I don't care if you own it or not. When gold drops $100 in a day, your $6 margin is now Negative $94. In the last couple of weeks, they would have all gone broke as gold dropped almost continuously.
Likewise, when gold rose even more over the past year or so, these shops did “gang busters” especially on the $75-$100/oz. Spreads buying and selling jewelry. I highly doubt any of these gold shops ran into a liquidity problem this past month. Their $6 spread per oz. is still being advertised 24/7 online to Thais (and every farang who knows where to look).
Wondercoin.
Please visit my website at www.wondercoins.com and my ebay auctions under my user name www.wondercoin.com.
If you own the gold with no debt, you won’t get wiped out. FWIW, I would guess that most of these dealers actually like owning gold, think in terms of gold and not so much in terms of baht and dollars, and are comfortable with the volatility of the markets. I’m that way with rare coins, so I’m not completely making this up.
I don't care if you own it or not. When gold drops $100 in a day, your $6 margin is now Negative $94. In the last couple of weeks, they would have all gone broke as gold dropped almost continuously.
The only way to make money on a $6 margin is if you DON'T own it.
You are missing the point.
They want to own gold in the long run as their core holding regardless of the current market value.
If you own the gold with no debt, you won’t get wiped out. FWIW, I would guess that most of these dealers actually like owning gold, think in terms of gold and not so much in terms of baht and dollars, and are comfortable with the volatility of the markets. I’m that way with rare coins, so I’m not completely making this up.
I don't care if you own it or not. When gold drops $100 in a day, your $6 margin is now Negative $94. In the last couple of weeks, they would have all gone broke as gold dropped almost continuously.
The only way to make money on a $6 margin is if you DON'T own it.
You are missing the point.
They want to own gold in the long run as their core holding regardless of the current market value.
You invented that point. I'm talking about the business not the buyers. They have bills to pay. They also need capital to buy one the counter. They do but want a long term gold on their inventory.
All comments reflect the opinion of the author, even when irrefutably accurate.
@wondercoin said:
I don't care if you own it or not. When gold drops $100 in a day, your $6 margin is now Negative $94. In the last couple of weeks, they would have all gone broke as gold dropped almost continuously.
Likewise, when gold rose even more over the past year or so, these shops did “gang busters” especially on the $75-$100/oz. Spreads buying and selling jewelry. I highly doubt any of these gold shops ran into a liquidity problem this past month. Their $6 spread per oz. is still being advertised 24/7 online to Thais (and every farang who knows where to look).
Wondercoin.
It depends on the turnover rate.
Would you run your business on 1/4 of 1%, even in a bull market? I would if I were a broker. I wouldn't if I owned the inventory. Hence my question.
If the bulk of their business is higher margin jewelry, which you referenced, that may work. I'm not questioning your observation. I was just trying to figure out how it actually works.
All comments reflect the opinion of the author, even when irrefutably accurate.
Would you run your business on 1/4 of 1%, even in a bull market?
In the USA, it would be virtually impossible. Just with the fixed costs alone, including salaries - forget about it. But, in Chinatown (Bangkok) the model is working just fine. Family run operations (for generations) who are perfectly fine owning the gold at any levels just as they are comfortable owning the Thai baht cash.
I brought this up here on this thread as there was discussion about what the fair levels should be for a buy/sell spread on gold. Many coin shops here in the USA believe (or know) they need 5%-10% spreads to make any money-all things taken into account. It always amazed me how these Thai (and Chinese) businesses could successfully operate with under a 1/2 of 1% spread. A great respect for one’s elders and the family unit certainly plays a significant role in it I believe.
Wondercoin.
Please visit my website at www.wondercoins.com and my ebay auctions under my user name www.wondercoin.com.
@wondercoin said:
In Thailand, when a dealer in a fully licensed gold shop is selling the equivalent of an oz. of gold for let’s say $4,000/oz., the buy/sell spread is $4,000 for the gold shop to buy and $4,006 to sell. If gold was $4,400/oz, the spread would be $4,400 to buy and $4,406 to sell. These are 23 kt. .965 pure gold bars in all sizes with roughly a $6 spread per each ounce. The shops flourish and work off the concept of quick nickels are better than slow dollars. Many Thai people have nearly their entire life savings in these gold bars hidden in their homes that they easily cash in and out of at the mere $6/ounce spread (in lieu of bank accounts). I am a huge fan of seeing these gold dealers make an honest buck keeping the buy/sell spread on gold to well under 1/4 of 1%!!
Wondercoin.
That's insane. Are they only brokers? How would they not be wiped out during a sustained downward move like last week?
If you own the gold with no debt, you won’t get wiped out. FWIW, I would guess that most of these dealers actually like owning gold, think in terms of gold and not so much in terms of baht and dollars, and are comfortable with the volatility of the markets. I’m that way with rare coins, so I’m not completely making this up.
I don't care if you own it or not. When gold drops $100 in a day, your $6 margin is now Negative $94. In the last couple of weeks, they would have all gone broke as gold dropped almost continuously.
The only way to make money on a $6 margin is if you DON'T own it.
That’s completely wrong.
First, sometimes market swings can work in your favor. So you can work on a $6 buy/sell spread and sometimes make or lose hundreds on any given ounce, depending on what you paid for that particular ounce. But in the long run, you’re going to make money, at least before taking overhead into consideration.
Second, if you own your gold outright, the only way to go broke is for gold to go to zero.
And third, working with other people’s money does not protect a business from losses. It only protects the owner, and that’s only after the business goes under.
Andy Lustig
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Considering 10c on the dollar doesn’t cut it in the coin business….lol.
One needs to develop a cost plus minimal markup factor for the particular venue - Which considers dealer sales commission, shipping costs, plus variable and fixed overhead expenses. This can vary based on the size of the business and plan sales volume. Example: Graduated Markup Factor based on wholesale bid or cost plus.
They want to own gold in the long run as their core holding regardless of the current market value.
You invented that point. I'm talking about the business not the buyers. They have bills to pay. They also need capital to buy one the counter. They do but want a long term gold on their inventory.
@wondercoin said:
In Thailand, ...Many Thai people have nearly their entire life savings in these gold bars hidden in their homes that they easily cash in and out of at the mere $6/ounce spread (in lieu of bank accounts).
in Chinatown (Bangkok) the model is working just fine. Family run operations (for generations) who are perfectly fine owning the gold at any levels just as they are comfortable owning the Thai baht cash... It always amazed me how these Thai (and Chinese) businesses could successfully operate with under a 1/2 of 1% spread. A great respect for one’s elders and the family unit certainly plays a significant role in it I believe.
@wondercoin said:
In Thailand, when a dealer in a fully licensed gold shop is selling the equivalent of an oz. of gold for let’s say $4,000/oz., the buy/sell spread is $4,000 for the gold shop to buy and $4,006 to sell. If gold was $4,400/oz, the spread would be $4,400 to buy and $4,406 to sell. These are 23 kt. .965 pure gold bars in all sizes with roughly a $6 spread per each ounce. The shops flourish and work off the concept of quick nickels are better than slow dollars. Many Thai people have nearly their entire life savings in these gold bars hidden in their homes that they easily cash in and out of at the mere $6/ounce spread (in lieu of bank accounts). I am a huge fan of seeing these gold dealers make an honest buck keeping the buy/sell spread on gold to well under 1/4 of 1%!!
Wondercoin.
That's insane. Are they only brokers? How would they not be wiped out during a sustained downward move like last week?
If you own the gold with no debt, you won’t get wiped out. FWIW, I would guess that most of these dealers actually like owning gold, think in terms of gold and not so much in terms of baht and dollars, and are comfortable with the volatility of the markets. I’m that way with rare coins, so I’m not completely making this up.
I don't care if you own it or not. When gold drops $100 in a day, your $6 margin is now Negative $94. In the last couple of weeks, they would have all gone broke as gold dropped almost continuously.
The only way to make money on a $6 margin is if you DON'T own it.
That’s completely wrong.
First, sometimes market swings can work in your favor. So you can work on a $6 buy/sell spread and sometimes make or lose hundreds on any given ounce, depending on what you paid for that particular ounce. But in the long run, you’re going to make money, at least before taking overhead into consideration.
Second, if you own your gold outright, the only way to go broke is for gold to go to zero.
And third, working with other people’s money does not protect a business from losses. It only protects the owner, and that’s only after the business goes under.
Wow. That is so far off, it needs correcting
I never said to work with other people's money, as in borrowed money. I said to act as a broker. That is a very different thing.
AS A BUSINESS, you can easily go "broke" (actually out of business) even if gold doesn't go to zero because the business has fixed costs. You can't simply sit on your inventory for months or years.
You aren't buying and selling at a later date when gold has moved. That's not the way it works if you're buying and selling all day. Yes, if the business is brisk, you win some and lose some. But the wins and losses should mostly balance and you're simply moving with the dominant trend. So, again, to my point, a prolonged move down would cause massive losses as you continued to buy and sell with an average sale price below your $6 margin. It's not a $6 profit margin, it's $6 bid/ask spread.
All comments reflect the opinion of the author, even when irrefutably accurate.
They want to own gold in the long run as their core holding regardless of the current market value.
You invented that point. I'm talking about the business not the buyers. They have bills to pay. They also need capital to buy one the counter. They do but want a long term gold on their inventory.
@wondercoin said:
In Thailand, ...Many Thai people have nearly their entire life savings in these gold bars hidden in their homes that they easily cash in and out of at the mere $6/ounce spread (in lieu of bank accounts).
in Chinatown (Bangkok) the model is working just fine. Family run operations (for generations) who are perfectly fine owning the gold at any levels just as they are comfortable owning the Thai baht cash... It always amazed me how these Thai (and Chinese) businesses could successfully operate with under a 1/2 of 1% spread. A great respect for one’s elders and the family unit certainly plays a significant role in it I believe.
I'm not denying they exist. I'm also well aware of a number of different cultures that like to hold their assets in gold. I'm trying to figure out how the finances work.
There is still the liquidity issue if you are buying and selling. And if this is your business, you need to make your living on it. You can't simply sit on inventory indefinitely.
All comments reflect the opinion of the author, even when irrefutably accurate.
@wondercoin said:
In Thailand, when a dealer in a fully licensed gold shop is selling the equivalent of an oz. of gold for let’s say $4,000/oz., the buy/sell spread is $4,000 for the gold shop to buy and $4,006 to sell. If gold was $4,400/oz, the spread would be $4,400 to buy and $4,406 to sell. These are 23 kt. .965 pure gold bars in all sizes with roughly a $6 spread per each ounce. The shops flourish and work off the concept of quick nickels are better than slow dollars. Many Thai people have nearly their entire life savings in these gold bars hidden in their homes that they easily cash in and out of at the mere $6/ounce spread (in lieu of bank accounts). I am a huge fan of seeing these gold dealers make an honest buck keeping the buy/sell spread on gold to well under 1/4 of 1%!!
Wondercoin.
That's insane. Are they only brokers? How would they not be wiped out during a sustained downward move like last week?
If you own the gold with no debt, you won’t get wiped out. FWIW, I would guess that most of these dealers actually like owning gold, think in terms of gold and not so much in terms of baht and dollars, and are comfortable with the volatility of the markets. I’m that way with rare coins, so I’m not completely making this up.
I don't care if you own it or not. When gold drops $100 in a day, your $6 margin is now Negative $94. In the last couple of weeks, they would have all gone broke as gold dropped almost continuously.
The only way to make money on a $6 margin is if you DON'T own it.
That’s completely wrong.
First, sometimes market swings can work in your favor. So you can work on a $6 buy/sell spread and sometimes make or lose hundreds on any given ounce, depending on what you paid for that particular ounce. But in the long run, you’re going to make money, at least before taking overhead into consideration.
Second, if you own your gold outright, the only way to go broke is for gold to go to zero.
And third, working with other people’s money does not protect a business from losses. It only protects the owner, and that’s only after the business goes under.
Wow. That is so far off, it needs correcting
I never said to work with other people's money, as in borrowed money. I said to act as a broker. That is a very different thing.
AS A BUSINESS, you can easily go "broke" (actually out of business) even if gold doesn't go to zero because the business has fixed costs. You can't simply sit on your inventory for months or years.
You aren't buying and selling at a later date when gold has moved. That's not the way it works if you're buying and selling all day. Yes, if the business is brisk, you win some and lose some. But the wins and losses should mostly balance and you're simply moving with the dominant trend. So, again, to my point, a prolonged move down would cause massive losses as you continued to buy and sell with an average sale price below your $6 margin. It's not a $6 profit margin, it's $6 bid/ask spread.
I’ll try on more time:
Acting only as a broker sounds good, but consignment arrangements are not practical in the bullion business. On the other hand, some dealers will immediately sell all purchases to limit risk, but that only works if the dealer is working on relatively fat margins. Other dealers will hedge their positions in the futures market to eliminate market exposure, at least when their positions get above their level of comfort.
That’s true. I should have repeated my earlier comment about overhead to avoid confusion.
Yes. If a dealer is maintaining an unhedged inventory over long periods of time, he will have some long streaks of outsized losses whenever the market has a long losing streak. But he will also have long streaks of outsized profits when the market has a long winning streak. Like you said, you win some and you lose some.
Andy Lustig
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
@Bryan6736 said:
I am curious about a trend I have seen that does not make sense to me. I have contacted several dealers in NC to sell some gold coins and silver. All of them justify paying more or less because of the type of coin. My coins include some First Spouse .999 Gold, silver eagles, loose half dollars, some army gold commemorative coins, and a few America the Beautiful 5-ounce silver coins.
What I do not understand is why, if you are buying Gold or silver at bullion prices, the type of coin matters, provided the coins have the same purity. In my case, they are all American coins from the US Mint. Am I missing something here? Bullion is paid based on the weight and purity of the coin.
I guess what I am saying as an example is that if you pay $47 for an American Eagle "1oz", but then only offer $45 per ounce for the beautiful 5-ounce silver coin. They are buying bullion, not paying based on numismatic value, or so I thought. In which case, my First spouse graded coins, then they should be worth more than bullion. However, they are not as hot an item as the silver eagles.
I cannot help but think that it is a bs tactic to get things cheaper. Should I stay clear of dealers that try that tactic, or is that common and normal?
If you are selling any PCGS certified MS70/PR70 Spouse gold please let me know.
It’s all in the art of the deal. I dumped blowout to dealers ages ago. They are going to buy what’s best for the business. Then they will mark it up accordingly, It’s their turf, their stadium. The fixed opex cost of a shop requires a profit margin that can overcome that.
Why not setup an eBay store? Then your in control of your own destiny.
Last year I priced a large collection of silver coins, mainly 90% silver dimes etc., around $20K worth. It had been from the guy's aunt who worked in a bank. I called a state wholesale buyer who has a counting machine and was willing to travel if the potential customer accepted a very reasonable pricing on the group of coins. This all takes lots of time and honest assessments and calculation shared for free. The few items that were numismatic were rolls of Morgan unc. dollars some of which could have graded prooflike. Pricing was all standard based on what dealers I know pay. In the end he inferred he had a higher offer. No big deal. If the profits are minimal a lot of this is just a community service.
Comments
I don't care if you own it or not. When gold drops $100 in a day, your $6 margin is now Negative $94. In the last couple of weeks, they would have all gone broke as gold dropped almost continuously.
Likewise, when gold rose even more over the past year or so, these shops did “gang busters” especially on the $75-$100/oz. Spreads buying and selling jewelry. I highly doubt any of these gold shops ran into a liquidity problem this past month. Their $6 spread per oz. is still being advertised 24/7 online to Thais (and every farang who knows where to look).
Wondercoin.
You are missing the point.
They want to own gold in the long run as their core holding regardless of the current market value.
You invented that point. I'm talking about the business not the buyers. They have bills to pay. They also need capital to buy one the counter. They do but want a long term gold on their inventory.
All comments reflect the opinion of the author, even when irrefutably accurate.
It depends on the turnover rate.
Would you run your business on 1/4 of 1%, even in a bull market? I would if I were a broker. I wouldn't if I owned the inventory. Hence my question.
If the bulk of their business is higher margin jewelry, which you referenced, that may work. I'm not questioning your observation. I was just trying to figure out how it actually works.
All comments reflect the opinion of the author, even when irrefutably accurate.
Would you run your business on 1/4 of 1%, even in a bull market?
In the USA, it would be virtually impossible. Just with the fixed costs alone, including salaries - forget about it. But, in Chinatown (Bangkok) the model is working just fine. Family run operations (for generations) who are perfectly fine owning the gold at any levels just as they are comfortable owning the Thai baht cash.
I brought this up here on this thread as there was discussion about what the fair levels should be for a buy/sell spread on gold. Many coin shops here in the USA believe (or know) they need 5%-10% spreads to make any money-all things taken into account. It always amazed me how these Thai (and Chinese) businesses could successfully operate with under a 1/2 of 1% spread. A great respect for one’s elders and the family unit certainly plays a significant role in it I believe.
Wondercoin.
That’s completely wrong.
First, sometimes market swings can work in your favor. So you can work on a $6 buy/sell spread and sometimes make or lose hundreds on any given ounce, depending on what you paid for that particular ounce. But in the long run, you’re going to make money, at least before taking overhead into consideration.
Second, if you own your gold outright, the only way to go broke is for gold to go to zero.
And third, working with other people’s money does not protect a business from losses. It only protects the owner, and that’s only after the business goes under.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Considering 10c on the dollar doesn’t cut it in the coin business….lol.
One needs to develop a cost plus minimal markup factor for the particular venue - Which considers dealer sales commission, shipping costs, plus variable and fixed overhead expenses. This can vary based on the size of the business and plan sales volume. Example: Graduated Markup Factor based on wholesale bid or cost plus.
in Chinatown (Bangkok) the model is working just fine. Family run operations (for generations) who are perfectly fine owning the gold at any levels just as they are comfortable owning the Thai baht cash... It always amazed me how these Thai (and Chinese) businesses could successfully operate with under a 1/2 of 1% spread. A great respect for one’s elders and the family unit certainly plays a significant role in it I believe.
Wow. That is so far off, it needs correcting
All comments reflect the opinion of the author, even when irrefutably accurate.
I'm not denying they exist. I'm also well aware of a number of different cultures that like to hold their assets in gold. I'm trying to figure out how the finances work.
There is still the liquidity issue if you are buying and selling. And if this is your business, you need to make your living on it. You can't simply sit on inventory indefinitely.
All comments reflect the opinion of the author, even when irrefutably accurate.
I’ll try on more time:
Acting only as a broker sounds good, but consignment arrangements are not practical in the bullion business. On the other hand, some dealers will immediately sell all purchases to limit risk, but that only works if the dealer is working on relatively fat margins. Other dealers will hedge their positions in the futures market to eliminate market exposure, at least when their positions get above their level of comfort.
That’s true. I should have repeated my earlier comment about overhead to avoid confusion.
Yes. If a dealer is maintaining an unhedged inventory over long periods of time, he will have some long streaks of outsized losses whenever the market has a long losing streak. But he will also have long streaks of outsized profits when the market has a long winning streak. Like you said, you win some and you lose some.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
If you are selling any PCGS certified MS70/PR70 Spouse gold please let me know.
http://ProofCollection.Net
It’s all in the art of the deal. I dumped blowout to dealers ages ago. They are going to buy what’s best for the business. Then they will mark it up accordingly, It’s their turf, their stadium. The fixed opex cost of a shop requires a profit margin that can overcome that.
Why not setup an eBay store? Then your in control of your own destiny.
Last year I priced a large collection of silver coins, mainly 90% silver dimes etc., around $20K worth. It had been from the guy's aunt who worked in a bank. I called a state wholesale buyer who has a counting machine and was willing to travel if the potential customer accepted a very reasonable pricing on the group of coins. This all takes lots of time and honest assessments and calculation shared for free. The few items that were numismatic were rolls of Morgan unc. dollars some of which could have graded prooflike. Pricing was all standard based on what dealers I know pay. In the end he inferred he had a higher offer. No big deal. If the profits are minimal a lot of this is just a community service.