Companies that sell gold are in it for profit, their's

DEAR BRUCE: TV and radio ads from several companies encourage investing in gold. Why would these companies be selling gold for less than its value? With the value of the dollar declining and gold increasing, local companies are buying old jewelry, etc. — Jeri, via e-mail

DEAR JERI: You should understand that the companies who deal in gold, platinum, silver, etc., do not hold these metals. They simply sell them at market with an extra markup for their commission. For the sake of discussion, if you want to buy a gold coin, which, at this writing, the current market price is in the near $1,000 range, the company selling you that gold will simply buy it at the market price and then sell it to you for that price, plus a percentage for commission.

They are not in the business of holding and speculating. They are simply brokering on a given daily market price. The companies that are buying the old jewelry are not holding it: They are either selling it to a refinery or melting it down themselves and disposing of it quickly. If you are encouraged to invest in the metal, which would indicate that you are going to hold it for a time, that is quite different from a brokerage. It is in their interest to get in and out quickly. They have a commission from you to sell a coin, they buy a coin, mark it up and sell it.

Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL 34680. E-mail to: Questions of general interest will be answered in future columns.

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