How to sell precious metals
This is How Bullion Dealers make MONEY from Silver & Gold | Can we do the same!?
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how do bullying dealers actually make
money now i'm not just talking about the
semantics of buying and selling coins
but the
inner workings of a bullion dealer and
how they
actually account for things make money
and continue to make money as a business
what can we
as individuals learn from that to help
us with our own stacking journeys
hello everybody backyard bullion here
now in today's video i want to talk
about
bullion dealers and specifically about
some of the ways that they make money
and how it
actually works because there's a lot of
misconceptions about bullying dealers
and how they
rake it in hand over fist and they just
make so much money from the sale of
bullions with the premiums on top
of the coins themselves and in some
situations that's very true that's very
correct
but there are different ways of
approaching
being a dealer and i think there's a lot
that we as individuals can learn
certainly
if we're in the market for doing a
little bit of coin flipping
buying coins and selling if you do not
know making a little bit of cash on the
side
there's a lot of different accounting
tips and tricks and just general ways to
work it
that a lot of people don't necessarily
think about so i thought in today's
video it'd be an interesting topic to
talk about now i am not a financial
advisor it's very important for you all
to remember i'm just a guy who likes to
talk about
shiny things here on youtube so a lot of
what i'm saying is of course kind of
theoretical i have you know no inside
knowledge as to how
any big dealers around the world do
their books do their accounting and do
their sort of selling and how they make
their money
i do hate these eagle tubes sometimes
but anyway
so from that perspective i'm just here
talking i'm not giving financial advice
so if you're going to go and take any
financial decisions
having watched this video they're yours
and yours alone
now in a nutshell being a bullying
dealer sounds like a really
good thing you can buy silver you
probably have preferential rates from
mints and
you buy it at a time when the silver
prices are low and then you sell it it's
a huge premium and you make a huge
large sum of cash and that sounds all
fantastic doesn't it and
in some cases that will be the case you
can and you have probably seen dealers
putting on
really high premiums on some silver
and making a mint there's a reason why
the mints are called mints they
literally will mint money and
create the money but bullying dealers
are somewhat beholden in a way to
the mints themselves because they will
of course be buying their stock
predominantly from the mints directly
and
it's not as profitable as you might
think yes
there are misconceptions out there that
you as a dealer will buy
your silver spot price from a d from a
mint and you'll sell it at
30 40 50 premium depending on the type
of coin
if it's an eagle for example at the
moment dropping coins all over the place
if it's a u.s eagle at the moment those
are very sought after
and you get some pretty high premiums on
them and you make a lot of money as a
dealer
and in a nutshell that's kind of the
business model you buy
cheap and you sell higher that is
ultimately how any business
should work you should be able to make a
profit on the items that you are
buying however there's a bit of a
problem with a
bullion related business that's all fine
and well if what you're buying and
selling
has a very fixed price like if you're
buying and selling
a tv and it's a particular model of a tv
you kind of know the market price on
that yeah the market price will drop
over time as new models come out but
generally speaking
everybody's going to be selling
something at the same price but
more importantly the price doesn't
fluctuate on a daily basis metals
fluctuate on a daily basis so as a
dealer
or as even as an individual you know at
the end of the day in this video we're
relating it back to how
we as individuals can learn from the big
players out there what do they do and
how do they do it
so essentially what the dealers will do
is they will have a large stock of coins
silver gold whatever metals they sell
they will have that large stock
they'll have bought that in and then
they will sell it and they buy it in
obviously at a certain price now if
the metal prices change for the better
and the price of silver goes up then of
course you can sell your
coins at a higher price even more so
that you paid for them and you get this
really nice little profit
however it does of course work the other
way even in small market shifts you can
somehow see if you buy if you're a bit
bullying deal you buy 5 000 ounces of
silver
and there's a 50 pence or 50 cents ounce
change in silver price
downwards that's quite a hefty potential
liability and because of
in normal times anyway the ratio not the
ratios the percentage markups being
really very tidy
and thin on certain products you know it
can completely kind of wipe out
where you are so one of the ways that
bullion dealers and in fact most
businesses out there just outside of
gold and silver
as well will run is that they will have
their
stock and then when they sell it they
will replace
the exact same stock at that time
thereby locking in the profits
or indeed the losses but if it's a loss
you are buying again
at a lower price from where you
originally purchased
your original stock and it's a really
it's a very different way of looking at
things certainly
it's one that i've been coming to grips
with as a
manufacturer of silver products so when
for example i
buy the silver to pour things
you know i'll make a certain amount of
profit on the item that i
eventually have and make and sell and
that's great but it's
really only a paper profit until i
actually go and buy
the same amount of silver once again the
same amount of raw material once again
to actually lock in that profit if i did
not do that
i would then be beholden to the metal
market's prices now
yes that can go up and you can make even
more cash
but of of course actually in that
situation if the metal prices go up
you actually end up making less cash
overall because it costs you more to
replace the same amount of stock
as you had at the start of that whole
process
now for a dealer dealing in literally
millions and millions of pounds and
dollars worth of
silver and gold each month that can be a
pretty huge liability so what dealers
will have and this is
kind of my this is where we delve into
more of a theoretical economic kind of
model
of how a business or how a precious
metal business comes to be and
runs so think of it like this if you're
joe bloggs on the street and you think
i'm going to start myself a precious
metal dealership this is i'm going to
buy coins and i'm going to sell them
so you have of course a business that
you want to start up and you want to get
some stock so you buy a bunch of stock
let's just represent that with this
line of silver here this has cost you a
hundred thousand pounds hundred thousand
dollars whatever denomination currency
you want to put it in
that's your initial stock of goods for
your business
now when you sell some of those goods of
course you're going to want to continue
on
making money or at least trading as a
business it takes a long time sometimes
for businesses to recruit that you know
you've put a hundred thousand pounds
into stock but let's say very
fortunately that you managed to sell
all of these or these hundred thousand
pounds worth of stock for a hundred and
ten thousand dollars
you've then got 110 000 in your hand in
your pocket it's
there you've done it you've made some
profit well done however if you want to
continue trading of course you need to
reinvest that cash
so you take the hundred thousand pounds
that you originally had again
and that kind of stays in the business
and you basically just roll over the
profits you take your ten thousand
and you buy some more stock and then
you've still you've got this kind of
bank of stock
still you've rebought all of that
hundred thousand pounds worth originally
so you've
put a hundred thousand pounds in you've
you know spent a hundred thousand pounds
you then get 110 000 back
you then re-buy 110 000 pounds worth of
metal you have a little bit more metal
now conversely if
the metal prices had gone the other way
and you'd lose out a little bit
you have still a hundred thousand pounds
worth of metal but it's a little less in
terms of that stock
and generally speaking the way that the
markets work is they will have their ups
they will have their downs and if it's
very unfortunate you get a cycle of
downs just as you start your business of
course your
original kind of investment will start
to sort of slowly dwindle over time but
eventually it will start
recouping because let's say you've
bought that hundred thousand pounds
worth of raw material to get you started
and then the silver price goes up as you
are selling that hundred thousand
and you get 120 000 pounds worth
invested back
in you can then roll it over and roll it
over and roll it over but the only way
to secure
that profit margin there is to actually
buy the silver
once again and then the idea is you keep
rolling keep rolling keep rolling of
course the bigger the budgets and the
bigger the customer base and the more
you can sell and the faster volumes that
you can sell will give you
bigger returns over time and eventually
the idea is you've then got your hundred
thousand pounds original investment that
you can at some point take out of the
business you can just go
right you know what that was a
director's loan the business is now
sustainable we've got a large enough
capital
of the stock that's rolling that we can
look in to look after that and get it
all sorted
or you just keep that in there as that
kind of stock for the business and
it's almost like an investment in silver
itself so a lot of these dealers will
have this kind of
initial chunk of change that they've put
into a business that they are keeping
almost as that kind of rainy day fund
and that's a really really important
thing that we can all learn from that
now of course that's huge like macro
economics and you know there's loads of
different different accounting
principles that you can do about
when you look to lock in prices when you
buy things when you sell things how they
you know are counted on your books of
course there's going to be lots of
different things like overheads to
factor in and dealers will of course
have all of these different uh
things to deal with uh including
customer returns faulty products if you
have
you know fakes and and false bars and
coins go through your books and you've
got to sort
all those problems storage security
internet
website costs you know all of these
things add up so
when you take this in perspective you
know somebody like a
a small fledgling coin flipper for
example and that's kind of like how i
see myself as well like at the start
anyway uh you know i was coin flipping
but with hand pulled silver i'd buy a
certain amount of
raw silver in i would then sell it and
then i would immediately go and i would
buy again
basically what the money i'd come in
every single month and for the first
like well still
even to this day i've been going four
years now i still roll over
the money each time because i know that
if i
don't lock in prices at a specific time
for a specific product i'm very beholden
to the swings and the metal prices if i
want to continue trading now of course
if i want to just shut up shop and stop
all together then
yeah i've got all this raw material that
i've locked in and
it's fantastic because you could
basically realize all your profits in
one go if you
sell all of that raw material stock so
for a lot of people to think that
bullion dealers
are like swimming in cash they have huge
cash reserves and they are just rich and
like scrooge mcduck rolling around in
their swimming pool full of gold and
silver
and it's not always the case you know it
really isn't it's it's about how
you do the accounting and how you
actually look at that
in the perspective of what you want to
achieve with the business as well
i think there's a lot of different ways
of looking at it and of course it's
you know it's going to be down to
financing to a certain degree if you've
got the capital to invest initially into
that business or whether you're on
finance
loans and so on uh you know there's a
lot of people who always say
borrowing money to buy silver is never a
good idea when you're a business
that's actually not the most horrendous
idea in the world one of the
most amazing benefits of this and i
always said this to mrs backyard
bullying as well as
if this doesn't work if we
sell any of our poured silver uh you
know the assets that we have the raw
material assets are still worth money
if you were doing a business where you
were taking plastic beads and making
plastic
form toys or you know molded plastic
toys or whatever
if you bought a hundred thousand pounds
worth of plastic that's not going to be
easily sold at the same kind of price
that you bought it from of course with
silver
there's a swing and you buy at a certain
price if i wanted to liquidate all of
the raw material silver that i have
yeah you're probably not going to get
the exact kind of premium point that you
put back in but
ultimately it's still really quite
valuable and you don't lose a great deal
whereas a lot of businesses out there
take this big gamble on this initial
investment they go
yeah i'm going to have to stick with
this for 5 15 years to get
that money to be able to take out of the
business all
together and have my original original
investment back it's
it's a true investment in you know
yourself as a business so
there's a lot of different ways to look
at it and ways to account for things and
that's just kind of
my one of i think that's one of the ways
that you can do it and it's very going
to be very different for different
things so what
can we learn as individuals if we are in
the market to do a bit of buying and
selling
ourselves now i have absolutely no
problems with people
doing coin flipping i've done it many
times before in fact some of these that
we've got here on the table the world of
dragon coins i specifically
would import from the us despite having
to pay import taxes and everything it
would still end up yielding me
about a pound fifty one pound two pounds
depending on where i sold it
return per ounce of silver which is
which is great it's fantastic and
you know most dealers out there would
love to see that kind of return you know
two pounds on a at the time 15 pounds or
with tax 18 pound
coin was you know a really good deal
it's it's like 20 i don't know
12 12 return most dealers operate a lot
less than that on silver
so that's a good kind of uh example for
me you know i'd taken i'd spend
you know 600 pounds on a roll of a
couple of rolls of 20 of these
world of dragon coins i'd then sell them
subsequently get in you know
690 700 pounds whatever it would be
and then because this was a series i'd
take that cash and i'd roll it up into
the next series and i'd get
more of the second or third or fourth or
fifth release of that series
and then when it came to the end of the
series i had this sort of surplus
of coins which i kept for myself and
this was essentially
the sort of small model that i've got
going as i've explained in this video
this was like
this is the original initial investment
minus a few other little bits and bobs
and you know this is now in a way kind
of
free silver i suppose because the money
that we earned
flipping all the others including some
of the coppers has ended up kind of
paying
for those but it's still an asset that
i'm holding so i still haven't actually
you know i haven't made profit on them
yet because all of my initial capital is
locked up in there still does that make
sense so you you've got to do it in a
certain way to account for things and of
course
that's the most important thing for you
depending on what you want to achieve
with coin flipping if you're just after
a little bit of extra pocket money then
you need to sell all of your
stock and then to one end you know
you've got to ask yourself what are you
going to do with the cash if you want to
then continue selling
you've got to roll that cash up into
more items and
to really get it kind of flowing like a
snowball you can't just do it on
what you can you can just do it on one
coin but if you only reinvest the
profits and you make two pounds profit
on that you're not gonna be able to buy
very much silver to re
sellers so you know you've got to kind
of take a bit of a gamble
to get started so business is not easy
that's kind of the general message here
and there's
this misconception that you can just
sell a lot of coins and bars and silver
and gold and whatever
and have this kind of really nice
cash cow this profit coming in i haven't
even talked about all of the additional
sort of business admin side of things
like of course if you're a
you know limited company if you're a uh
you know a registered business that
you've got obviously taxes to pay tax
returns to do accountants to
you know look at and or whether you're
gonna do the accounts yourself you know
i've always been
very much a fan of doing accounts
yourself and trying to learn as much as
possible but there's
always a certain point where your skill
and expertise that you can learn is
always limited compared with the skill
and expertise of others
so it's very very interesting that
there's a lot of misconceptions out
there around the big boy bullion dealers
and how they are
raking in cash and how they actually
probably
have got a lot of cash but it's actually
not necessarily as much profit as you
might imagine
so it's a really interesting way of
thinking about it and i know that it's
going to be different for loads of
different people and different companies
and the ways that one will look to
account things and write off
losses and all of that as well is it's
just
fascinating to me i think but it can
also be quite dangerous i do want to
finish this with a sort of a slight
warning so
the illusion of profit i think is the
final thing to look at here a lot of
businesses a lot of companies around the
world
precious metal or not will have
potentially
made a lot of money but again a lot of
that money is reinvested
into stock and it can then become a
liability now with gold and silver that
is a mitigated liability because it is
of course valuable in of itself but as i
explained with the plastic
scenario there a lot of companies will
roll over money into
other things so the same applies to gold
and silver despite the fact the risk is
less if you are
rolling things up always do it within
your own means if you're just a
fledgling coin
buyer don't go and invest that hundred
thousand pounds worth of your life
savings the only money that you've got
in this world
because the markets are volatile and if
they go up if they go down or if you
suffer
some untoward customers ripping you off
or some losses because of the postal
services or something like that goes
wrong
you can be risking an awful lot of cash
and it's
not a get rick get rich quick scheme
get rick anyway i have rambled on long
enough about this subject which i think
is fascinating and i find
really interesting and i would love to
hear from you
if you are a coin seller if you are a
dealer if you are an accountant if you
disagree with the things that i've
supposed here in this video i'd love to
hear from you but i do think that's
a model by which a lot of dealers will
have to work by because if they
don't buy what they sell on a monthly
weekly daily basis even then they will
not
secure their profits or even their
losses and it can spiral out of control
and if they don't they are essentially
gambling on the precious metal markets
and i know for a fact that a large
number of businesses
don't like to gamble the security
of stability is one of the most
important things
that any business will say that is my
thoughts on the subject
if you've enjoyed this ramble then put a
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