Buying and selling gold and silver for profit is easier than you might think, and the profit can become quite substantial! Precious metal buyers are compensated on a “bid-ask spread,” which allows them to make money in almost any market conditions regardless of normal price fluctuations. This short how-to guide is designed to give you an idea of whether or not precious metal buying and selling for profit is right for you!
Get Legal
There are two major requirements in the State of Florida to buy and sell precious metals for profit. First, you need to apply for and obtain a sales and use tax ID number from the Department of Revenue. This number gives you the ability to collect sales tax if you decide to retail any particular piece of precious metal jewelry that you purchase. Finding an individual who is willing to purchase a piece at a retail price allows you to reap even greater profits, considering that you originally purchased the item on a percentage of the precious metal’s value-by-weight.
Second, you need to apply for and obtain a Secondary Metals Recycler’s License from the Department of Revenue. This is the license that gives you the official authority to buy and sell precious metals for profit in the State of Florida. The form required is called a DR-1S, and is fairly simple and straightforward to fill out. Fees involved as of 5/12/13 include a $6 licensing fee per location (as a hobby-business, your home address could be considered your “location”) and any fees for the fingerprinting requirement to obtain the license (usually around $55.)
As always, it is important that you study up on all the local and state laws that apply to the purchase and sale of currency-functioning commodities such as gold and silver. For example, most localities require reporting of purchases to your local sheriff’s department for the purpose of spotting any stolen items that thieves often attempt to liquidate with a small-time gold-buyer. Also, a holding period of 14 days applies to the purchase of precious metals by secondary metals recyclers.
If you plan on buying and selling to make more profit than one could consider to be a “hobby-business,” it is highly recommended that you formulate a business entity such as an LLC or Corporation to protect yourself from liability and to simplify your taxes at the end of the year. It’s a great idea to consult a lawyer if you’re considering this endeavor seriously as a primary or major secondary income source.
Stock Up On Supplies and Formulate Your Plan
The supplies needed to test gold for karat weight and authenticity are fairly inexpensive! You will need a “scratching stone,” acid solution for metal testing, rare-earth magnets for determining composition of the internal metal of a thick piece, a scale for weighing the metal, and a jeweler’s loop or heavy-duty magnifying glass to check for karat markings on the metal. These items are readily available online, and instructions for how to perform testing can be found here.
Formulating your plan ahead of time is the best way to ensure profitability and to protect yourself from market-fluctuations during the mandatory 14-day holding period for precious metal purchases. The first step is to find your buyer. Visit your major local gold-buying shops and ask what percentage they pay for dealers selling 3-5 troy ounces or more in precious metal (expect the answer to be between 87% and 95%.) Strike up a business relationship with the company that gives the best offer and you may find that they are willing to help you get started in any way they can! Down the line, it may benefit you to look into a refinery contract to get upwards of 99% melt value on your holdings!
Next, you need to establish your maximum payout percentage. If you’re comfortable with a minimum profit of around 15% and your buyer is paying you 90% melt value, the most you would be willing to offer a seller is 75% of the melt value of the metal. Consider offering a higher percentage for those who bring more weight, and a lower percentage to those who bring only a couple grams. Your transactions have to make sense for you in terms of compensation for your time and effort! Bear in mind that no one will be offering someone 100% of the melt value of their gold or silver ring if it only weighs 1 or 2 grams, and the profit you make is considered a commission for utilizing your connection with those who are able to obtain enough weight to get a higher percentage of the melt value.
Start Buying!
Start advertising on Craigslist, telling your friends and family, and consider making business cards that tell people what you do! You would be surprised at how quickly your phone will start ringing. For safety and to stay in compliance with the law, only pay clients by check to avoid thievery and to maintain a paper trail of your transactions. I highly recommend starting with an absolute minimum of $5,000 in buying capital to avoid not having money when a big seller comes along! With practice and a little self-promotion, you may find that buying and selling precious metals can supplement your income and even become your full-time job!
