Gold Buying And Gold Refining During COVID-19

COVID-19 IS IMPACTING EVERY FACET OF SOCIETY

The novel coronavirus (COVID-19), a highly contagious acute respiratory disease, is spreading around the world. Many businesses are affected, including jewelers, pawnbrokers, and gold refiners. Moreover, as business conditions have become so uncertain, many financial markets have become highly volatile. This is especially true for gold, which recently went from a high of $1684 per ounce to a low of around $1480 (Check out my last blog for a discussion of the factors in play). If you have a gold adjacent business, you need to know how to protect both your financial and physical health during these uncertain times. Below, this gold refiner discusses the economics at play, the legal landscape surrounding whether or not your business will remain open, the length of time COVID-19 is expected to last (it is longer than you might think), and offers tips for safely buying and selling gold.

GOLD SALES FROM MEMBERS OF THE PUBLIC WILL LIKELY SPIKE DURING COVID-19

Many gold buyers are reporting that their gold purchases from members of the public have gone way up in recent days, even as the price of gold has gone down. “We fully expect the next few weeks to see a surge in gold sales, so be ready” advises Joe Bussy of Beach Loan in Stanton, FL People need cash to buy groceries and products and many folks in the service industry are out of work and figuring out how to pay the rent. Although the government is working on providing stimulus in response to the virus, these measures are likely to be significantly delayed in the political process and implementation, and not to cover all needs. For example, one idea is to send checks to any or many members of the public. This remains in debate within Congress, but the numbers that are being discussed are around $1,000 per individual. This would help, but would hardly replace the income that many people have lost. Moreover, as a logistical matter, the mass mailing would likely take the government a significant amount of time to complete.

Another idea is to expand the scope and generosity of unemployment benefits. These payouts are based on the reported income of the unemployed at their last job – and thus will be of limited use to many tipped workers in the service economy who have been hit the hardest by COVID-19 (Tipped workers rarely report all of their earnings). Whatever the government does, the public’s need for cash liquidity and the resulting volume of gold sales are likely to increase as the pandemic drags on. Gold sales could further increase if a prolonged recession drives the price of gold higher.

PREDICTING WHETHER YOUR BUSINESS WILL BE ALLOWED TO STAY OPEN DURING COVID-19

Government responses to the COVID-19 threat have varied between states, counties, and municipalities. The largest business closures to do date have been in California and New York, both of which entered state-wide orders closing many businesses considered “non-essential.” These orders tend to set up a list of rather vague criteria and leave it to the business to determine its own status in the first instance. The federal Department of Homeland Security has set up its own influential list of essential businesses and the California order directly incorporates the critical business exemptions from this federal list. Many pawnshops will stay open by arguing that they are part of the “Financial Services Sector” as identified by DHS. Miami has explicitly stated that pawn shops are part of this sector. Even video game outlet GameStop has argued that it is an essential business! Jewelers may have a more difficult time exempting themselves from shutdown orders, but may wish to make other arrangements to continue to participate in gold buying.

Since these orders are complex, it pays to consult legal counsel and/or a state trade organization and to read the text of the orders themselves on your state government’s website, rather than relying solely on news reports. For example, the state of Rhode Island, where this gold refiner is located, was widely reported to have shut down most retail businesses. The actual text of the order appears to be limited to businesses that must place employees within six feet of customers. While this blog cannot replace legal advice from your attorney, perhaps a Rhode Island jeweler can stay open with a strict rule that sales associates must stay six feet away from customers. Bona fide gold refiners like Pease & Curren qualify as “essential manufacturing” on the Department of Homeland Security list and will remain open.

BEST PRACTICES FOR GOLD BUYING DURING COVID-19

Opportunities to buy gold from the public can be very lucrative, but you need to stay safe. Coronavirus can live on some surfaces for up to 72 hours and infect people who touch these surfaces and then touch their faces (most people do not realize how often they touch their faces). If you are buying gold from the public, you should wipe down cases, testing equipment, and the gold pieces themselves with disinfectant wipes (If you do not have disinfectant wipes, they may be hard to come by. Check out this CDC resource for tips on making disinfectant solutions). Try to stay positioned far away from the customer (the CDC recommends six feet of distance between individuals). Wash your hands thoroughly after customer interactions and after each time you touch purchased gold or jewelry handled by customers, and avoid touching your face.

SHIP TO A GOLD REFINER RATHER THAN SELLING IN PERSON

As a financial matter, given the extreme volatility of the market, turning around purchased gold quickly may be very important to you. You want to make sure that fluctuations in the gold price do not wipe out your margin on the purchase. It can be very tempting to sell to a middle man who comes into your store.

Pease & Curren has always embraced the business model of receiving shipments and performing the best testing that science has to offer in our facility. We believe that this makes the most business sense, but in the current situation it also makes the most health sense. If a gold buyer or dealer shows up at your store, how many other gold transactions has he or she performed? How many metal surfaces has he or she touched with all of the weighing and cash hand-offs that person does each day to stay in business. You are much safer in arranging a shipment to a gold refiner and staying six feet away from the delivery driver during the pickup.

ORDER A CONTAINER FROM PEASE & CURREN TODAY

Pease & Curren offers may options such as advances, locks, and a refine and hold option that allows you to wait for the gold price to hit a desired market before selling. With the markets in flux, this flexibility may be an important tool. In gold refining, what is good for your health is also likely good for your wallet!

THE COVID-19 CRISIS MAY LAST LONGER THAN YOU THINK

Although many government officials are discussing two-week shutdowns, epidemiologists predict that the virus will remain a threat for significantly longer. Much depends on human behavior. The more that people go about their business as though COVID-19 were not a threat, the faster the virus will spread, and the faster it will run its course as infected people either die or recover with immunity.

According to a recent academic paper by the Imperial College COVID-19 Response Team, the fastest the crisis is predicted to resolve itself in the U.S. is in late July or after (Neil Ferguson et al., “Impact of non-pharmaceutical interventions (NPIs) to reduce COVID- 19 mortality and healthcare demand,” 16 Mar. 2020). This would be the timeline if the virus spreads quickly through the population with little or inconsistent government intervention. According to the paper, government measures to suppress the spread of the virus would drastically slow its progress but not eliminate it. To be successful, these measures, such as strong quarantines, would need to remain in place until a vaccination could be distributed, which is likely to take a year or more.

In the meantime, gold buying and gold refining are likely to be lucrative in the coming months as individuals and businesses struggle to raise the cash they need to weather the pandemic. Pease & Curren is here to help. Call us at 800-343-0906 to talk through any of these issues or discuss how we can be of assistance.

 

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