A lot has happened with precious metals since I began my time with Stebgo in 2010. When I started here in the sales division, the metal markets were climbing at a meteoric pace as the economy was recovering from the Great Recession.
Retailers in the jewelry, pawn and coin industries were seeing a record amount of jewelry scrap coming through the door. In fact, the surge in people “emptying out Grandma’s jewelry box” saved many smaller jeweler retailers who were struggling to sell high-end goods in a tough economy.
Our clients at the time were pushing metals into Stebgo as fast as they could in order to finance buying more scrap. There wasn’t much time to ponder if the markets would go up or down. Cash flow was king during that particular gold rush.
Now, over a decade later, the times certainly have changed. Retailers (along with everyone) have had to navigate another extraordinarily difficult time with the pandemic. The metals markets have taken similar sharp rises as the decade before, but there is not nearly the rush from the public to sell their old jewelry. Part of that is because there simply hasn’t been much time for them to accumulate “old jewelry” in such a short time frame since the last market rise. Another factor may be that the real economic impact of this last year has not been fully realized…and hopefully it won’t be as bad as we originally feared.
The changing times bring up a good question: When should you sell the scrap precious metals you’ve accumulated? In my time here, I’ve found that the best answer to this question is that it completely depends on your situation as a business. I’ve seen several approaches that fit individual business needs, and I’ve also seen what doesn’t seem to work so well.
Below are some scenarios that you may find your business in, and also my recommendation for a sound approach.
Example 1: You buy a fairly consistent amount of precious metals over the counter. It’s a vital part of your business, and you count on the revenue to operate smoothly.
-Your best option here is getting into a consistent routine with your refiner or buying source. Whether it’s based on time (ex. monthly) or volume accumulated (ex. every 200 dwt), staying in a routine no matter the other variables will keep the cash flow coming in and eliminate overthinking about what the market may do.
Example 2: You take in a fair amount of metals over the counter, but it certainly isn’t your main source of revenue. Rather, you have the ability to hold your scrap until you need some extra financing or simply like where the market is at.
-In this case, you have a lot more flexibility. There is, however, some danger in playing the market if it is going through quick up and down swings. You don’t want to buy scrap just to lose a large chunk of your profit if the market moves in the wrong direction. At the very least, I would recommend talking to your refiner about the ability to “pool” your metals with them. At Stebgo, this means that we fully process your scrap for purity, return any stones you may want removed, and hold your results here until you decide to sell all or part of it. This not only makes your assets more liquid when the time comes to sell, but also takes away your risk of holding a large amount of precious metals. It's also a more cost-effective way to stay in the precious metals market without paying high premiums for physical assets (coins, bars, bullion.)
Example 3: You don’t actively seek out buying scrap over the counter, but every once in a while you have the opportunity to take scrap in for trade or purchase. It takes a while to accumulate enough to consider sending it in for refining.
-The goal with this type of business is that you are able to help your customer, but also not lose money or put a pinch on your cash flow. If you have the ability to hold your scrap until you have enough to refine, great. But that’s not always the case for small businesses. Talk to your refiner about any minimums they require or when it makes sense to send your scrap in for refining. Most reputable refiners will work with you so that it makes sense for both parties.
There are many unique circumstances in the precious-metal buying world beyond what I covered here. Buying scrap metals can be a very profitable endeavor and taking the right approach for your situation can make a huge difference. The most successful buyers I’ve worked with are the ones who pay very little attention to the market and just keep the train moving with a regular refining schedule. There will be times where you catch the market in a downward turn, and times where it’s much higher than what you bought at. One thing is certain…nobody can really predict what the market will look like down the road.
If you have any questions or are in need of some further recommendations, please feel free to reach out through the web site or call us at (651) 451-8888.
Be Well and Happy Buying!
Adam
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