7 Questions You’ve Wanted to Ask Your Coin Dealer
Out of a list of possible professions that an individual may pursue, a coin dealer or numismatist is likely one that isn’t top of mind. It’s certainly a niche industry and one that many people aren’t familiar with, especially the inner workings. As a result, we frequently receive questions from customers who are curious about how we operate.
Clients are even interested to know where the coins and bullion go after we acquire them. Our owner most often gets asked how a “hobby” can be turned into a full-time business.
The purpose of this article is to address a list of seven questions that we regularly receive from the public. We thought that this information would be of interest to many of our readers and customers. Furthermore, in some cases, it may provide some peace of mind as to what ultimately happens when we purchase coins, bullion, and coin collections.
What Do You Do with the Coins When You Buy Them?
Inevitably, the first question that we receive from someone selling their coins or coin collection is what we do with the items once we purchase them. This is sometimes asked out of curiosity, but in many cases, because there’s a sentimental attachment to the coins, as they belonged to a loved one.
We often joke with customers that we operate much like an adoption agency. Our goal is to find a good home for the coins. All coins, bullion, and paper currency have different markets, so much of our time is spent identifying the proper market for the various items that we purchase.
This is a simple process if we purchase a single item or type of item, such as gold coins. However, it can become a bit more complicated when we acquire a large number of different types of items. While it’s a more involved process with a diverse coin collection, it’s always a welcome challenge and one that keeps our job interesting and exciting.
Do You Melt Down the Coins?
Another question that we receive daily is if we melt down the coins. This is a valid question and makes sense since the terms “junk silver” and “melt value” are frequently used in the industry.
Our readers will be happy to know that we don’t melt down the coins and bullion that we purchase. Not only would it be a shame to do so, since we’re coin collectors ourselves, but in a sense, it destroys a piece of history. Furthermore, it would also be extremely expensive to do so.
The reason being is that most refineries pay a much smaller percentage of spot or the melt value of the items than what we offer our customers. Secondly, in many cases, it’s illegal to melt, deface or damage U.S. coinage and paper currency.
Who Buys Your Coins?
If we don’t melt down the coins that we purchase, who ultimately do we sell our coins to? After all, coin collecting isn’t as popular as it once was and many individuals that are avid coin collectors are aging or passing on.
Granted, coin collecting isn’t quite as popular as it once was, but there are still a number of interested investors and collectors. This, in part, is evidenced by the attendance of national coin shows and the continued strength of recent coin auctions.
We find that many individuals interested in the field of numismatics or coin collecting tend to work in specialized fields. Many of the avid coin collectors that we see these days work in the medical, dental, and engineering professions, but that’s not always the case.
While admittedly there are fewer coin collectors these days, many individuals are interested in purchasing precious metals as an investment or a hedge against inflation. While most financial advisors may be reluctant to admit it, the addition of gold and silver to a portfolio helps to reduce uncertainty and increase security.
Not only does gold and silver offer benefits as additional assets, but it historically has served as an excellent hedge against inflation.
At the time of this writing, the year-over-year inflation rate is 6.2%, which is about three times the normal rate. As a result, we’ve seen many new investors taking steps to preserve their wealth and maintain their purchasing power.
Where Do You Sell Your Coins?
While our intent is to sell as many coins and bullion as possible to our local customers, not all the items that we acquire are suitable for local sales. Additionally, as a high-volume coin dealer, we will occasionally purchase coins and bullion in large amounts that may exceed local demand for these items.
In addition to local sales, we sell coins through the mail to customers outside the metro Atlanta area, including those individuals who are located out of state. We’ll also occasionally use auction services when we have more obscure items that require a larger potential audience.
Lastly, we’ll sell items through the various networks of which we’re members.
Coin dealer networks are extremely active, with thousands of trades being conducted daily. Inevitably, we’ll have excess inventory that another coin dealer needs. On the other hand, we regularly fill orders through these networks and our suppliers when we’re short of specific items that are requested by our local customers.
Where Do You Get your Coins From?
As we noted above, we occasionally source our inventory through our networks and suppliers, but this is typically only when we need to fill a specific order. As a percentage, this accounts for 10% or less of our supply.
We receive a large portion of our coins and bullion from individual investors. With the explosion and popularity of alternative investments, such as Bitcoin, many individuals are cashing out their precious metals holdings to invest in Bitcoin or Ethereum. While there’s no doubt that potential gains are higher than those typically realized in the precious metals market, the downside risk is also much greater.
In addition to individual investors and collectors, we regularly purchase estate coin collections. In fact, we specialize in large and diverse collections that may take hours or days to evaluate. These collections are always interesting, as many are decades old, and in fact, are oftentimes passed down through the generations.
We love hearing the stories of coin collections that were first started in the 1800’s by a distant ancestor. It’s not uncommon to hear of tales of the owner of a convenience store or small grocery store assembling their collection by plucking coins from the day’s sales. In fact, the stories behind coin collections are probably what intrigues us the most about our job.
Do You Speculate on the Price of Gold & Silver?
As a coin dealer that has a reputation for paying competitive prices, we’re frequently asked if we speculate on the price of gold, silver, platinum, or palladium. After all, if we’re paying close to or above the spot price of gold and silver, how can we afford not to?
You may be surprised to hear that we rarely speculate on the future price of gold and silver. In our industry, it’s impossible to know where gold and silver prices are heading (at least in the short term). Factors, such as global political issues, GDP, jobs reports, CPI, PPI, trade deficits, etc. all can have a substantial short-term impact on prices. Of course, we would love to have a crystal ball, but the reality is that economic reports oftentimes even surprise the experts.
The only time we may speculate on the price of gold and silver is following a flash crash. This is a situation where prices suddenly and drastically drop without a valid reason.
In other words, if it appears as though the markets are being controlled, we may take a pause until the markets settle down and correct themselves.
How Do You Make Your Money?
All of the above questions ultimately boil down to how we make our money. Our business model is based on low margins and large volume. This means that we don’t make our money on individual transactions, but rather the combined amount of business that we conduct throughout the year.
We have target margins (buy/sell spreads) for various types of items that we buy and sell. Our lowest margins are for the most liquid and stable coins and bullion that we deal in. We have higher established margins for less liquid items and those that are subject to larger price swings.
For example, our smallest spreads are for United States gold coins; especially for those that are among the most popular, such as American gold eagles and buffaloes. Margins are a bit higher for silver bullion and platinum bullion since silver and platinum are more volatile metal than gold.
Lastly, rare coins, which are commonly referred to as collectible or numismatic coins have the highest margins. This is especially the case with coins that are a bit more obscure, as there is a somewhat limited market with fewer potential buyers for these items.
As you would expect, we have more sellers when gold and silver prices are up and more buyers when gold and silver prices are down. This can occasionally create a bit of a challenge, and in a sense, is a bit of a balancing act. We need to be aware of our basis in the items so that we’re selling at a profit and meeting our minimum established margins.
We thoroughly enjoyed writing this article and sharing with our readers how a coin dealer operates. Hopefully, this answers many of the questions that you’ve always had but have always hesitated to ask. We realize that not everyone operates the same, but this should provide you with some insight as to how dealers generally operate.
Sharing this information is consistent with our mission of operating with transparency. We would love to hear from you if you have any further questions about our operations. We are also happy to answer any questions that you might have regarding buying or selling gold bullion, silver coins, rare coins, or a coin collection.
Not only are we transparent, but we offer among the most competitive rates in the industry. Additionally, we provide a concierge level of customer service that is unparalleled in the industry. Additionally. we are a proud lifetime member of American Numismatic Association, among other leading third-party organizations.
Contact us today through our website or give us a call at 404-236-9744.