Bullion being sold at insane prices on the Highstreet in the UK, who is buying it?

[Blacksmith876]

I had a very interesting trip to a pawnbrokers in my home town of Reading, UK (H&T pawnbrokers) the other day and was shocked to discover that they sell precious metals very quickly for insane prices (despite their website having reduced prices which are high but more reasonable - https://handt.co.uk/)

They had an ounce of platinum in an assay card for over £2000, many different second hand silver bullion coins which are sold for close to double what an online retailer costs (even after adding 20% VAT) Gold is more reasonably priced but still is 25% higher than any online dealer despite it being second hand (a 10g gold bar for example was priced £700)

I couldn't resist speaking with them and asking how they can justify such high prices, pointing out that the ounce of platinum was over double the spot price for example and told them that I would pick something up every time I passed the shop if they were competitive but as they are so overpriced it makes no sense since.

They gave me the chat about how as a shop they have higher overheads which I countered by explaining how genuine bullion dealers and coin shops with physical stores charge a set % over spot which surprised them as they clearly have no clue about coins or bars despite it being literally 40% of their stock and after chatting for a while they admitted that they set the prices so high because people are buying it and they actually sell out quickly!

I understand the smaller coins maybe being brought by people just as a nice trinket with no consideration given to the value but I find it hard to believe that people are buying ounces of gold and platinum for double spot price so I wanted to ask everyone here if this is common and if so who is buying PMs at such a high price? I feel like there could be a lot of elderly people buying these items, assuming that they are paying a fair price who then cash it in a few years later only to be told that the metal hasn't performed well when really the mark up is so high there is no possibility of the items retaining their value.

I understand that buyers have a responsibility to educate themselves but its frustrating seeing people being taken advantage of and precious metals getting a bad reputation as a result. Anyone else come across this?

[iacabu]

I too have wondered the same.

I asked at a local pawn broker to me (Nathan and Co), they buy in sovs at ~£300 (spot £360ish at the time) and sell for £500!

I think a lot of purchases will be from the less scrupulous individuals who hold large amounts of cash and want to convert it. This was also agreed when I was chatting with a local jeweller I buy from. 

I understand shops have large overheads to cover and can't just get by on making a tenner, but it still leaves the question as to who buys it. 

My business mind is that I would rather keep stock moving and sell at a more reasonable price in order to buy the next item, rather than have a £500 sovereign sat in the window for months. 

[Blacksmith876]

18 minutes ago, iacabu said:I think a lot of purchases will be from the less scrupulous individuals who hold large amounts of cash and want to convert it. This was also agreed when I was chatting with a local jeweller I buy from. 

 

 

I understand shops have large overheads to cover and can't just get by on making a tenner, but it still leaves the question as to who buys it. 

That's interesting to hear, personally I don't think this is the case since you never hear about precious metals being seized during these raids and from knowing quite a bit about that world growing up around those sorts of people they are almost all extremely stingy with money and won't overpay if it can be avoided so they just would outright refuse to overpay after comparing prices online where they could still buy and then claim they sold it or use a third party to order on their behalf which is something these people do a lot when making large purchases like a car. Bitcoin also rapidly became the vehicle for discreetly storing wealth in those circles so even the old practice of having jewellery that could be pawned in an emergency died out. 

From what I observed it seemed like there are older people who trust the shop because there is always a person available (ironic since the prices are so inflate) and buy mostly metals to pawn a few years down the line should they need cash using it like a savings account except the appreciation is almost non existent if they aren't holding for over 5 years or in case of the platinum even if the price doubled they would still only be breaking even.

I want to hang out there and figure this mystery out but they probably don't want me hanging around!

[Blockhead]

I know someone who worked at H&T for a short time and am as puzzled by their pricing as you. I also know the rates they paid for 9ct, 18ct and 22ct at the time (this was two years ago). (they paid the same for 24ct as 22ct). Absolute top whack they'd pay on 22ct was about £30 a gram and this when spot was mid to high £40s. Essentially if your coin or jewellery was in excellent condition you'd get scrap value, otherwise you'd get less. The rates didn't change regularly so it wasn't adjusting to the market. Silver was always 25p a gram. 

He said there is high staff turnover and they get minimum wage. Testing is the acid kind as that's all the have in store so will be destructive, so only encourages poor condition items or desperate sellers who need cash instantly. Maybe that is factored into their pricing 

Edited October 1, 2023 by Blockhead

[BLOOMMAN101]

Not saying this is the answer but always something to keep in mind , I think we will all be guilty of this when/if we decide to sell

Greater fool theory

 

 

From Wikipedia, the free encyclopedia

 

In finance, the greater fool theory suggests that one can sometimes make money through the purchase of overvalued assets — items with a purchase price drastically exceeding the intrinsic value — if those assets can later be resold at an even higher price.

In this context, one "fool" might pay for an overpriced asset, hoping that he can sell it to an even "greater fool" and make a profit. This only works as long as there are enough new "greater fools" willing to pay higher and higher prices for the asset. Eventually, investors can no longer deny that the price is out of touch with reality, at which point a sell-off can cause the price to drop significantly until it is closer to its fair value, which in some cases could be zero.^[1][2][3][4]

Crowd psychology[edit]

See also: crowd psychology

Due to cognitive bias in human behavior, some people are drawn to assets whose price they see increasing, however irrational it might be.^[5] This effect is often further exacerbated by herd mentality, whereby people hear stories of others who bought in early and made big profits, causing those who did not buy to feel a fear of missing out. This effect was explained by economics professor Burton Malkiel in his book A Random Walk Down Wall Street:

A bubble starts when any group of stocks, in this case those associated with the excitement of the Internet, begin to rise. The updraft encourages more people to buy the stocks, which causes more TV and print coverage, which causes even more people to buy, which creates big profits for early Internet stockholders. Successful investors tell you at cocktail parties how easy it is to get rich, which causes the stocks to rise further, which pulls in larger and larger groups of investors. But the whole mechanism is a kind of Ponzi scheme where more and more credulous investors must be found to buy the stock from the earlier investors. Eventually, one runs out of greater fools.

— Burton Malkiel^[6]

Examples[edit]

In real estate, the greater fool theory can drive investment through the expectation that prices always rise.^[7][8] A period of rising prices may cause lenders to underestimate the risk of default.^[9]

In the stock market, the greater fool theory applies when many investors make a questionable investment, with the assumption that they will be able to sell it later to "a greater fool". In other words, they buy something not because they believe that it is worth the price, but rather because they believe that they will be able to sell it to someone else at an even higher price.^[10]

Art is another commodity in which speculation and privileged access drive prices, not intrinsic value. In November 2013, hedge fund manager Steven A. Cohen of SAC Capital was selling at auction artworks that he had only recently acquired through private transactions. Works included paintings by Gerhard Richter and Rudolf Stingel and a sculpture by Cy Twombly. They were expected to sell for up to $80 million. In reporting the sale, The New York Times noted that "Ever the trader, Mr. Cohen is also taking advantage of today’s active art market where new collectors will often pay far more for artworks than they are worth."^[11]

Cryptocurrencies have been characterized as examples of the greater fool theory.^[12][13] Numerous economists, including several Nobel laureates, have described cryptocurrency as having no intrinsic value whatsoever.^{[14][15][16][17]}

In contrast, in times of hyperinflation or in remote regions, the prices of necessities can be so exorbitant that relative to normal markets these prices may seem arbitrary. Yet the local cost of doing business relative to the price in these regions, as well as the necessity to feed and shelter oneself in a hyper-inflationary crisis, justifies through profit or actual benefit the "foolish" price. In these cases, there is no "bubble", even though prices are very high.

 

[Petra]

Possibly you should think about the people who are selling to these places!? Getting ripped off and don’t have a clue as to where else to go🤔😮🫣

[stefffana]

46 minutes ago, Petra said:

Possibly you should think about the people who are selling to these places!? Getting ripped off and don’t have a clue as to where else to go🤔😮🫣

Very true, Petra and very sad!

Over 90% of people have not another options to sell their goods and the pawn shops and jewellers are taking advantage.

[Petra]

The pawn shops round here have the same stuff in the windows for ages, they must be making money from somewhere? The one here that often has small gold bars in the window usually see them go pretty quick as they are well priced, unlike their coins, or when you go in, their silver Britannias! The only place I have seen them more is an advert seen today on tv for the first time wanting £40 for a sliver Britannia!🤔

[BLOOMMAN101]

15 minutes ago, Petra said:

The pawn shops round here have the same stuff in the windows for ages, they must be making money from somewhere? The one here that often has small gold bars in the window usually see them go pretty quick as they are well priced, unlike their coins, or when you go in, their silver Britannias! The only place I have seen them more is an advert seen today on tv for the first time wanting £40 for a sliver Britannia!🤔

what does one of those places pay per gram for scrap gold mate?they probably make a good profit buying cheap and selling on to a bigger dealer

[Petra]

mmm.. you’re probably right, enough in to keep em going. The local ‘workshop’ will do even better, buying in scrap gold and then melting it down to use. Cut out the middle men🤔😮

[ArgentSmith]

8 hours ago, Blacksmith876 said:

I understand that buyers have a responsibility to educate themselves but its frustrating seeing people being taken advantage of and precious metals getting a bad reputation as a result.

I agree and definitely key for buyers to educate themselves, same situation with bad actors involved in Bitcoin ie alt coiners NFTs and dubious exchanges etc. At the end of the day people should not pursue any endeavour based on gut feelings and emotional thinking.

Sad but the little freedom we have remaining has to include the freedom to make mistakes.

[dicker]

Loads of people simply see then buy without any real thought.  It’s not inexpensive items, it extends to cars and brash consumer goods.

I’m sure it’s not just me that has friends that pay full whack at car dealerships and are thrilled to get a set of mats and a t shirt….

[GoldDiggerDave]

Money washing/laundering? 

 

 

[SidS]

What would you consider a good price for a shield sovereign these days?

I'd only consider spending £500 on a pre-Victoria, an 1840s shield sovereign, or a higher grade 1850s. No way on earth I'd spend £500 on a St George or even shields from 1860 onwards.

[Petra]

3 hours ago, SidS said:

What would you consider a good price for a shield sovereign these days?

I'd only consider spending £500 on a pre-Victoria, an 1840s shield sovereign, or a higher grade 1850s. No way on earth I'd spend £500 on a St George or even shields from 1860 onwards.

😮😮🤔best you not come shopping round here!🤔

[SidS]

2 hours ago, Petra said:

😮😮🤔best you not come shopping round here!🤔

Well I am out of touch, last time I bought a sovereign they were in the £280-£325 range.

[Blacksmith876]

On 01/10/2023 at 12:12, BLOOMMAN101 said:

Not saying this is the answer but always something to keep in mind , I think we will all be guilty of this when/if we decide to sell

Greater fool theory

 

 

 

Thanks for this comment, we see this behaviour with equities all of the time but with metals its so much easier to understand their value that I thought it would stop businesses getting away with charging these sort of insane prices.

I guess the answer is that people assume that they are paying a fair price based on assumption.

[theman73]

On 01/10/2023 at 19:27, GoldDiggerDave said:

Money washing/laundering? 

 

 

Nah, this is happening here, Facebook, eBay and so on

[Gruff]

On 01/10/2023 at 10:25, iacabu said:

I too have wondered the same.

I asked at a local pawn broker to me (Nathan and Co), they buy in sovs at ~£300 (spot £360ish at the time) and sell for £500!

I think a lot of purchases will be from the less scrupulous individuals who hold large amounts of cash and want to convert it. This was also agreed when I was chatting with a local jeweller I buy from. 

I understand shops have large overheads to cover and can't just get by on making a tenner, but it still leaves the question as to who buys it. 

My business mind is that I would rather keep stock moving and sell at a more reasonable price in order to buy the next item, rather than have a £500 sovereign sat in the window for months. 

This was my first thought. Effectively washing the proceeds of "illegal" activities

[iacabu]

I was excited to start the day as I had a number of bids in for various items ending today. As with most auctions I've bid on, it was short lived...the hammer prices are crazy. 

For example, £330 for a run of the mill 1913 Sovereign. Make that £432 with fees plus delivery on top (£20 from this particular auction house, unless collecting in person). 

[SidS]

3 minutes ago, iacabu said:

I was excited to start the day as I had a number of bids in for various items ending today. As with most auctions I've bid on, it was short lived...the hammer prices are crazy. 

For example, £330 for a run of the mill 1913 Sovereign. Make that £432 with fees plus delivery on top (£20 from this particular auction house, unless collecting in person). 

Most sovereigns I see for sale (other than at the bullion dealers) are north of £390, most in the £400s.

[Petra]

Well someone is buying! Saying that, local to me, some of the stuff is in the window a long time. One has a small gold coin in for £115, they tried to tell me it was a 1/4 sovereign, it isn’t, been in the window a month.

another shop actually has silver coins displayed inside, however, unless you want to pay £40 for a 1oz silver Britannia, they seem to be sitting for a while!