebooks which were in the assay lab until a new book was required and then it moved to the vault. When the assay results were reported, our in house bean counter entered the assay results onto the sheet of paper that started when the lot arrived on site. He added the date we settled the job and the metal prices for the day of settlement. From the data on this sheet a settlement could be calculated.

When the accountants came to do an audit they typically stayed 2 or 3 days. First thing they would do would go to the assay lab and pick out randomly about 6 or 8 assay numbers. Totally random, I had no say in what they picked. They then went to the in house accountant and got the data sheets that pertained to those lots and from there they could calculate the amount of money (or metal) the customer was paid. They also could calculate the number of ounces of metal retained for charges as this was potential income.

To double verify this information for lots sent out to the majors for sale or refining, every lot that made up a larger melt for karat or powder for sweeps indicated the process lots that went into that lot and the larger bar being shipped was melted in house and assayed. And the sweeps lots were blended and sampled as well. All of the numbers in these lots had to add up to the totals the CPA's calculated or they would have questions.

At the end of their audit they would know if the lots they randomly chose added up. Once I remember a lot where one drum of a 6 drum blend was not shipped by omission on our part. But that last missing drum was given a lot number and assayed and entered the paperwork process again. When they randomly picked that lot the note on the paperwork directed them to the follow up paperwork which made things add up.

This is far from me giving them a page full of numbers and telling them to do their thing. We didn't have to do anything special to prepare for an audit as all of the paperwork was on file and it never failed us. Actually not true.... we did have to supply the auditors with coffee and donuts.

They did not.... nor could they, do this process with every job that went through the shop. I knew our paperwork added up and my in house accounting totaled our expenses, metals bought, refinery payments incoming from which we calculated our margins.

The accountants were satisfied that we had a proper paper trail and we never failed an audit. And some of our lots were every refiners favorite account called "house". Those lots were assayed and recorded but the values went straight to the bottom line.

I hope you can see from the above description that the word pliable never entered the accounting process.

 

[Justincase]

Well, trading with the public in the UK does not involve quite such industrial protocols.
We record the name address and bank details of our client, then the quantity of alloys they liquidate.
I personally use a carbon copy system that generates a hard record of the transaction and receipt that will match an independent automated digital record.
The same automated system tracks all sales.
I am under obligation to retain all such records for a minimum of eight years for inspection.
Not a lot of Wigle room.
Nice to not have to worry about oversight.
It is a good enough business without having to try and cut more out by dishonestly.

 

[Justincase]

Maybe a detailed explanation of practical as it pertains to refining accounting is in order here.

First off, my accountants were CPA's (certified public accountants) and as such they are held to a level of accountability as well, and they were anything but pliable. Let me go through what was involved with their 4 annual in house audits which they felt were adequate to verify my ongoing "self assessments."

To start every job that came into the refinery had a lot number which was a combination of the day it arrived and the customers 4 character identifier. This was followed with the scrap type, incoming weight, after burn or after melt weight, settlement weight. This paper traveled with the lot until it was ready for assay. The assay number was only linked to this sheet of paper in the office. In the assay lab every lot number contained the sample weight and the results for every metal requested. These assay results were kept in stitch bound numbered notebooks which were in the assay lab until a new book was required and then it moved to the vault. When the assay results were reported, our in house bean counter entered the assay results onto the sheet of paper that started when the lot arrived on site. He added the date we settled the job and the metal prices for the day of settlement. From the data on this sheet a settlement could be calculated.

When the accountants came to do an audit they typically stayed 2 or 3 days. First thing they would do would go to the assay lab and pick out randomly about 6 or 8 assay numbers. Totally random, I had no say in what they picked. They then went to the in house accountant and got the data sheets that pertained to those lots and from there they could calculate the amount of money (or metal) the customer was paid. They also could calculate the number of ounces of metal retained for charges as this was potential income.

To double verify this information for lots sent out to the majors for sale or refining, every lot that made up a larger melt for karat or powder for sweeps indicated the process lots that went into that lot and the larger bar being shipped was melted in house and assayed. And the sweeps lots were blended and sampled as well. All of the numbers in these lots had to add up to the totals the CPA's calculated or they would have questions.

At the end of their audit they would know if the lots they randomly chose added up. Once I remember a lot where one drum of a 6 drum blend was not shipped by omission on our part. But that last missing drum was given a lot number and assayed and entered the paperwork process again. When they randomly picked that lot the note on the paperwork directed them to the follow up paperwork which made things add up.

This is far from me giving them a page full of numbers and telling them to do their thing. We didn't have to do anything special to prepare for an audit as all of the paperwork was on file and it never failed us. Actually not true.... we did have to supply the auditors with coffee and donuts.

They did not.... nor could they, do this process with every job that went through the shop. I knew our paperwork added up and my in house accounting totaled our expenses, metals bought, refinery payments incoming from which we calculated our margins.

The accountants were satisfied that we had a proper paper trail and we never failed an audit. And some of our lots were every refiners favorite account called "house". Those lots were assayed and recorded but the values went straight to the bottom line.

I hope you can see from the above description that the word pliable never entered the accounting process.

anachronism said:
"I agree. There's too many complications here and Justin possibly needs a more practical accountant. It doesn't need to this involved or convoluted."
I would never suggest your accounts 4metals were "Pliable"

 

[haveagojoe]

There is a distinct difference between holding gold as an investment and turning it over as your business.

I would imagine it to be a very tough industry to be in, especially at the smaller scale. It's not only gold refining but also gold trading, and the main tool traders have of choosing when to buy and sell is much restricted by the need for turnover. I admire your determination and courage to make it work- perhaps we could call it "precious mettle"!

I have often dreamed about doing it as a business but it's clearly a completely different ballgame to messing around at home. As a hobbyist all my source material is free and my "profits" are never actually realized, they just sit in my stash waiting for doomsday. Gold for long-term investment should really be mint bullion, and if I feel like dabbling in the shorter-term market I can do it online without touching physical gold.

It occured to me that as a professional refiner you might be able to use online trading to hedge some of your business risk in order to protect against market fluctuations. When you buy source material, if you were to take a short position of the equivalent amount of the expected yield via the online marketplace, and then close the position when you sell your refined product, you could potentially smooth out some of the risk. You mentioned last week that you were concerned about a price drop over the weekend, which did in fact happen- a short trade on friday would have reaped a profit which would balance out the loss on the physical gold you are holding. Worth considering perhaps, if you haven't already.

 

[Justincase]

I would imagine it to be a very tough industry to be in, especially at the smaller scale. It's not only gold refining but also gold trading, and the main tool traders have of choosing when to buy and sell is much restricted by the need for turnover. I admire your determination and courage to make it work- perhaps we could call it "precious mettle"!

I have often dreamed about doing it as a business but it's clearly a completely different ballgame to messing around at home. As a hobbyist all my source material is free and my "profits" are never actually realized, they just sit in my stash waiting for doomsday. Gold for long-term investment should really be mint bullion, and if I feel like dabbling in the shorter-term market I can do it online without touching physical gold.

It occured to me that as a professional refiner you might be able to use online trading to hedge some of your business risk in order to protect against market fluctuations. When you buy source material, if you were to take a short position of the equivalent amount of the expected yield via the online marketplace, and then close the position when you sell your refined product, you could potentially smooth out some of the risk. You mentioned last week that you were concerned about a price drop over the weekend, which did in fact happen- a short trade on friday would have reaped a profit which would balance out the loss on the physical gold you are holding. Worth considering perhaps, if you haven't already.

Not educated enough on the subject to make an informed decision, let alone how to negotiate such derivatives or with whom.
I actually thought all such derivatives had been abolished in relation to the precious metal markets to discourage manipulation by the larger banking houses.
Yes, it was a bit of a hit over the weekend, but not a complete loss.
Retained enough to keep the lights on for another month or two.

 

[4metals]

Having a pool account at your major refiner whom you sell your metals to is essentially the same thing. Refiners send out material to be refined and when the job is settled one option is to only sell what you need to cover settling the gold, the rest remains in the pool. Once you build up a quantity of metals in your pool account you can simply call your refiners trading desk and sell the amount of metal you need to cover your purchase and once you refine it and ship it to your refiner it can go back into pool. This can minimize your risk.

The down side is you need to move a certain amount of metal routinely to get into a pool situation. The bigger down side is even the big boys can overextend themselves as Handy & Harmon did in the early 1980's and go belly up, with your pool metal. More recently Republic Metals hurt a lot of refiners in the US when they were shuttered.

 

[Justincase]

Having a pool account at your major refiner whom you sell your metals to is essentially the same thing. Refiners send out material to be refined and when the job is settled one option is to only sell what you need to cover settling the gold, the rest remains in the pool. Once you build up a quantity of metals in your pool account you can simply call your refiners trading desk and sell the amount of metal you need to cover your purchase and once you refine it and ship it to your refiner it can go back into pool. This can minimize your risk.

The down side is you need to move a certain amount of metal routinely to get into a pool situation. The down side is even the big boys can overextend themselves as Handy & Harmon did in the early 1980's and go belly up, with your pool metal. More recently Republic Metals hurt a lot of refiners in the US when they were shuttered.

Luckily, a very nice bullion dealership decided to taken my metal without assay.
Monday to Thursday.
They have to catch up on Friday.
It is not the gold that is valuable, we could be trading potatoes.
It is the honesty, courtesy and integrity that makes the trade worthwhile.

 

[4metals]

When you own or operate refinery you cannot look at the metals as investments and get all bent out of shape if it drops a few dollars. You should look at your metals as fungible which is "I sold X ounces of gold today and bought X ounces of gold today" without dollars entering the picture. Not unlike potatoes.

fun-gi-ble

1. (of a product or commodity) replaceable by another identical item; mutually interchangeable.
   "it is by no means the world's only fungible commodity"

 

[Justincase]

When you own or operate refinery you cannot look at the metals as investments and get all bent out of shape if it drops a few dollars. You should look at your metals as fungible which is "I sold X ounces of gold today and bought X ounces of gold today" without dollars entering the picture. Not unlike potatoes.

fun-gi-ble

1. (of a product or commodity) replaceable by another identical item; mutually interchangeable.
   "it is by no means the world's only fungible commodity"

I was bent out of shape by people and forces I would never readily describe.
My Irish family name is Garvey, which is an Irish surname that comes from the Gaelic word Gairbhshíth, which means "rough peace".
Potatoes and conflict resolution is a family tradition.
Turnover is vanity, profit is sanity.
I do keep track of how profitable each trade is.
My rates insure I do not lose money, but are cut fine enough to my client's advantage that if the market takes a sudden down turn I do not make a profit.
I take pride in providing my clients as good a rate as they can expect from any public desk.
That means sometimes I have to work for less money than I would like.