Assess dealers before you buy metals
January 3, 2019
In last week’s column, I listed some background information for beginning the decision process on purchasing physical precious metals.
After listing some “paper” forms that some people consider instead of direct custody and control of the metals, I provided some basic definitions.
Then I noted some decisions about what kinds of products to choose to own.
That column can be found here: https://www.numismaticnews.net/article/deciding-to-own-physical-precious-metals.
There are other factors involved in purchasing physical precious metals that I cover this week. They include finding a reliable dealer, performing price comparisons, evaluating delivery standards, and storage options.
In the United States, banks pretty much do not handle physical precious metals trading. Some brokerage firms do, but they discourage purchases where the customer wants to take direct possession. In America, that mostly means using any of a few thousand coins and precious metals dealers as your source for physical precious metals.
Here are points to consider when finding reliable dealers.
- Ask those you trust for recommendations. Check online reviews for every company you are considering.
- Search your local directories for coin dealers in your area. Be sure to visit them for education on products and as a possible vendor. For instance, few people realize just how dense gold is. When someone holds a gold coin or ingot in their hands for the first time, they will often comment on how heavy it feels.
- Check membership directories of the American Numismatic Association (www.money.org), Professional Numismatists Guild (www.pngdealers.org), and Industry Council for Tangible Assets (www.ictaonline.org). Especially look for a dealer who is a member of all three.
- Company longevity in the business is a good sign of financial stability. Look for 20 years or longer, which should mean that management has experience in strong and weak markets. However, remember that an experienced dealer may also leave one company to go out on his or her own, so be sure to check his or her background.
- Dealers who have merchandise available before you make your purchase are likely to be more financially stable. You should avoid dealers that cannot even order merchandise until after they have received your payment.
- Dealers who can deliver immediately in their store or ship promptly are likely to be more financially stable.
- Dealers who can knowledgeably and sensibly answer your questions are more likely to be well-run operations.
- Dealers who insist that you take delivery are safer than those who talk about delayed delivery or storing your merchandise for you. Taking prompt delivery of all your purchases is especially important for your own protection.
- A few primary distributors for various mints will sell to the public. Such status usually indicates financial stability. However, you should not automatically exclude consideration of other sellers.
Many dealers post their selling prices online, either with continuous updates or at least once a day. Check several of these for the particular products you might buy in order to get a good sense of what the premiums are for the various products. In particular, focus on the size of order that you are contemplating. A company that may be a low-price seller for 100 units of a product may or may not be competitive for 1, 10, or 1,000 units.
For those purchasing by mail order, find out whether there is an additional cost for shipping or postage. Also, some companies quote what appears to be a very low sell price but then add a commission fee on top of the product cost. The important price to compare is how much the total payment will be to purchase the merchandise.
However, keep in mind that the absolute lowest price does not necessarily indicate the best value. A company with a competitive price and great service may provide better value than a low-price seller with a general lack of service. This could be especially true when dealing face to face with your local dealer versus a business that you call or conduct business with online.
Here are some service standards to consider:
- Do the sellers seem to have your best interests at heart or their own? Do they listen to you? Can they accommodate your special requests?
- Do the sellers provide their own independent, timely, and practical information to assist you in your decisions? Or is their information stale or glorified sales puffery?
- Do the sellers offer recommendations for both buying and selling? What is the accuracy of all of their past recommendations? Do they offer reasons to back up their current recommendations?
- Do the sellers have a wide product selection, or do they offer you limited choices?
- Will the seller accept orders of the size you contemplate? Or do they have a minimum or maximum order limitation?
- Are the sellers friendly and knowledgeable, or do they often put you on hold to ask someone else?
- Are answers straightforward or complicated? Do the sellers even take the time to answer your questions?
- Do the sellers offer you ample time, without pressure, to make up your own mind?
- Do the sellers perform as promised?
The more of these services that a dealer provides, the better experience you are likely to have with precious metals. Often, it is worth paying a slightly higher price in return for better customer service.
For those making purchases by mail order, you should also consider delivery standards.
The most reliable companies typically have the fastest shipping standards. To do this, they must have product on hand or in depositories. If customers make payment by good funds (bank wires, cash, money orders, cashiers’ checks), merchandise should be shipped within three business days of receipt of payment. If the seller cannot ship within five business days (one week), consider avoiding them.
When paying by personal or company check, sellers normally do not ship immediately. Even though checks normally clear within one to two days, the banks never contact the sellers to say the check is good or not good. Checks that do not clear can still take as long as two weeks before the seller learns of the returned payment. So, the normal industry delay is one to two weeks before shipment of merchandise paid by a personal check. A greater shipping delay, other than for overall market supply shortages, is not a sign of a financially stable company.
In extremely active markets where buyers overwhelm supplies, delivery times can be delayed. If a single dealer states that they cannot ship merchandise within a reasonable time, but other dealers don’t have delays, you should avoid the dealer who cannot make prompt delivery. If every dealer is reporting delays for a particular product, then the delay is legitimate.
Products shipped by Federal Express or UPS are not covered by the carrier’s insurance, even if an extra fee was paid for such coverage. Technically, it is illegal to use these companies to ship money, except for products that the U.S. government ships, by these vendors. If a seller ships by Federal Express or UPS, ask if they have private insurance coverage. The Post Office’s registered mail is highly reliable, with my company experiencing the loss of only 21 packages out of tens of thousands of packages in 48 years.
Packages of precious metals should be wrapped, as far as possible, so that the contents are anonymous. Words such as “gold,” “coins,” “precious metals,” and “silver” should not appear on the shipping label.
I recently discussed the subject of where to store your physical precious metals in previous columns, which you can read at https://www.numismaticnews.net/article/stored-bullion-might-be-taken-from-you and https://www.numismaticnews.net/article/dont-risk-losing-everything-at-once.
Next week, I will go through a list of business practices that I consider to be warning signs of coin and precious metals dealers you may want to avoid.