Considering Becoming A Precious Metals Dealer
calbull
Posts: 8
I've been pondering this business venture for quit some time now. I've been a professional watch designing manufacture and bullion stacker for over 20 years and I think I'm ready.
However, it takes a village to raise a child, so collectors please give me as much as you can of your professional experience and expert advice.
However, it takes a village to raise a child, so collectors please give me as much as you can of your professional experience and expert advice.
All Markets Are Driven By Fear or Greed
0
Comments
Buying in volume helps. Choose your products carefully. Avoid generic products, stick with the quality stuff.
Don't sell what you don't have in hand.
One more thing - don't whine and get your panties in a wad if a potential buyer inquires and you never hear from him again.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
I've been pondering this business venture for quit some time now. I've been a professional watch designing manufacture and bullion stacker for over 20 years and I think I'm ready.
However, it takes a village to raise a child, so collectors please give me as much as you can of your professional experience and expert advice.
Well you start with a cool load of green backs.... and figure you will make 4 points on both sides... buying and selling... now do the math.. how many deals to make enough to pay the overhead..... or do like the "EXPERTS" here who know it all.
Oh and one more thing.. if someone inquires with a price lower than your posted offering price... please answer with.... are you sure you are gonna make enough on this $100 purchase or should I lower my price a bit more so you can play pretend dealer?
oh and yeah what Derry says and don't forget to send him and everyone else one of those stale popcorn tins at Christmas, Hanukkah and Ramadan.... or when ever.
Following all these steps should make you very popular and maybe successful.
All of the above, but I like derryb the best.
buy controlling interest in one of the major players
mark
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
go to work for a shop that sells bullion or better yet a bullion dealer. Learn the ropes from the inside out before you put a toe in the water.
bob
All of the above, but I like derryb the best.
buy controlling interest in one of the major players
Keep a list of who the a-holes are and block/ignore them when they inquire about an item and then don't treat you with the same respect that you showed them.
If you are going to buy & sell then there are a lot of things to consider besides selling to unnamed ebay buyers. Ebay is 1/100 of 1% of the business.
Sign above the door reads:
-
Hotel California Gold & Silver
Saul Goodman: Proprietor
A lot of people buy restaurants thinking it would be a good investment, because they've had a lifetime of experience eating.
But the recommended prerequisite would be to get experience by working/training in all areas of the restaurant business first.
Last thing I remember, I was
Running for the door
I had to find the passage back
To the place I was before
"Relax, " said the night man,
"We are programmed to receive.
You can check-out any time you like,
But you can never leave!
Don't,
go to work for a shop that sells bullion or better yet a bullion dealer. Learn the ropes from the inside out before you put a toe in the water.
bob
Learn how to hedge
mark
This. And since most don't do this, the personal stack gets bigger every time metals go down. Seems a lot more bullion dealers pop up when metals go up a few bucks.
My Ebay Store
Don't,
go to work for a shop that sells bullion or better yet a bullion dealer. Learn the ropes from the inside out before you put a toe in the water.
bob
I would try being a vest pocket dealer to start off if you don't want to work at a Pawn Shop, Bullion Shop or a Coin Shop. That can help you to make contacts, gain a customer base, see what your margins are and how much time/effort is involved and to learn how to hedge.
Having ads in local papers, Craigslist, on forums and setting up a table at coin/bullion shows can help you start off. Then you work off repeat customers/dealers from there...
First and foremost Safety is the most concern. Make sure you have things in place to prevent potential robberies. Cameras, possibly locking doors , more than one person in store at all times, and don't flash cash to entice crooks.
if I have a customer who wants large cash, I usually have them meet me at my bank across the street and do the transaction over there. The Branch Manager knows me well and doesn't mind giving me an office to conduct the business.
Make sure you have all the necessary local permits if applicable and follow the laws regarding bullion / cash transactions.
I have noticed over the years, many customers that have large amounts of gold/silver check out a place before they bring it in. They want to feel secure. I'm am in a secure building , but I still do the above I mentioned in some cases.
Also watch out for scams, even people you trust. Had a dealer Ive known for 8 years (no longer a friend) loose 20k of my money right before Christmas on a gold scam. The coins got switched with fakes while in his possession. (so he says) I think he was in on it. Never paid a dime of it back to me , or even offered (*****). I even thought about capping him ,but didn't want to go to prison so I just sucked it up and let it go.
anyway, need lots of capital. so you can sell at the right price. Don't want to buy 20 oz of gold , have the price drop 30 bucks and panic sell it. Need to be able to hold for a bounce back and sell at the price you expect. If you pay fair, the margins are going to be tight, so you have to be able to maximize profits. I know there are several places that buy way back and make killings on every piece they buy. I always tried to pay fair, and when times get tough, you can always count on past customers too remember you as the guy who paid me fair and bring more business back to you. Some of the shyster buyers I just mentioned have started drying up and closing down.
Be careful, abundance of fakes on the market in just about everything silver and gold now, you better have a good feel for whats real or get some o the equipment that helps in identifying good material . Not hing like buying 200 oz silver and find out they are no good...
adding further - (paying and selling fair) helps keep a good continual/growing customer base for the long haul.
Menomonee Falls Wisconsin USA
http://www.pcgs.com/SetRegistr...dset.aspx?s=68269&ac=1">Musky 1861 Mint Set
Learn how to hedge
mark
This is quite overlooked by most dealers. I'd bet less than 5-10% of them ever carry hedges. But during the 1-3 months (2X per year) where metals are diving into intermediate cycle lows, it's nice to be hedged...maybe even mandatory if you aren't clearing inventory every few days. Getting a feel for the cyclic nature of gold would be a help. Futures contracts would be one way to hedge w/o tying up a ton of money. Yes, it will cut into your profits, but you also won't get crushed on multiple $100+ down days as occurred back in April 12th-15th 2013.
A vest pocket dealer friend of mine did very well buying approx $20K each week in gold deals during the 2008-2013 period. But that has really dried up the past year. If it starts coming back, then maybe being a "gold dealer" can work again. He worked on a fairly tight 4%. He bought from all the local jewelers, pawns, and coin shops. Those guys would pay 65-85% to the public and my friend would offer them 94% of spot....and then sell to the refiner at 98%. As I recall it would sometimes take weeks to be paid from the refiner as they have to assay the melt/jewelry gold before paying out. $50K-$250K in funds should be enough to get going. You can start as small as you like. I recall my local coin shop doing a $1 MILL dollar deal of AGE's. They negotiated for a 1% fee and were responsible for pickup and also shipment to the end retailer. And I don't think they carried insurance either which could be a problem.
Pay attention to the lessons learned from Haynes Tulving and other bankrupt, ex-gold dealers. Most importantly, there are people out there who won't think twice about killing you for $1,000 in bullion. That fact alone scares the heck out of me about being a "public" gold dealer. I'd be careful about inviting slime into your business via Craig's List and other sources. Your competition will be pawns and other businesses who are breaking the rules, buying stolen merchandise, stealing from widows and orphans, etc. It's hard to beat them when playing 100% straight. Most towns don't need another gold buying entity. Every jeweler, antique store, collectibles shop, etc. in my area seems to have a sign about buying gold. Maybe that's why my friend decided to be the one stop drop-off for all those guys to make a win-win out it. They didn't have to worry about selling it for the final 4%, tying up money for additional days, and shipping stuff off, etc.
Made some good points, I kind of do the same. back in the height of the gold boom, we were buying in excess of 5k a day. It has long since dryed up. I do get the occasional dealer (pawn shop/gold buying shop) folks to sell quickly and leave me a few percentage points. Don't buy much off the street anymore as most left now is crooks and thiefs selling off what they stole, and I not set up for that(nor do I want it)
One of the local gold buying shops here in town still does fairly well because he buys from everybody and don't care. Pays like 5-60% and the cops are over there all the time. Intresting story is last time I talked to him , local police came in and was looking for some stolen jewelry in which he bought. Some he had turned, police said " just get the other melted and out of here" don't want to waste time making a report if you can believe that?? (I don't buy from them by the way) He just contacts me bragging about all the coins he steals from the public at low low prices.
I think : "Buy a scale, a test kit, equipment, a pencil, pad of paper, and be prepared "
Because when you think you're going to sell something, a thousand others think you're there to buy something.
If I were to do it all again, I would have been a stripper.
Gold is up today. Go figure; I just went to the refinery yesterday
Rr,
Made some good points, I kind of do the same. back in the height of the gold boom, we were buying in excess of 5k a day. It has long since dryed up. I do get the occasional dealer (pawn shop/gold buying shop) folks to sell quickly and leave me a few percentage points. Don't buy much off the street anymore as most left now is crooks and thiefs selling off what they stole, and I not set up for that(nor do I want it)
One of the local gold buying shops here in town still does fairly well because he buys from everybody and don't care. Pays like 5-60% and the cops are over there all the time. Intresting story is last time I talked to him , local police came in and was looking for some stolen jewelry in which he bought. Some he had turned, police said " just get the other melted and out of here" don't want to waste time making a report if you can believe that?? (I don't buy from them by the way) He just contacts me bragging about all the coins he steals from the public at low low prices.
So are you better off not to buy from the public? Or just be selective about what you buy? Do people stay away as buyers and sellers if you limit what you buy? Is it appropriate to open a tube of ASEs and test each coin or is there a way to test the intact tube?
Rr,
Made some good points, I kind of do the same. back in the height of the gold boom, we were buying in excess of 5k a day. It has long since dryed up. I do get the occasional dealer (pawn shop/gold buying shop) folks to sell quickly and leave me a few percentage points. Don't buy much off the street anymore as most left now is crooks and thiefs selling off what they stole, and I not set up for that(nor do I want it)
One of the local gold buying shops here in town still does fairly well because he buys from everybody and don't care. Pays like 5-60% and the cops are over there all the time. Intresting story is last time I talked to him , local police came in and was looking for some stolen jewelry in which he bought. Some he had turned, police said " just get the other melted and out of here" don't want to waste time making a report if you can believe that?? (I don't buy from them by the way) He just contacts me bragging about all the coins he steals from the public at low low prices.
Also if a customer shows up with a large amount of cash how does one know that he isn't an agent merely testing you to see if you are following cash reporting requirements? For a form 8300, what info is the customer required to give and what info can they refuse to provide?
A bullion dealer who buys/sells more than $50K per year in "bullion related" items is required to have a formal anti-money laundering (AML) plan in place that would meet approval by the IRS/DHS. This applies even for sole proprietors. This is required per Patriot Act 2. The ICTA helped dealers put together standard plans when the requirements first came out approx 10 years ago. Penalties for non-compliance as I recall were up to a $250K fine and 5 years in prison. If you have a store with employees they have to be trained as well along with periodic (annual) refreshers. Everything gets documented.
The AML's are aimed at the biggest dealers where the odds are the highest of large sums of criminal/drug money ending up. But, that doesn't mean that as a small fry, they can't look at you and take action if they don't like what they find. I've not heard of any local dealers in my area being taken to task on the AML provisions of PA2. I think some have interpreted this statute to concern only cash transactions. But, from the research I did at the time, it included non-cash transactions as well. Maybe Jdimmick and others can give more details.
Its a double edge sword from public on gold jewelry. You can buy it cheaper, but you have to worry about thieves with stolen stuff and most importantly safety, dealing with all the street thugs.
or, you can buy from the public and do all the proper procedures, make people show id's and fill out paper work and pay by check, and you will be closed up shortly from being out of business with all the competition that doesn't.
I mainly buy from other dealers or past customers as I mentioned, I'm not set up for off the street walk in which I prefer. Less profit and business, but scrap business is not like it used to be, so I rather be safe and have peace of mind.
Coins and bullion not as big of a problem off the street as jewelry.
If I am buying a tube of anything, I check every thing. if you don't you might have a hard lesson comin.
If somebody came into pay me with a pile of cash, yes it could be an undercover agent, if you follow proper procedures it shouldnt be a problem.
Honestly, I have never had a large cash transaction on the sale end, its only ever been on the buying side of the equation. I get the money out over at the bank and they report it , and I have a receipt(name and info) where I purchased it. Its on them(the seller) to report the money which I'm sure in most cases JQ public doesn't .