Selling Precious Metals When the Time Comes

Selling Precious Metals
When the Time Comes

If you are like most people who own physical precious metals, you hold them for the long-term. You’re not looking to trade in and out of your gold and silver coins to try to game short-term swings in prices. You’re looking to hold them as a tangible source of wealth protection and as crisis insurance to possess at all times.

Nevertheless, at some point you may want (or need) to unload some or all of your precious metals stash. It’s important that you have a plan as well thought-out for selling as you did for buying. Just as you must do a little market research before buying to make sure you don’t purchase from a dealer who charges exorbitant mark-ups, you should take the same studious approach when selling.

“Buy” prices for bullion products can vary widely, and there are a number of potential pitfalls to avoid when selling. I speak from first-hand experience! I was tasked recently with helping a friend unload most of his precious metals bullion holdings. He didn’t want to sell, but life circumstances necessitated that he do so. Fortunately, he wasn’t in a rush, so I had the opportunity to shop around parts of his collection through various channels over the course of a couple weeks to try to get him the best offers.

Here are Places

NOT to Sell Bullion

First, the channels I avoided. I didn’t bother trying to sell to pawn shops or jewelry stores or fly-by-night “cash for gold” operations. These places might be suitable for small scrap gold or jewelry sales, but even then you’ll probably get low-ball offers in relation to the actual melt value of your metal. The best place to sell gold or silver coins is to actual coin dealers who process significant volumes on both the buy side and the sell side.

Internet marketplaces such as eBay may seem attractive because you can sell directly to buyers at higher prices than what a dealer or other middle man would be able to offer. But when using eBay, you do have to pay a middle man in the form of auction fees and PayPal (payment processing) fees, not to mention packaging, shipping, and insurance costs. Even after deducting all these costs, you still have to account for return risk and fraud risk. When you’re selling high-dollar products such as gold coins, these risks are substantial.

New eBay Rule

Scams Coin Sellers

Recently, eBay has taken steps to reduce the counter-party risk that buyers assume – by offering a money-back guarantee program, among other things. But the money in the money-back guarantee program comes from sellers! They can now be forced to accept returns and issue refunds at the demand of buyers. In effect, eBay can override a seller’s own return policies. Dishonest buyers can now more easily scam sellers.

Most buyers and sellers on eBay and other Internet auction and classified ads sites are honest, to be sure, and most transactions go smoothly. But the point is, you take on more hassle and assume greater risk by selling coins over the Internet than you do by simply going through a reputable local coin dealer.

Some Coins Do

Have Bigger Premiums

When you have coins with rare or unusual features that a particular buyer somewhere may be willing to pay up for, it might make sense to advertise those coins on eBay or other e-commerce sites. For example, I listed a few oneounce silver rounds commemorating Civil War figures. By the book, they have no actual numismatic value and
a dealer would likely offer no more for them than for any generic one-ounce silver rounds. But they were minted in limited quantities and are of particular interest to Civil
War buffs and other collectors. Sure enough, they did end up fetching a significant premium on eBay.

But most of what I had to sell consisted of common products such as silver bullion bars, pre-1965 90% silver coins, Canadian Maple Leafs, and American Eagles. It wouldn’t be worth the time, hassle, and risk of listing them on eBay or Craigslist; nor would it be feasible to try to find a particular buyer locally. Instead, I searched the Yellow Pages for coin dealers.

The Ins and Outs of Going
Through Local Coin Dealers

Local coin dealers will still often pay in cash. And by that I don’t mean checks or bank drafts. I mean $100 bills! Cash need not pass through the banking system
at all, meaning the transaction can be kept private. You can’t sell a stock or a house or a car or a boat without generating electronic records that contain personally
identifying information. But you can potentially sell significant quantities of precious metals without any traceable financial or tax records being generated if you go through local coin dealers.

If you want to be paid in cash, it’s best to break up your inventory into smaller units for sale. If you’re selling $20,000 of dollars worth of coins, in all likelihood you’re not going to be paid that much in cash. But if you divide your inventory into five $4,000 lots, you’ll likely be able to find local dealer(s) who will pay out $4,000 in cash. You might come back to the same dealer on subsequent days to get through each lot or try different dealers. The advantage of spreading out your sale over a few days is that you reduce market risk and avoid selling everything at a low.

Sell Gold and Leave Behind No Paper Trail –
Yes, It Is Still Possible!

From a privacy standpoint, receiving payment in cash from a dealer is preferable, though not necessarily perfect. Most dealers will ask to see a driver’s license and record your address. This is done mainly to protect themselves from the risk of buying stolen property. The actual record of your transaction is usually kept in-house and isn’t shared with the IRS or other government agencies (though it could be obtained by law enforcement in an investigation).

One dealer I visited didn’t ask for any ID at all. I ended up selling him a couple rolls of silver Peace Dollars and was paid in cash. The transaction was as close as it gets
to being 100% financially invisible and untraceable.

If financial privacy is a top concern when selling precious metals, it may be worth searching for a dealer who will buy without taking any identifying information. You may even be willing to take slightly less in payment for the benefit of being able to do an off-the-grid transaction. In my case, I didn’t sacrifice anything in payouts. I got another offer from a larger dealer on another roll of the same type of coins, and it was significantly more than a smaller dealer I tried first.

Beware of Low-Ball Offers
from Small-Time Dealers

That brings up the downside of trying to sell coins to businesses that advertise themselves as dealers in “collectibles” (which may include stamps, autographs, memorabilia, coins, etc.). Such operations may do very low volumes in coin transactions. They may not buy many types of bullion products at all – and those that they do buy may come with low-ball offers.

One such “collectibles” shop I visited advertised itself as a dealer in coins among other things, but it was apparent when I walked in that its main business was comic books and games. The guy running the place said he doesn’t buy gold coins at all. As for the silver coins I was ready to sell, he gave me an insultingly low offer – nearly 50% below what another dealer offered. Going there was a total waste of time. But fortunately I didn’t waste any of my friend’s coins on the dealer’s stingy buy prices.

The Ins and Outs of Going Through
Large National Coin Dealers

If there aren’t any good coin shops in your area or your collection is too large for the scale of business they do, you might consider selling your coins to a major
national coin dealer. If you have an extraordinarily valuable rare coin collection, a coin dealer may send a representative directly to your home to conduct an appraisal. But if you are selling common bullion products, you’ll typically be able to receive an offer over the telephone, then ship your product to the dealer.

Therein lies some additional risk as compared to selling locally. You have to package, ship, and insure your precious metals, then trust that they will be handled and accounted for properly once received by the dealer. If you choose a reputable dealer, you should have no problems. (Search the Internet for customer reviews if you are unsure about a firm’s track record.) However, there still is a bit of added risk entailed by shipping precious metals and waiting for payment as opposed to receiving cash on the spot from a local coin shop.

When you ship product to a dealer, you can expect to receive payment by check or electronic transfer – not $100 bills. Selling to a national dealer poses greater
privacy risks – though as with local dealers, the sale itself isn’t reported to the IRS or other government agencies except in rare circumstances.

You may have better luck trying to unload less liquid bullion products, such as platinum and palladium coins, through a national dealer. Some local coin shops won’t take platinum and palladium or will only offer an unacceptably low price based on what a wholesaler will pay for them.

My Takeaway
on Selling Precious Metals

With some of the more obscure types of bullion products, it’s easier to buy them than to sell them back – at least at a reasonable price. That’s something to keep in mind now if you’re in buying/accumulation mode. Beware of historic or “rare” coins that carry high premiums. You may find it difficult to realize those premiums when you sell. Even relatively small premiums you pay for things like fancy packaging or the purity and beauty of government-issue Canadian Maple Leafs instead of generic bullion rounds may be money wasted. A lot of dealers have a single “buy” price for all bullion, no matter how shiny it is or who mints it (though most will at least pay a small premium for American Eagles).

I re-learned a few of the lessons outlined in this story when I went to sell on behalf of a friend. Hopefully, you’ll be able to take away a few nuggets of wisdom so that you’ll always receive a fair price when you sell and minimize privacy incursions and other risks.