Dealing With Local Coin Shops

There was a recent article written on Opening A Coin Shop which talked about the considerations when starting this type of business.

What the article reminded me of was the pitfalls of only dealing with one or more small local coin shops which may not be able to serve your needs when buying and selling gold and silver. My old boss used to say "the failure rate in the coin and bullion business is 90% every decade". If gold goes to $1500 or $2000 (as some experts are predicting), how likely is a local dealer going to be able to buy back the 10 or 15 Gold Eagles (or other one-ounce coins) you bought from them?

If silver goes to $50 an ounce (as it once did), how likely is a local dealer going to be able to buy back the bag of junk silver you bought from them (at 715 ounces per bag, that would be approx. $35,000).

If you are only dealing with a small coin shop, you might want to consider establishing a relationship with a large coin dealer who is more likely to be in business long-term and be able to handle the larger transactions you have or will have in the future.

Happy investing.

Prosperity (Scrap Gold) Parties

Over the weekend, I watched a short news story on one of the Minneapolis/St. Paul TV stations about Scrap Gold parties. Sometimes referred to as Prosperity Parties, this is where people bring their scrap gold and other jewelry to a place (usually someone's home), have it examined and converted to cold, hard cash.

People proudly display a few hundred dollars they received and everybody is happy. But they leave out an important detail which is what percentage you can expect to receive of the gold's value based on the spot price of gold. If the customer receives 30 percent of the gold's value and the appraiser turns around and receives 95 or 98 percent from a refiner, how fair is that?

I am not saying some of these appraisers don't present a fair offer but there is certainly room for some serious low-balling to the customer. If you happen to attend one of these parties, here are a few useful facts...

Spot gold is stated in Troy ounces. A Troy ounce equals 20 pennyweights which equals 31.1034 grams. If spot gold is $900 a Troy ounce on the day you attend one of these parties, then each penny weight has a gold melt value of $45 for a pure 24k gold piece of jewelry or $22.50 for a 12k piece of jewelry.

If you are quoted a price in grams (as opposed to pennyweights), each gram is worth $28.94 for a pure gold piece and $14.47 for a 12k piece (which has only 50 percent gold content). When you are offered a price on your scrap gold, do a little figuring in your head to see if you are being offered a fair price and one you are willing to accept. More information on this subject is contained in my Gold Weights & Measures article elsewhere on this site.