Investing in precious metals is one of the most popular ways to diversify one’s investment portfolio. One of the ways to get started in this is to create a bullion buy-and-sell business. This can be lucrative when you know how to do it. That’s because precious metals, like gold, aren’t usually affected by how the economy goes. For instance, if the value of dollars goes down, chances are, the price of gold doesn’t.
With such, you can protect your assets while making a living out of them through a buy-and-sell business. If this seems like a good idea, continue reading to know what you should consider before starting such a business.
1. Learn The Terms
As a buy and sell business owner, there are several jargons you need to be familiar with. You’re more likely to use and encounter these terms in your daily transactions, so it’s good to be aware of what they mean.
- Gold Bullion: Bullion simply pertains to non-ferrous metals refined to meet a certain standard of quality. Gold bullion is a bulk of gold used to produce gold products like jewelry and coins, like the ones you can find on infinitycoins.com and other online retailers.
- Hallmark: In the gold business sector, hallmark refers to the engraving used to guarantee that a piece contains a certain amount or quality of the metal.
- Carat Or Karat: Karat refers to the metal’s fractional measure of purity in comparison to 24. For instance, an 18-karat gold necklace has 18 out of 24 pure gold parts. That means that the necklace is about 75% pure gold.
2. Things You’ll Need To Begin The Business
Like any other business, there are several items and tools you need to run a bullion buy-and-sell business. Some of this equipment can be bought pre-loved but remember to choose one that has good quality. Here are some of them:
- Magnet, File, And Loupe: You’ll be using a magnet, files, and loupes every time a client brings a piece of jewelry or bullion to your store, so you must buy a quality magnet. They don’t need to be expensive, but they must be durable enough to last you a long time. You’ll also be using your file to scrape the outer coating of certain jewelry pieces. Your loupe, on the other hand, is to magnify the small crevices of the jewelry you’ll be inspecting.
- Professional Jewelry Scale: This tends to be more expensive, but they’re essential in your daily operations. Make sure not to go cheap on this one. Be sure not to choose other scales as they may look unprofessional and out of place in your business. And to maintain your scale’s accuracy, it’s also wise to take a reading from it regularly. When you do, keep the records to track if there are discrepancies that could occur. With such, you can avoid potential problems that may arise with customers or regulatory agencies.
- Gold Testing Kit: This is another essential tool you need. Most of the jewelry items that you’ll buy may not have a hallmark. Of course, you can’t just eyeball what a piece of metal is worth, so you need a quality testing kit. Testing kits have acids inside that’ll determine how many carats of gold are in the jewelry. Some of these kits also have two more acids to test silver and platinum. By having a testing kit, you can give an accurate valuation of your customer’s jewelry.
3. Understand Gold Valuation
Not everyone can enter the gold business sector since it requires substantial knowledge in measuring and weighing bullion quality before purchasing it. Novice business owners could get beaten out by more experienced sellers without understanding gold valuation. Thus, you may need to do your due diligence to determine real gold and its changing value on a daily basis.
In addition, you need to know that there’s a difference in gold coins and jewelry valuation. Gold coins have a standard guide, while gold jewelry is measured according to its fineness. There’s also a standard table determining how much gold a piece of jewelry contains, which affects its market value. After evaluating the market value of a piece of metal and once you’re certain that you can profit from it, only then can you decide whether to buy it.
You should also be updated about the market price of gold as it always changes. This will help you figure out when’s the best time to buy and sell. Buying gold wholesale may get you a lower price for the same quality, and you’ll be able to sell it for a much higher price.
4. Understand The Market
Aside from valuation, you should also understand the market. Gold business has a wide range of clients coming from multiple backgrounds. And the highest in the client hierarchy is the gold bugs. These people like to collect physical bullion and divide a portion of their assets into gold equities, options, and futures. Most importantly, they’re usually long-term clients. Thus, they’re rarely affected by the downward gold trend, unlike many ideological gold owners.
Gold bugs are the type of clients you want to have in your business. They provide significant liquidity in your supplies even if they’re still investing in other gold securities such as stocks and futures.
Furthermore, gold businesses also call the attention of many institutional investors who are actively part of hedge investments. These investors buy and sell gold in conjunction with securities such as currencies and bonds. This is called a bilateral strategy.
5. The Best Type Of Bullion To Buy
Of course, you first need a supply of bullion before you can start selling and gaining profits. So, the first step, then, is to buy precious metals. If you have close family members or friends who are willing to lend you their gold pieces, then that’s great. But essentially, you’ll still have to purchase more before you can start selling.
And when you’re buying gold, there are few things you want to keep in mind, such as the following:
- By far, purchasing standardized gold bullion coins from national mints is still the best way to acquire gold. Some examples of national mints include American Eagles, Canadian Maple Leafs, and Australian Philharmonics.
- Certain types of gold out there are too expensive but are less liquid in the long run. Some pieces that fall in this category include ancient shipwreck treasures, gold rounds with skulls or bayonets printed on the back, and pre-1933 gold coins.
- On the other hand, specialty round golds from designers also come at a very high price which may not give you an ROI in the future. Not everyone is looking to buy specialty rounds, and if you’re looking to sell your items to international clients, then gold coins with skulls on the back may not sell as much as you want to.
- The same goes for moose coins or Canadian wood buffalo. They’re usually more expensive, but you may not be able to sell them back if your customers aren’t looking to get limited edition items.
6. Know How To Test Bullion
Another factor to consider before buying bullion is to test them. There are a few ways you can test your gold products, and here’s a non-exhaustive list for you:
- XRF: This is by far the most advanced way of evaluating gold products. The way this works is that you have a battery-operated tool with an x-ray tube inside and a tiny x-ray beam. The beam inside the tester interacts with the elements in the gold piece you’re testing. When it does, the machine interprets the results. Since XRF is the most advanced and perhaps the highest quality among all testers, it also comes at a whopping average price of USD$17,000. This type of tester is most recommended for buyers and sellers who trade gold in really high volumes.
- Electronic Testing: This method is the best option for owners who want nothing to do with acid testing. The only downside of using electronic testers is the tendency to make errors. The tester might be deceived by gold-layered pieces, which can be mistaken as solid gold.
- Acid Testing: This is one of the oldest ways of evaluating gold and perhaps one of the most accurate. The acid test is known to be a “destructive” test because it dives deep into the gold layer, ensuring that each layer is solid gold. Apart from being effective, acid tests are also the cheapest. Most acid test kits cost USD$5 to USD$100, which is way cheaper than its XRF counterpart.
7. Know Where To Buy Them
Buying gold is quite easy and intuitive; you can look at trusted gold retail websites. From there, you can select the gold products you want and choose a specific weight, quantity, or price. Such online retail websites offer discounted prices if you buy wholesale or in large quantities. And some stores give discounts if you use a credit card, wire transfers, or their most preferred payment options.
Another way to buy gold is through online bidding. But before you do so, it’s best to check the seller’s feedback. You may want to avoid sellers with negative reputations, especially when it comes to authenticity, shipping and handling fees, and delivery schedule.
Lastly, you can buy gold at Gold-to-go ATMS which are popular in cities like Las Vegas and Dubai. However, be careful with such mediums as their prices are usually higher than most retailers.
After receiving the gold bullion, be sure to store them properly to maintain their optimal quality. It’s best to keep the product in a box to prevent the risk of scratching. Another option is to keep the gold bullion in a deposit box at your bank for maximum security.
8. Know Where To Sell Them
Now the exciting part of the business is selling your bullion. However, the challenge is to find the best place to sell them. While gold buying kiosks is a great option, there are better ones such as the following:
- Local Jewelry Stores: Some shops aren’t buying gold, but others are into buying bullion. What’s great about this is having an instant payment since you’re going to their stores physically to sell them your bullion. And with such, you no longer have to worry about shipping them out.
- Pawn Shops: Another easy way to get instant cash is to find local pawn shops that buy bullion. However, they’re more likely to buy them at a much lower price. Pawn shops earn a more significant profit margin by buying it low and selling them higher.
- Online: If you want to have a wider pool, you can find online buyers. Although it may not give you instant cash, it’s still a great way to expand your target market. And you can have a much lower operating cost since you can sell them online even without having a brick-and-mortar shop.
9. Knowing Spot Price
Most importantly, you should know the most common pricing option: spot price. Because it’s impossible to buy and sell bullion based on the stock market, you have to understand how the pricing goes. More often than not, spot price can identify the value of raw ore. This ore is what refinery companies buy and turn into bullion’s pure form.
And in layman’s terms, the spot price is the bullion price you can sell at a specified time and place. This price is also what defines the explicit value of bullion in the marketplaces.
Before registering or deciding to start a buy-and-sell bullion business, it’s best to know the basics. In terms of valuation, you need to familiarize yourself with such to manage your business better. In addition, you can prevent buying fake ones since you already know what to look for and what to use to spot counterfeit billions. Most of all, knowing where to buy and sell your gold bullions is crucial. It’s important to identify buyers who can guarantee you the best returns for your products.