Discussion in 'Gold' started by gandhi28152, Aug 7, 2019.
That's pretty great that you can mail them your bullion and get spot.
Wow. That's great!
I believe Ainslie in Brisbane have a policy of buying Silver @95% spot and gold @98% spot anytime, bullion/numistmatic/whatever, bought on weight at spot.
Best to check yourself though, but thats what Ive been quoted previously.
when they get clean out, they would hate to put up "SOLD OUT" sign
it means bad planning
so long as they can sell to their customers, they would buy to sell them
Goldmongers pays 92% of spot to the public for scrap and higher if you are a Stacker
We pride ourselves on the pricing and service that we provide & especially like to look after the Stackers. Feel free to give us a call on 1300 334 653 for a quote
Can’t see why a dealer won’t buy as the price is going up.....
Can see dealers not buying as the price is going down....
Then they will go out of business.
Dealers survive because of the margins in buying and selling, not because the price goes up or down. You can't just do one of those two things for very long.
If one is a dealer and the prices are declining everyday after a big long bull run.... and the market for gold fading why would any sane dealer want to buy to add to inventory?
Of course no dealer can predict to perfection but going against market sentiment is a recipe for disaster
Ps I wouldn’t blame a dealer for not buying from a walk in.
You do not buy just to add inventory, you would have a set range of stock you want to hold based on current sales projections and once you exceed that you stop buying.
The inventory effectively become "dead money" in terms of the business and you make money on the margins from continually trading.
If you sell a 1oz gold bar then you immediately buy another 1oz gold bar regardless of the price, keep doing that and you average out to the margin difference. Your stock going up and down in value doesn't really matter unless you want to close the business and sell the lot.
I do not see logic in what you are saying....
Gold goes up because more people are buying than selling... dealers have shortage.
Gold goes down because more people selling than buying...dealers have a surplus.
Who will the dealer sell to immediately when the gold price is falling, especially if there are many sellers (dealer buying) and few buyers, while the inventory is losing value everyday, at the very least some dealers would say sorry.
Hedge your stock levels with offsetting position in futures market This can protect against movement in price.
Ie buy 100 ounces of gold today sell 1 gold futures contract , buy 5000 ounces of silver sell one silver contract conversely sell 5000 ounces today buy one futures contract
can also use option on futures (put call)
Margin on turnover can be the business model.
Gees that is a tall ask for dealer “guaranteeing 95% spot, let alone 98% spot buy back”
Not really . Standard operating procedure unless you are willing to take the risk of price movement against you.. for example with the release of any of the popular lunar series with multiple pre sales to a dealers customers weeks in advance without knowing the price of the coins on release day ( ie lunar dragons in 2012).
Not sure of the costs involved no doubt the 95/98% buy back margin would cover costs..
No doubt some dealers may have a market view on price however extreme volatility could cause large losses so a small margin with a high turnover is a lot less risky.
Perhaps some of the dealers may care to comment on their own arrangements on hedging
I believe there are also mini futures contracts for smaller amounts.
.......small margin with high turnover.......this is a key ingredient. I see the same concept in Singapore at the foreign exchange dealers. The best exchange rate between the Singapore dollar and the Malaysian Ringgit is at the bus terminal where tourists/workers are coming and going from both countries. The Malaysian Ringgit is a bit of a dog currency but the location of the dealer means he is able to give Malaysians a good deal and immediately off-load the risk to Singaporeans looking to travel across the border shopping and give them a good deal as well.
Applies to gold and silver as well. A dealer will buyback only if they are in a position to offload quickly.
Nah ... 95% is like taking candy from a baby. IMO
I ran a shop that paid 100% of spot for 5 years.... Never an issue. However, as people would know there were daily limits on that.
Working off 98% is easily sustainable. Working off 95%, with a few shipments to a refiner, and cherry-picking the good stuff. That's money for Jam.
Look at it this way.
You start a dealership by investing say $100k in stock. Consider that "dead money", so for the sake of the business forget it exists, mentally write it off.
You are now starting to trade and someone buys a 1oz gold bar for say $2100, you immediately go and buy another 1oz gold bar wholesale (or from a walk-in or whatever) for say $1900. Congrats, you have just made $200 regardless of how the price of gold affects your stock value.
Repeat that again and again and bingo, you now have a "rolling average" turnover business that is pretty much immune to the spot price. Your business makes money on the margin of sales, not the gold price.
It doesn't matter too much if the gold price halves to $1000, you are still making the same (or more maybe) margin on each sale.
Sure, buyers can dry up, and that's a risk of this business. And that's often related to the spot price, but if you run a well known business with good prices there should always be buyers around. And you can always cut your margin (and still maintain the same $$ profit per trade) to help increase sales.
I believe that most dealers have a number of clients with unallocated PMs, and they can use these items to ensure they've always got stock.
The Perth Mint has also stated that to save the cost of leasing gold to keep their refinery operating, they use gold from their client's unallocated PM investments to operate the refinery, so they get their working gold for free.
I should clarify my earlier point....when I wrote offload quickly, I was referring to the dealer being in close proximity to the active market that enables the transactions. ie a city location, not a country town when considering gold.
Dealers will always buy back, it is simply a matter of price. The person selling may not like the buyback price but it will enable a more attractive sell price for the dealer. That is business. You can still maintain a reasonable margin whether it is gold bullion or used cars.
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