Scrap gold is not always the most lucrative industry for the wholesale salesman, but quite a good industry for the end-user; that is, scrap gold is more lucrative for the one-time gold seller than for the regular wholesaler. The reason for this is that the wholesaler does not actually make much of a profit as most people seem to think; a reputable gold wholesalers’ profit margins are usually quite limited, as they have to buy the gold, pay for overhead such as store fronts, offices and allow for the fluctuation in the sometimes volatile gold market.
This is not to say that we don’t make a profit, of course we do as that is the point of running a business, fortunately reputable dealers such as myself receive referrals, the lifeline of my business which allows me to eliminate advertising expenses and allow me to payout higher prices, do more volume and thus make a living.
In addition, the wholesaler is the one who bears all the risk of purchasing the gold, while knowing full well that the prices may fall in the short term. If they do fall (and gold prices have been known to fall quite rapidly, notwithstanding their recent meteoric rise), the wholesale reseller will be left with an inventory of gold that is worth less than what he paid for it. This is why commodities trading with any material is risky, but particularly so with gold, because of the instability in prices.
Scrap gold prices tend to fluctuate a lot, because there are several extraneous factors that affect the price of gold, such as the changing value of the US dollar. Since gold has several singular uses that are not shared by other commodities (such as the fact that gold is a hedge against the value of the dollar), the gold scrap price suffers from a high degree of volatility.
Ironically, however, it is precisely these factors that make gold the most widely recognized store of value, and it is a direct consequence of these reasons that the ancient empires came up with the idea of using fine metals such as gold and silver for coinage and jewellery – to retain value.
And so it happens that almost every household has an amount of gold jewellery saved up, sitting in a safe deposit box and gathering dust. And even though it might be alarming to know that the value of your safety-deposit-box gold is fluctuating up and down day by day, the important thing to note is that you are receiving NO value from the gold as long as it sits there, collecting dust. This is the reason that you are more likely to come out a winner if you sell your gold to a wholesale scrap gold collector, because if you deal with a reputable dealer you should expect to receive 75-80% of the paper value of your gold. The gold wholesaler will receive the other 20-25% of the scrap price of gold, but they will also have to pay processing costs, in order to melt the items down and reclaim the gold. Processing costs usually add up to a bare minimum of 5% of the price of the gold itself, which is quite a hefty tax. Again there are other business expenses such as rent, travel costs, salaries, materials costs, office expenses etc, in the end our company tends to make approximately 15-18% profit margin which I believe is fair.
Add to this the additional risk carried by the wholesale dealer – the risk that the scrap gold price might suddenly change, leaving the dealer in the unenviable position of holding gold that is worth less than what he paid for it.
So there you have it. In spite of all the unexpected bounces attached to the price for scrap gold, the fact is that you, as the one-time small-scale seller of gold, stand to make a lot more profit than the wholesale seller does. So if the fear of being taken advantage of was keeping you from selling your gold, worry no more, and go release the value of all that gold that you just have lying around somewhere, gathering dust.