Question sent in by “Ordell”
I got one question. There are gold buyers who purchase gold from the miners on the spot. They are paying for the gold at the current rate. So how do the buyers make any money? Are they counting on gold to go up? Making something with it and charging a premium?
The gold buyers charge an assay and refining fee per lot, then they return some percentage of the gold, typically 98% (they keep 2%), and 90% or no percent of the silver (they keep 10% to 100% depending on the buyer). The per lot fee is several hundred dollars, and pays for the overhead of melting and assaying the lot. If a buyer comes with less than some amount, like 10ozt or less, then the buyer typically will buy it outright, over the counter, for something like 60%, which is a better deal than paying the fees.
Here is a made up example of how it typically goes:
Deliver 100ozt clean and dry gold.
Fees are charged to account and are taken out of the first payout later. -$450
The gold is melted and assayed.
Melt loss: 10ozt of impurities, remaining weight 90ozt
Assay of that 90ozt: Gold 88% (79.2ozt), Silver 9% (8.1ozt), other 3%.
A “next day” sell order is placed by me, the next day’s London PM fix is used as the sale price, lets say this was $1200/ozt
Payout: Gold: @$1200/ozt, 98%: 79.2ozt*98%*$1200=$93,139.
Silver: @$20/ozt, 90%: $145.8
Check issued for $92,834 no sooner than two weeks after the gold was delivered by me to the gold buyer.
Some gold buyers do it differently. This example might be a bit low for us, since we get our gold very clean. It seems that the result is about 85% of the raw dry clean weight times the gold price.