Today we are looking at a category in the precious metals (gold, silver, and platinum) business: coins.
Bullion coins are coins made from precious metals. They are typically minted in weights that are fractions (1, 1/2, 1/4, 1/10) of one troy ounce, and they are most commonly made from gold and silver. People use them as an investment, savings (especially in countries with little faith in government or local currency) or a a general “store of value” or “hedge against inflation”.
The coin is a form factor that can easily be minted in a specific weight, it is portable and can easily be stored (or hidden). Some people also store precious metals as ingots or “bars” but today I will focus on coins.
This business buys and sells gold and silver coins. It buys below spot and sells above the spot price of gold. From an client perspective the opposite happens (buys above spot and sells below spot).
The bullion coin business
The bullion coin business is pretty straightforward and follows the trajectory of the international price of the metal. People (your clients) will usually buy the coin slightly above spot and when they sell it they will sell it slightly below spot. Somewhere inbetween the difference there is the business opportunity. Think currency exchange, USD/ZAR pair trades at R15.50, Bureau De Change buy dollhair$ at R15 and sell for R16. That is the spread you looking at. In both metals and currency you will be guided by what is known as the spot price and this price will fluctuate several times a day within trading hours. So automated software will often take the spot price feed as a variable. Buy price will be {spot – x%} and sell will be {spot + x%}.
The coin business
Interestingly while the US has American Eagle series and Canada has Maple Leaf series, Chinese has Gold Pandas; South Africa has the most popular one ounce gold bullion coin in the world: The Krugerrand (Praise The Lord it’s named after Paul Kruger otherwise they would have a communist depicted on the obverse by now already). As we are guided by spot price the Krugerrand will follow the price of gold. Now you probably pulling up a chart and saying “oh no! the price of gold YTD has decreased Jan 3 it was $1812 today it is today it is $1806. That is a $6 decrease I could have kept my money in a savings account”. That is not the way to look at things. I like to see an investment in gold is a proxy for an investment in USD, a buffer against local inflation (even against the USD). If you take Turkey or Türkiye the lira lost 44% of its value in 2021. But if you bought your coins you bought into USD using local currency: lira or the rand. Then you in fact would be up double-digits.
Business Model
Here is the current buy/sell price at my local bullion exchange today:
1 oz Silver Krugerrand: BUY R440 / SELL R646 DIFFERENCE: R206 (47%)
1/10 oz Gold Krugerrand: BUY R3074 / SELL R3567 DIFFERENCE: R493 (16%)
1/4 oz Gold Krugerrand: BUY 7686 / SELL R8611 DIFFERENCE: R925 (12%)
1/2 oz Gold Krugerrand: BUY R15372 SELL R16914 DIFFERENCE: R1542 (10%)
*1 oz Gold Krugerrand: BUY R30753 SELL R32599 DIFFERENCE: R1846 (6%)
Gold spot price: US$1,808.36 (ZAR30 957,68)
*1 oz Krugerrand bought at spot -0.7% and sold at spot +5.3% (BUY: R30753; GOLD PRICE: R30957,68; SELL: R32599).
Notes:
* As an investor stay away from retail outlets when buying coins. Sellers on Takealot charge between R915 and R999 for 1 oz Silver Krugerrand then the packaging is still shit according to comments. Deal with a bullion or gold trader who’s bread and butter is this business. A new vs. “secondhand” debate is irrelevant outside of cosmetic sentimentality. Gold bullion coins do not have a lesser second-hand value, they are still worth their content/weight in gold.
* 1 oz Silver Krugerrand has a significant discount/premium due to supply/demand liquidity. Basically they don’t sell as fast as gold.
* I found 6% a very interesting margin on a full Krugerrand.
* Check the gold spot vs Krugerrand buy. Remember rule of thumb buy discount to spot sell at premium to spot.
You read that right. If you can sell just one, ONE of the cheapest gold coin – 1/10th of an ounce – A MONTH you no longer need to knock up girls to get the SASSA money!!! (child-care grant is currently at R480 a month while a 1/10th will net you R493). FUCK YEAH LET’S DO THIS SHIT!
If you can sell one full Krugerrand per day, Monday to Friday, you can make R36920 a month (R1846 x 20, or R1846 x 5days x 4weeks – for the 30%ers wondering how I got to 20). Plus you don’t even have to tell the receiver of revenue. If president Cyril Ramaphosa can store hundreds of thousands of dollars in his couch then so can you. Don’t allow ANC lackeys like Edward Kieswetter to intimidate you if you don’t bank the money they won’t find out which is what Cyril the Squirrel was doing. Just don’t be a moron and actually hide it in your couch. If we going to fix this country we need to dry up the water that the criminals ANC swim in.
That being said I have a new range of t-shirts coming out. Currently in pre-order:
Safety
As you can probably gather this business carries a SIGNIFICANT safety risk of robbery.
