Silver and gold spot prices are steady after a rocky stretch of record gains and losses.
Market volatility has created headaches for local coin shops that buy precious metals.
“If you make this mistake, your capital runs out really fast,” one shopper told Business Insider.
If January was a party in the precious metals market, February is a hangover.
Gold was around $5,300 an ounce and silver was around $120 at the end of January. The expansion of record gains and losses has stabilized in the early days of February.
“These price moves have caused a lot of damage across the board,” HSBC precious metals analyst James Steele told Business Insider.
One type of business that bears the brunt of volatility is local coin shops, where people often trade gold and silver. The high prices have led to a huge influx of salespeople, but some shops tell Business Insider they are scrambling to offload excess metal from their usual locations.
While the market was in its tailspin, Tim Heuer said his shop, University Coin & Jewelry in Madison, Wisconsin, was still making deals.
Heuer said one customer came in to sell silver when the spot price was $98 an ounce and falling: “By the time I wrote his check, silver was already down $3.50 when he walked in the door.”
The current volatility puts those businesses in an uncomfortable position, beyond quickly changing spot prices that erode profit margins.
Local coin shops play an important role in the circulation of physical gold and silver by providing a reliable way for individuals to sell their bars, coins or scrap metal.
If someone bought a gold bar at Costco last year and wants to return it for cash, a local coin shop is one of the first places they can go.
And when these shops turn around and sell some of what they buy, most of the metal is sold to refineries to be melted down and made into new bars or coins.
That flow has been disrupted in recent months as a run in gold and silver prices has encouraged more people to trade in their metals, leading to a backlog of raw materials at refineries.
Jarrett Niese, president of Precious Metals Refining Services in Chicago, said his company stopped buying scrap silver in October, when prices topped $50 an ounce, which was gathering dust on old silverware, plates and other knick-knacks.
And since then the market has only been deserted.
“This crazy silver move that happened, we’re sitting on the sidelines,” he said.
Refineries like Niesse are one step in the process. Many of the products they melt are further refined by other mints and exported to Asian markets, where demand for bars and coins is high. With so much gold and silver to process, even those refineries have stopped buying, cutting into local coin shops’ cash flow.
“When the guys at the top say they’re going to open the door and start accepting more stuff, the guys in the middle like me and my competitors will send in,” Neis said.
Because of their role in their local markets, reputable coin shops simply cannot stop buying altogether. They are finding ways to adjust, but it is a difficult balance.
“If you do it wrong, you run out of capital really quickly,” Sporl said.
This is not the kind of business where even tapping a loan or credit from a bank makes real sense.
“You don’t want to hold the metal for any length of time and finance it,” HSBC’s Steele said.
Spoerl and Heuer stores recently began establishing limits on how much they can buy from a person in a day, which they say allows them to serve more customers and allow people to get the cash they need for expenses such as annual tax payments or medical bills.
It’s anyone’s guess what prices will do in the coming days and weeks, but Sporl and Heuer said they will continue to try to thread the needle between serving customers and not overstretching their balance sheets.
“It would be a little strange for us to stop buying now,” Sporl said. “It’s something we haven’t seen before, so it’s about going with the flow and figuring out what to do in the moment.”
Heuer, meanwhile, is thinking long-term: gold is still up 76% and silver is up 147% from a year ago.
“If you look at a one-year, short-term investment, you’ve still almost tripled your money,” he said of silver. “The cost-to-average ratio is still fantastic.”
Read the original article on Business Insider
Gun manufacturers and dealers faced a slowdown in sales in 2025 that contributed to financial…
By Panu Wongcha-um and Devjyot GhoshalBANGKOK, Feb 8 (Reuters) - Voters in Thailand turned out…
MINNEAPOLIS (AP) — For days, Luis Ramirez had an uneasy feeling about the men dressed…
The story discusses human remains and graphic descriptions of death that some people may find…
Back in 2024, XRP (Crypto: XRP) Seemed like a great investment. Parent company Ripple Labs…
President Trump is asking November voters to remember his policy victories — and not his…