Selling Gold & Silver at Auction

Advice on how to get you the best deal from an auction house for your precious metals.OLYMPUS DIGITAL CAMERA

When it comes to selling gold, silver and other precious metals at auction, there are advantages and disadvantages; but for most auctioneers, selling gold and silver at auction is a no-brainer. They want to sell it for you. This gives you some negotiating room when you consign to auction houses and you shouldn’t hesitate to negotiate. Auctioneers make their money two ways: 1) Commission, 2) Buyer’s Premium. Both of these eat into your bottom line as the consignor/seller and make the auctioneer rich. To be fair, the auctioneer has to make money, but just how much money is fair for you and for the auctioneer? A fair price for precious metals is a about 80-90% of its spot rate on the market.

*Therefore you have one rule when you bring precious metals to an auctioneer:

RULE: NO COMMISSION SHOULD BE PAID BY YOU, THE SELLER, ON THE SALE OF YOUR METALS!

This post could end here and you can simply believe me, do what I say and it will work every time unless you’re dealing with a complete fool and should probably go elsewhere. If you still need convincing, continue reading. There are both advantages and disadvantages to selling your precious metals at auction. If you’re savvy enough from the start, it is a good way to get a fair price!

Advantages of selling precious metals through auction.

1879 Morgan Silver Dollar. Normal range $80-125.

1879 Morgan Silver Dollar. Normal range at auction: $80-125. Commodity “market value” of silver, about $35.00

Let’s start on a positive note with some of the advantages. Gold and silver comes in many forms, shapes and sizes, purity etc. It could be old jewelry with scrap value, or it could be silverware or bars and coins for example. Precious metals always have a certain intrinsic value and are traded on the commodities market. Coins are an exception to the commodities market because while they have their base market value ($1682.00 for an ounce of gold and 32.05 for an ounce of silver as of the writing of this post) they also have collector’s value. Today, a Morgan Silver Dollar has about $30 worth of silver in it, but an almost uncirculated 1894 Morgan Dollar can sell as high as $2000 simply because collectors are willing to pay the price for a rare, fine coin. In this case, you can’t go wrong with the auction venue. Numismatists are a rare breed with a highly trained eye, knowledge of both the commodities and collector’s markets and they are constantly combing auctions. Advantage you, the seller, because if you’re not sure if you have the $2000 or even the $5000 Morgan Dollar, it is almost guaranteed the auctioneer or the bidders will find it and it will sell for a fair price or certainly close to market value. This is where things get problematic for the seller, because you want to keep as much of that $2000 as possible.

The Problem

On a $2000 sale of your coin, you may be thinking you got a good deal, but in fact the auctioneer can net a very high margin at your expense. If he takes a commission and buyer’s premium on top of the sale price, you could lose big. Let’s say the auctioneer takes 15% from you in commission and 15% from the buyer in buyer’s premium, netting him $600. That’s not exactly fair for the amount of work that went into selling your coin which is minimal. If you negotiate a no commission the auctioneer would get a more than fair $300.

Commission on Sale Scenario: You you $1700; Auctioneer gets $600.

No Commission on Sale Scenario: You get $2000; Auctioneer gets $300.  THAT’S FAIR!

Auction is a points game (as in percentage points) and bidders are always adding the percentages that they will have to pay for their purchases above and beyond what it sells for on the floor, setting their margins so that they can also profit from their purchase. They factor in buyer’s premium and tax, which could be anywhere from 10-25% more than what is called on the floor. The bidder must leave room to make a profit as well factoring his cost of selling and the profit he must make for purchase to be worth it, which could be an additional 5-10% (more percentage points taken from you). As these percentage points add up, potential profit is taken away from you, the seller, and suddenly you’re in the hole 15-40%. You, never see this because it is buried in the auction process. If you didn’t negotiate your zero commission, you could throw those points away and you could be in the hole another 10-20%, for a grand total of 25-60% of your money going to other people. You might as well take your gold to the Cash n’ Go and give the man whatever he’s will pay you and get the cash now because it’s the same deal.

Buyer’s premium: A percentage the auction house takes ABOVE the sale or “hammer” price called on the floor. For example, Item sells for $100 on the floor, with a buyer’s premium of 15%, buyer is pays $115.00.

The Solution: Be Smart About Your Precious Metals! 

Because the auction market allows many bidders to determine the price, your precious metals will almost certainly fetch a fair “hammer price.” But to make sure you don’t get hosed on hidden fees, find an auction house with a low buyer’s premium, take your gold and silver in and say “hey guys, I want you to sell my gold and silver for me, but at NO commission.” Especially if you have a lot of it, everyone wins with this scenario. Hypothetically, if an auctioneer took $100,000 worth of precious metals to be sold at auction on consignment, if the consignor didn’t negotiate terms, the auction house could conceivably make over $60,000 in buyer’s premium and commission (varies from house to house). Believe me, that the auction house would have been just as happy to have earned $30,000 which would have been a much better deal for the seller.

In Conclusion…

Prior to taking your gold and silver to auction, determine an approximate value of what you have. Weigh it, check current gold and silver prices (always on Auction Exclusive in real time), and come up with a rough value for your precious metals – it doesn’t have to be exact. Then take your precious metals to the auctioneer and say “Hey, I have $______ worth of gold and/or silver and I want you to sell it for me, but I don’t want to pay any commission on the sale. You will make enough on buyer’s premium.”  The auctioneer will be in less of a position to do hardball negotiating if he perceives you are an educated seller and know the game. You will come out ahead almost every time!

 

Current Prices From Monex

About Berkeley Brown
Anson Brown, co-founder and principal of Auction Exclusive, is an expert in rare books, prints, antique maps, historical manuscripts and autographs. He is also well versed in a variety of fine and decorative arts and antiques and has 7 years experience in the auction industry. He holds a Bachelor of Arts degree in Philosophy from George Mason University and and Master of Business Administration from the University of Maryland.

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