How do Coin Distributors work?

bentasm1

I'm trying to learn how coin wholesalers work. By wholesalers, I mean those who buy/sell from dealers only. Not the local coin shops.

When a wholesaler buys 100oz of gold angels, what is his protection that the price won't go down? Of course if it goes up that's a nice treat, but I can't imagine that it would 'even out' as usually more buy when the prices are going up and sellers sell when prices go down.

As a stock market investor by profession I'm rather curious.

Anyone with any ideas or real world experience?

-Ben

kieferscoins

Every wholesale dealer is different and it takes years of contacts and knowledge to become one. We can't just give "here are the steps" because every single wholesale dealer operates differently.



<< <i>When a wholesaler buys 100oz of gold angels, what is his protection that the price won't go down? >>



Just like every other dealer there is no protection.

Cameron Kiefer

BAJJERFAN

I'm not real sure that there are typical wholesalers/distributors in the coin business. I would guess that bullionwise a dealer/wholesaler/distributor would not take your 100 ounces of gold unless they knew that they already had them sold. Its not like dealers are ordering fresh stocks of Morgans from their distributors. If they could their showcases wouldn't be so pathetically empty looking.

cladking

Most of these guys buy a few coins from each source and put together larger lots
for the big buyers who are often retailers. On smaller purchases they simply take
the chance that the coins will go down and on the whole they've been doing pretty
well with this for several years. On the very large deals the coins will already be sold
at market before the deal is done.

It wouldn't be surprising that some of the largest buyers would use the futures mar-
ket for protection though I have little first hand knowledge of this. Most of these guys
are much more like arbitrageurs than like dealers or investors.

bentasm1

kieferscoins: Thanks for the non relevant reply. If you had read my post you will have seen that I didn't express any interest in becoming a coin dealer, but that as a professional investor I was simply curious. I hope your other 36,000+ post are replies with more relevance than your assumptions that I wanted to compete in a venture with no experience. Thanks for trying to make me sound like an idiot.

cladking - I was wondering if the futures markets was something they would use to hedge a physical commodity holding. It would make sense to hedge this way.

Without some sort of hedging position, dealers are gambling unless it's a flip sale. A flip sale requires equal in and equal out though, and there are plenty of investors who will want to flip 100 coins at once, I'm one of them. I've yet to find *any* dealer who will not buy the coins at fair market value from me and issue immediate payment with the exception of the 'mom and pop' coin shop.

Liquidity for the gold coins and silver bullion is one thing too -- what about the proof sets, certified coins, bust coins, bu rolls? There's no futures market to hedge that, and it's speculation. The market isnt that liquid to allow a dealer to have everything sold. Almost leads me to believe that there should be some sort of 'market maker' style firm. Isn't that how bid/ask spreads are developed?

Cordially,

-Ben

Baley

collectibles markets do not operate like commodities markets in the sense that they can be "hedged" with fungible goods. there is always a certain amount of risk in holding the assets, including opportunity cost.

bullion plays, on the other hand, can be hedged effectively.

not as much "arbitrage" in the bullion markets, though.