SPONSORED CONTENT by Robert Torrissi, Vice President, Garfield Refining
As pawnbrokers know, managing price risk when buying and selling commodities like precious metals is a tricky business. While rising markets certainly help, market volatility can cause even most seasoned gold and silver buyers sleepless nights.
In August 2020, gold hit a record high of more than $2,000 per ounce, but the price dropped in November and had lost more than 10% of its value. Then earlier this month, investors and speculators using online and social media platforms (#thesilversqueeze) pushed silver futures to their highest level in eight years, sparking at least a mild concern about a physical short.
So, how do pawnbrokers take advantage of active precious metals markets while simultaneously protecting themselves from getting upside down on a buy? While it’s tempting to try to “time” the market and sell when gold and other precious metal prices are surging, precious metal prices (and markets) are notoriously unpredictable. Luckily, pawnbrokers can take some basic steps to avoid getting caught long (and illiquid) during a wave of falling prices.
Locking in a spot price
Buying low is not the only way to make money off precious metals and coins. Pawnbrokers can also eliminate risk by locking in their own sale price at the same time they’re buying. In this way, the savvy pawnbroker has locked in his margin and eliminated the uncertainty of market fluctuation.
At Garfield Refining, we allow regular clients to lock in precious metals prices when they sell scrap to us. For example, if a customer is looking to sell gold during a bull run, they might be wary of overpaying for their material (and run the risk of losing business to a competitor). Even if you think the gold price is bound to fall soon, Garfield can lock in your pricing without waiting for the material to arrive at our Philadelphia refinery.
Whether you lock in a spot price or not, Garfield Refining is a name you can trust in precious metals refining. Established in 1892, Garfield is a global leader in refining and has been named North America’s “Best Dental Refiner” for the past 10 years in a row. We’ve satisfied over a million customers in the more than 129 years we’ve been in business.
Don’t get burned by volatility
Dollar-cost averaging (DCA) is another smart strategy pawnbrokers can use. DCA is an investment strategy in which one divides up their total investment amount across periodic purchases. The idea is to reduce the impact of price volatility on the targeted asset.
Investors who use DCA make regular purchases of a targeted asset regardless of what the price is at the given time. DCA takes out the guesswork of trying to time the market when the asset’s price is highest.
Pawnbrokers can use the averaging strategy to protect themselves in a volatile precious metals market. By refining at regular intervals throughout the year, you average your wins and losses and don’t have to worry about whether you refined at the right time.
We advise the pawnbrokers we work with to not stockpile all their gold and precious metal scrap while waiting for “ideal” market conditions. Instead, use the averaging strategy to avoid getting burned by market volatility.
Garfield Refining’s dedicated team of experts includes several GIA-certified account managers with more than 30 years of experience handling pawnbroker-specific lots. Garfield is also a proud member of the National Pawnbrokers Association, so we have intimate knowledge and understanding of what pawnbrokers are looking for.
To boost precious metals profit, consider getting on a regular refining schedule with Garfield Refining. We’ll allow you to lock in spot prices, and we’ll encourage you to refine at least four times a year to protect you against commodity risk. No shipment’s too large or too small for us to handle, and we ensure a quick turnaround time when processing materials and sending payment.
If you’re ready to get the best value for your gold and precious metal scrap, call Garfield Refining today at (800) 523-0968.