Gold prices dropping

Originally Posted by unknownk

Middle men who buy under spot and sell at spot+ fixed rate make money no matter what gold is doing, they DO NOT SIT ON COMMODITIES.

While I can appreciate what it is you are trying to say, you are wrong about the people you are calling "middle men". I consider myself a middle man. I purchase scrap that I can process for it's gold content, and then retain as much as possible. Matter of fact, I hedge. I am protected against the price fluctuation of gold in this way.

As a business investment I might purchase 1000 ounces of silver for example. Each time I refine silver, I assay it so I know it's value, I then immediately sell enough silver to cover the cost of the material, and once refined, I simply replace the amount of silver from the amount I was able to refine. My profit is in any silver left that was not used to cover what I sold. Or maybe a better example would be explained in this way.

I have 1000 ounces, I pay $875 for material that that when assayed will prove to produce 80 ounces of silver. At today's prices, $875 worth of silver would be around 42.5 ounces. So right away I sell 50 ounces of silver, to pay for what the material cost me, and processing costs. When I refine the metal, I replace the 50 ounces out of the 80 ounces the material will produce, which leaves me with 30 ounces of silver as profit. I retain as much of this silver as possible, and only sell so much as I need to in order to make up any cash required for bills at the end of the month.

I retain not only the 1000 ounces of silver as my hedge, but I also retain as much of my silver I keep as profit as I am able to hold. I know of several other professional refiners who also do the same, although they might retain the value in other precious metals, they still retain as much as possible.

And so far as your example is concerned, when all money goes electronic, and the computer systems are down, try to buy a bag of cheetos at wal-mart with your plastic card, I'll be at my local farmers market exchanging some of my silver for fruit, veggies and other food stuff.

Also, I have never had to beg anyone to buy gold from me, matter of fact it gets a little annoying seeing all the gold buying places that are springing up all over the place. These places don't want you to know that you could get spot prices for your material fairly easy if you just knew how. Regardless of having a hard time or not selling your gold, why would you sell it? Why not directly exchange gold for goods and services? You might be surprised how many people will do exactly that. I purchase scrap on a fairly regular basis by exchanging precious metals for scrap. I even purchase a lot of my consumables by trading precious metals for goods, and even for services.

As an experiment, take a piece of gold sometime that has a hallmark and a known value with you when you make a purchase from a entity NOT a major corporation. Ask if they would be interested in trading gold for goods, and show them your gold. If you have never attempted to trade gold for goods or services, then you cannot say how difficult it would be. I find it pretty ****ed easy to do myself.

Scott

Originally Posted by unknownk

You are a value added manufacturer. You take raw material and produce a final product. If the cost of refining gold gets too expensive (not enough in the raw material you can scrounge to be profitable to extract) you are out of business. A middle man is just that, he buys a product for less then he can sell it for and makes a profit no matter what (unless he is unlucky to get caught in a crazy market or hold onto that commodity for too long). Middle men don't get their hands dirty, provide no added service, and create nothing of lasting value. Their whole reason for existence is to be the middle guy between 2 parties that for logistics can't do it on their own. If you have to do any work at all then you are more a value added service or manufacturer even if you happen to be in the middle of the food chain.

Actually, in the supply chain, a refiner is considered to be a middleman. Think of it this way, someone works to remove precious metals from the earth, then they sell it to a refinery. The refinery invests some labor and produces a refined product, or commodity. That commodity is then sold to someone else and made into goods. The refiner in this scenario is a middleman. Or in my specific case, I take recycled material someone else has collected and many times broken down, I purchase it, I refine it and invest some labor in doing so, then I sell to someone else who makes a good out of it. That's not my long term intent, but that's mostly what I do currently, that makes me a middle man. Sometimes I purchase metals from other refiners, and sell them to someone else strictly, and make money off the deal. Sometimes I broker a deal between a supplier and refiner. In all these ways I am a middleman. And I don't see anything wrong with being so. You are just really splitting hairs as to what a middle man really is.

mid•dle•man (ˈmɪd lˌmæn)

n., pl. -men.
1. a person who buys goods from the producer and resells them to the retailer or consumer.

In this case, I am purchasing from a someone who is scrapping, and producing recoverable material, turning it into something other people can use and selling to a retailer or consumer.

Scott