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How Dealers Make Money buying Gold from you

10 things gold dealers DON'T want you to know.

Number 10: How Dealers Make Money buying Gold from you

10. How Dealers Make Money buying Gold from you.

Dealers are always paying wholesale prices for coins and bullion. When it comes to buying your coins, the dealer asks "Why should we pay you a premium when I can get the same coin for less elsewhere"? This is the major position of dealers: after all dealers have overhead and employees to pay.That is why you need to know the numbers behind the gold you own.

When it comes to bullion the lesson is basic. The world spot price for gold is the base line for all transactions. If you are buying bullion, there is a fee which is spot plus. This fee varies from dealer to dealer. When selling your bullion it is spot minus. Some dealers will use " Melt value" when quoting buy prices and subtract the purity of the metal from that price. As a dealer, if I cannot make money on the buy, I will not buy it. No one wants to lose money.

When it comes to certified coins, the basic bullion rules apply: plus the condition and supply of the coin are additional factors that are considered. When showing a certified coin to a dealer, some dealers will not explain the full value of your coin to you. That is why you should know your coin and all of its values by studying all the numbers behind your coin.

1. Original mintage figure

2. Total number certified (all grades}

3. How many are certified in your coin's grade.

4. How many coins in total exist in a higher grade.

When you know this information, you are in a better position to negotiate a higher price and be able to judge your dealer's integrity.

Who Owns Most of the Gold?

Governments, Central Banks, and Investment funds are world's largest holders of gold reserves.

Yet these same institutions tell you that your retirement funds are better off in Stocks!

The 10 Biggest Gold owners in the world

10. Netherlands - 612.5 Tonnes 61.4% of Foreign Reserves.
9. Japan 765.2 Tonnes 2.1% of Foreign Reserves.
8. Switzerland - 1,040.1 Tonnes 37.1% of Foreign Reserves.
7. China - 1,054.0 Tonnes 1.8% of Foreign Reserves.
6. SPDR ETF - 1,120.6 Tonnes N/A of Foreign Reserves.
5. France - 2,450.7 Tonnes 72.6% of Foreign Reserves.
4. Italy - 2,451.8 Tonnes 66.5% of Foreign Reserves.
3. International Monetary Fund - 3,217.3 Tonnes N/A of Foreign Reserves.
2. Germany - 3,412.6 Tonnes 69.5% of Foreign Reserves.
1. United States - 8,133.5 Tonnes 78.3% of Foreign Reserves.

The total of the top ten represents 24,258.3 tonnes or approximately 15.4% of all the gold ever mined. It is estimated that all the gold ever mined equals 158,000 tonnes.

This data was provided by: The International Monetary Fund's International Financial Statistics Report.

If paper assets are better, than why do they own Gold?

To answer this question, I turn to the International Monetary Funds Policy.

The International Monetary Fund oversees the global financial system by following the macroeconomic policies of its 185 member countries. It is an organization formed to stabilize international exchange rates and facilitate development and offers highly leveraged loans mainly to poorer countries. The IMF's gold policies have changed in the last quarter century, but the reserves remain in place for use in stabilizing international markets and aiding national economies. The IMF's official policy on gold as it is stated on the organization's website is governed by the following principles:

  • As an undervalued asset held by the IMF, gold provides fundamental strength to its balance sheet. Any mobilization of IMF gold should avoid weakening its overall financial position.
  • The IMF should continue to hold a relatively large amount of gold among its assets, not only for prudential reasons, but also to meet unforeseen contingencies.
  • The IMF has a systemic responsibility to avoid causing disruptions to the functioning of the gold market.
  • Profits from any gold sales should be used whenever feasible to create an investment fund, of which only the income should be used.

The bottom line - To Stabilize International Exchange Rates.

When International exchange rates get out of line, gold is used to bring the markets back to safety. No other asset can do what gold does. If another asset could stabilize rates, there would be no need to own Gold!

Let's go back ten years: stocks were flying high gold was at $250 per ounce, and if you were asked to own gold, most people said they did not need gold because their paper assets would protect them. Why were so many people, misinformed about the protection of Gold?

China's Foreign Reserves

In the list above, China is ranked as the # 7 largest holder of Gold. However, the 1,054.0 tonnes of gold only represents 1.8% of its total foreign reserves. Most of China's foreign reserves is in The American Dollar.

As the value of the American Dollar has dropped, the value of China's Foreign reserves has dropped too. China has to increase their gold holdings to stabilize their foreign Reserves.

Most of the others in the top 10 have 60% or more of gold in their foreign reserve. With about 2 % of their reserves representing 1,000 tonnes China will need 15,000 tonnes of gold to equal only 30%. A gold order this large will take several years to acquire. This will give the gold market a strong base demand keeping gold prices steady and rising.

World Wide Numbers For Gold

The world wide annual output for new gold mined each year as of February 2008 is approximately 1,500 metric tonnes.

To fill China's order for gold, there are only 2 sources, existing supply and new gold mined. China will also have to compete with existing demand to acquire gold. Anytime demand outpaces supply prices increase.

This is great news for gold owners because this represents a consistent flow of money into gold over a long period of time. We now know that stock values can disappear overnight and put you in a severe financial bind.

Take the same strategy as the International Monetary Fund and stabilize your IRA, 401K or your cash savings: YOU need to own gold now. Most Americans have less than 2% of their money in Gold. Increase your holdings in Gold now and decrease the risk of loss to your money.

It's Smart, Prudent and The Right Thing To Do.

USGB Recommendations - Gold Buffalos

24-karat Gold Buffalo Coin

American Buffalo gold coins were the first .9999 fine (24-karat) gold coins made by the U.S. Mint. They are struck at the West Point facility in the same manner as the American Eagle gold coins. Starting in 2006 when the coins were first struck, the popularity of the coins overwhelmed the mint. That year, 300,000 uncirculated (bullion) coins were produced and a much smaller number of proof coins. Popularity remained high for the pure 24-karat coin throughout 2007.

In 2008, the mint saw increased demand for bullion related coins, so for the first three quarters of the year, the mint only produced American Eagle uncirculated coins. When the West Point facility finaly did produce the $50 Buffalo Proof coin only 19,571 were minted. The demand for the 2008 coin is strong with many investors and collectors trying to complete their sets.

We have inventory!

  • 2006 $50 Buffalo Proof 70 = $1,950
  • 2007 $50 Buffalo Proof 70 = $2,150
  • 2008 $50 Buffalo Proof 70 = $3,750 (only 19,571 minted)

With over two decades of knowledge and expertise in the modern and rare coin markets, now is the time for you to benefit from our insight.


United States Gold Bureau