Surviving in the Gold Industry – A look behind the scenes
I love gold & silver and I love this business; although it has gotten very challenging in the last two years.
Both, investors and bullion dealers sit in the same boat. And together we’re trying to manoeuvre this boat through this economic storm in the attempt to make it to the other side without drowning.
And drowning of course means loosing the purchasing power (value) of our wealth regardless if it’s 500 or 5 million Euros, Dollars or Pounds. Our opponents in this situation are corrupt governments and banks that try to harm our efforts, wealth and positive thoughts by
a) manipulating the markets
b) providing false information
c) induce fear in our heads.
Our opponents’ moves with the above tactics that we have written in depth in the past Bulletins have caused several challenges for again both investors and bullion dealers. The biggest challenge for us is of course to provide the real physical metal and securely ship it to you. And there are risks involved in the
timing between ordering the goods from the suppliers, having them transported into our secure vault and then the price difference when an investor buys them.
The bullion dealers risks are:
- Price risks
At what price has the seller bought them and how did the spot price move at the point of selling the metal to the investor
- Storing risks
The longer the metal is in stock the more money it costs. That means we try to turnover all products as quickly as possible.
- Shipping risks
All packages need to be shipped insured and that costs money for logistics, handling, insurance and shipping itself.
All of the above are no problem and in a normal market environment. However, the manipulation and false information of the media has in the last years caused:
1) War on premiums
With gold prices moving sideways for quite some time now there is a war on premiums raging in Europe driving them down to record lows. Remember the premium or spread says how much higher in percent the product is you buy compared to the gold spot price. The premium for a 1oz gold coin ranges normally between 5 and 8% - currently less than 4%. A 1 kilo gold bar is traded at a premium of 0.9%
over spot. Meaning the total margin is 180 Euro. From this 180 Euro the manufacturer, the insurance, the transport, the distributor and reseller margin are shared.
I did some business with an Irish gentleman last year and he was buying gold bars. My company ended up with a gross margin of 0.3% out of a 140,000 Euro deal. I went to complain with our supplier asking for a discount and our supplier said, his company makes 80 Euro out of this deal.
Currently this is a bit of a pain and that explains also why we have to chase every Euro from transfers that come in and sometimes write to our customers to transfer 10 or 20 Euro when banks take out their mysterious fees that no one can explain.
That’s the reality we’re looking at right now. So on one hand low premiums are very good for the investor but if they become too low the dealer just exchanges money. With these artificial heavy price fluctuations
some dealers loose substantial in liquidity. A German dealer who offers wholesale b-quality goods has lost 1.7 million and 70% of his liquid assets in this war over the last two years.
So, if this keeps going on we may as well see a series of gold dealer bankruptcies in the near future. And this is the very same reason why we at CelticGold run one of the most efficient bullion company with small budgets for marketing, office and staff. For example I have spent over 1,500 hours working in the online shop mostly at night doing the boring jobs that just need time to be set up as we can’t afford to pay an outside agency for these jobs.
2) Bent business politics
We have observed that there are bullion dealers that have started to play tricks to artificially make more profit from gold sales. Let’s look at the spot price tickers of a few different bullion dealers.
I wouldn’t tell who’s tickers these are but the first one you may recognise… it’s our CelticGold ticker. All these tickers have been screen shot in the very same second. These live tickers work with a feed. The prices are fed to the websites in an interval of around 1 minute. There are specialised data providers that offer this kind of information. A few cents up or down may occur depending on the data provider, the
speed of the server etc, etc. But do you notice that the gold price announced in Ounces and Grams in ticker Number 2 is higher than all the other tickers?
This particular bullion dealer fiddles the numbers to make his product to appear low in premium but the basis is artificially higher and not accurate. Some participants in the industry have started to become a bit bent. I must say normally most people working in this industry are totally reliable and honest people. I do hope that this is a short phase but this development naturally draws in some attention that we observe.
3) Insurance Premiums for shipments
Obviously insurance premiums get higher and higher after the financial crisis and I know that the Top online dealers in Germany don’t have an insurance but promise to their customers to ship fully insured. A transport insurance starts with 5,000 Euro per year and depending on the amount and value of shipments this amount can easily go up to 30,000 to 50,000 Euro. But if the dealer “says” we ship insured and then doesn’t this will save the company a lot of money.
Of course we at CelticGold always carry insurance and pay the premium.
4) Mis-leading Advertising texts
Buy affordable gold coins now
Buy gold coins starting from 39.90 Euro
Eagle of America solid gold coins for only 49.90 Euro (instead of 89.90 Euro)
And other mis-leading phrases send the new investor into the wrong direction. The price for a gram of gold is the price of a gram of gold. A gram of gold trades on February 16th 2013 at 38.89 Euro. It is simply impossible to offer a gold coin at 90 Euro and then reduce the price by 40%.
The price you pay for a gold coin is based on how much pure gold is in that coin or bar. Nothing else. But you are lead to think: “Oh, a gold coin for 49.90 Euro, that’s a good deal.”
The question always is: How much gold (in grams/or ounces) do you get for your money?
The seller in the above case sells a 9 carat gold “U.S. Eagle” coin with a diameter of 16mm. It does not specify the thickness and the investor doesn’t know how much the coin weighs. You’re basically buying a black box and it suggests you’re buying a US Eagle coin but you’re not. The “real” US Eagle coin looks totally different and of course is a 22 carat gold coin and one can’t get a real US Eagle coin for 49.90 instead.
The fake „bargain 9k coin“ and The real “US Eagle”
We can clearly specify the above offer as a scam – beware fools gold.
To summarize up on this little tour behind the scenes; we need to get the manipulation out of the market and then return to normal daily business. So we can trade gold and silver products at a normal premium and everyone can make a living and does not have to use bent tactics trying to take advantage of people.
There’s more investors that need to know about the scams to avoid and that physical gold & silver is the only real deal; this would help everyone enormously as we would see the price going to a normal fair-valued level again.
Remember, we’re in this together and we have to hold faith in the long term fundamentals and historical facts to row our boat to safe ground on the other side of the economic stormy river.
Author: by Stefan Krämer
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