The headlines are horrible: COVID-19 is having a “second” wave. Actually, did the first one ever end? The killing of George Floyd has led to widespread protests and even looting. So many people are out of work, and government stimulus funding is running out. The government is looking at reducing the extra unemployment benefits that kept the newly jobless afloat. Jewelers and pawnbrokers need a plan to deal with the disorder that is spreading across the U.S., and this plan should include their gold refinery.
Looting of jewelry stores and pawn shops has been nation-wide.
Pawn shops have been a prime target for looting. The problems has occurred in the Bronx, Rochester, Las Vegas, St. Louis, and the list goes on. Jewelry stores have not been left unscathed. If your store was robbed or looted, how much did you lose? If you have been hoarding precious metal scrap, that number is going to look a lot higher.
Even without mass looting, there are a lot people out of work and a lot of stores left vacant due to shutdown orders. The crime experts at SafeWise have listed “burglary of commercial premises left vacant” as a key trend during the COVID-19 pandemic.
Sending Your Scrap to a Gold Refinery Regularly Can Diminish Risk Among Other Benefits
There are so many benefits for jewelry businesses to having a regular schedule to scrap with their gold refinery:
- Regularly re-investing in your own business, which can provide much higher returns than the gold market;
- Investing in the stock market, which historically provides dramatically higher returns than the gold market (see below);
- Improving your credit position by cashing out inventory that is characterized as old inventory;
- Clearing space in your shop, including your most valuable sales asset — case space!
Over a long enough time scale, stock market returns have always exceeded the gold market.
And finally, the one we are talking about today — Security!
Insurance May Not Fully Cover a Theft of Scrap Gold
If you file a claim on stolen precious metal scrap, the insurer will want to know if you have followed all security procedures.
Imagine that you have a large amount of gold stolen or looted from your shop. Will you be fully compensated by your insurer? The first question is: does your insurance even cover precious metal scrap purchased from the public? You may wish to discuss this with your insurance broker and read the actual text of your policy if you are hoarding lots of precious metals. But even if the policy covers precious metal scrap, that is still not the end of the question. How are you going to prove the value of the scrap that you purchased and had stolen? Even if you have good records of each transaction and the amount you paid for each piece, will you recover the actual value of the precious metal? Your insurer could argue that it has never been tested as it was never sent to a gold refinery for fire assay. Finally, the insurer may seek to establish that you did not take the requisite security precautions and therefore avoid coverage. For example, in one case, the insurance company argued that coverage should be denied because two employees were not present while the store was robbed. See Assurance Company of America v. Lavdas Jewelry, Ltd., 316 Fed. Appx. 432 (6th Cir., 2009, unpublished). And there are many, many other examples of insurers seeking to avoid coverage for large jewelry thefts.
Pease & Curren and Your Bank Account Are Safe
Pease & Curren has been in business since 1916. We own our own land, plant, and materials. Nothing is leveraged. We follow all procedures for documenting what you ship us and insuring it under the correct policy so that you are fully covered when the material leaves your shop.
We follow best practices for plant safety and our vaults are extremely secure. But the materials are only in our custody for a brief time before we pay you and get the money into the safest place of all – your bank account!
Our Gold Refining Experts Can Help You Create a Scrapping Plan Tailored to Your Business
So how often should you ship your scrap to a gold refinery like Pease & Curren? That depends on a number of factors, but our experienced refining consultants are here to help! Among the factors you want to think about are:
- The volume of precious metal scrap you generate and the timing at which you generate it;
- Your business’ need for cash flow;
- Any debt you could pay down by realizing gains on precious metals;
- The lead time on getting paid for your precious metal scrap;
- Any need you may have to hedge the price you paid for the scrap;
- Whether it is feasible for you to accumulate enough precious metal scrap to make using a true precious metals refiner like Pease & Curren worthwhile.
Call us at 800-343-0906 today to discuss the best scrapping plan for your business!
Waiting too long to ship your materials to your refinery means that you are at risk for theft (the subject of this blog) and may be missing other investment opportunities that you could be putting the tied-up wealth into. Selling your scrap too often could mean that you are selling to a sub-optimal vendor: either a cash buyer, a “refiner” who is really a “middleman” that accumulates, takes a cut and ships to a real gold refinery like Pease & Curren. The trick is to find the right scrapping schedule that delivers all the benefits of using a true gold refinery like Pease & Curren while also cutting down on the financial and other risks for gold hoarding. Call us at 401-739-6350 to speak about all of these factors with our trained precious metals refining consultants. Pease & Curren will go over these factors with you whether you are a longstanding customer or have never used us before.
Hoarding Gold May Become Increasingly Dangerous If Things Get Worse
Experts are predicting that if the U.S. ever reaches the end of its first COVID-19 wave, a second wave would follow not too far behind as businesses open without a vaccine. All of the shutdown options that were available for the first wave might not be available in the second. For example, there is a finite length of time in which schools can be closed before real damage accrues to children’s educations. And the government may not be able to fund the sort of generous social safety net that is currently diminishing the economic harm to people from COVID-19. A second wave without “unemployment on steroids”, the Paycheck Protection Program, and other robust government relief could leave to an even greater increase in crime and social disorder.
A massive riot is not when you want to send your scrap to a gold refinery.
Imagine that sometime in the near future the police kill another African American and a videotape goes viral online. Black activists have been laying the groundwork for an even stronger response since the killing of George Floyd. Because of this organizing work, street protests could be even huger than those following Floyd’s killing. In the ensuing social disorder, it is not difficult to foresee bad elements taking advantage to loot perceived high-value targets like pawn and jewelry stores. You don’t want to have a lot of precious metal scrap hoarded when and if this occurs.
Use your gold refinery as a resource and establish a regular plan for shipping your precious metal scrap today!
About the Author
Frank Curren attended Georgetown Law and was a litigator at a Boston-based non-profit before joining Pease & Curren.