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New Bullion Businesses Squeezed?
By Patrick A. Heller
May 07, 2013

With the 10-15 percent drop in gold and silver prices from April 12-15, the number of people liquidating their bullion-priced coins and ingots has dropped significantly. Even more, the number of people cashing in their gold jewelry, sterling silverware and the like has also fallen sharply.

A recent report stated that companies who jumped into the gold buying business over the past few years have seen their purchasing volume decline by more than 50 percent from what it was before April 12. A survey of pawn shops, check cashing places, jewelry stores and other johnny-come-lately buying businesses shows the owners claiming that volume has disappeared almost as fast as it increased when they added a jewelry-buying service to the rest of their businesses.

Coin dealers who also sell bullion-priced gold and silver are also noticing the fall off in buying inventory from the public. However, at the same time they are enjoying soaring demand for physical gold and silver. This rise in sales masks the fall in purchasing activity.

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Many individual sellers of jewelry and related items are more or less forced to do so because of economic hardship. If gold and silver prices don’t rebound soon, I expect such sellers to be squeezed into selling at current price levels. If it takes more than a month or two for this phenomenon to appear, sellers just might find that some of the businesses that were buying such inventory earlier this year have closed or at least closed that part of their operations.

On the other hand, most coin dealers will still be going strong because of selling precious metals to retail customers. As a result, I expect that within a few months, coin dealers will handle a higher percentage of jewelry purchases from the public than they have over the past couple of years.

Another possible scenario is that gold and silver prices may soon recover and start heading even higher. If it happens soon enough, most of the newer “gold buyers” will be able to survive in business. Therefore, coin dealers cannot become complacent and assume that competition will dry up.

Whatever occurs, the next few months are bound to be interesting.


Patrick A. Heller is the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He owns Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at www.libertycoinservice.com. Other commentaries are available at Coin Week (www.coinweek.com and www.coininfo.com). He also writes a bi-monthly column on collectibles for “The Greater Lansing Business Monthly.” His radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at www.1320wils.com.)



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Comments
On May 7, 2013 Max Stucky said
'sellers just might find that some of the businesses that were buying such inventory earlier this year have closed'

We can only hope! In Colorado Springs the GOLD&SILVER BUYERS stores are all over town and continue to advertise that they 'pay more than anybody else'...which is blatantly untrue...3 visits by me have resulted in offers about 50% of silver value on various items if I will allow them to drill the items and then make a chemical test. One gal had never seen a Silver Eagle before and thought maybe a Philharmonic was from Germany.

The new ad motto in this town is:
'If you sell to GOLD&SILVER BUYERS...YOU JUST LOST MONEY'
On May 7, 2013 J said
Good article. I run a pawn/coin shop and there has been a big drop in the number of people selling us gold and silver. While gold was going up towards $2000 an ounce it seemed gold buyers were coming out of the woodwork, some even paying 100+% trying to outbid the competition and hoping the price would continue to rise, or hoping they could retail the item. Now they are dealing with losses, all that hard work for less than nothing. Our retail jewelry business is also suffering, gold bullion is about what it was, and we cannot keep silver in stock, it usually sells out within hours of getting it.  

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