Erik’s Blog: Board Shorts and Business Suits

As I write this the price for gold is at $493.00 per ounce while silver is at $8.15 per ounce. Gold’s up nearly $200 from 5 years ago and silver up nearly $4. With the economy shaky and the dollar sinking the year 2000 couldn’t have been a better time to invest in precious metals. If you’re like I was you are probably are thinking, aren’t gold and silver bars for royalty? The answer is no. You can probably walk down to your local pawn shop or jewelery shop and chances are good they have some bullion for sale. Bullion is the term used for precious metals in bar or coin form. Common sizes are 1, 10, and 100 ounces.

Now rather than going to the store right now and easier way might be to look on the internet. eBay has hundreds of people selling bullion, the only problem is once all is said and done with shipping you end up paying $4-$5 an oz over spot for silver and $20-$30 per oz over spot for gold. Spot is the current price or market price for the metal. The good thing about eBay is you can buy in low quantities.

The other online source for bullion is buying direct from the mint or from a reseller. The problem here is you end up having to buy at least 50 and sometimes 100 bars or coins to keep the price reasonable. On the plus side these places sell at about $0.40 over spot for silver and $10 over spot for gold.

You may have already seen it by now but doing the math shows selling bullion on eBay has the potential to make for a decent profit margin. Now you may be asking, If you are able to buy down the street or online for cheaper then sell it on eBay for a profit why isn’t everyone doing this? Well, not everyone can buy larger quantities or have stores which sell bars down the street from them. And quite frankly I don’t think everyone knows that this exists. There are a lot of ways to make money on eBay but selling silver bullion doesn’t cross my mind first. If you have a source near you can probably start with as little as $20-$50 like I did. If you don’t and have $500 to $1000 you can start no problem and get the profits going faster.

In my experience I have found that for silver bullion you make between $2 and $5 and oz profit. This all depends on whether you sell them in singles or multiples and how much you charge for shipping and handling. I get into this later and explain the different combinations. With gold there is the potential to make a lot more profit, possibly $100 per sale. The downside is that there aren’t as many people on eBay looking to spend $500 repeatedly. (Later I also talk about combining shipping and getting people to buy more)

I have sold a few bars online, mainly silver, and made money on all of them. The reason for me stopping is because living on Hawaii I have but one shop that sells bullion and they ran out quickly. I would have been able to buy online but shipping from some of these mints to Hawaii can be extremely expensive and cut into profits. Apparently they all think Hawaii is a different country. However on the mainland or anywhere else you can find bars to buy, this would be an absolute gold mine (excuse the pun).

I have found a way that I know will make money for someone out there if they only knew how to go about it. Like any repeat selling on eBay you must become good at selling. The good thing about silver bars is you are unlikely to loose money selling on eBay because with precious metals the market doesn’t tend to make big swings in a day. You should be able to get rid of the remaining bullion you own if the market goes south.

I have collected some tips to get you started. The follow are things I learned and how they can get you on your way to making a million dollars.

1. Finding a Bullion Source
2. Gold or Silver, 1 oz. or 100 oz.
3. Setting up an eBay and Paypal account
4. Posting your Silver or Gold
5. Shipping
6. Optimizing Profits

1. Finding a Bullion Source

Local source
I was able to find a good (short-term) source for silver bullion right down the road from where I work. It is a jewelery store that buys old jewelery and other precious metals and then resells them along with their own jewelery supply. You probably have one of these stores near you. Check in your local yellow pages or check online.

Local Jewelery Store - Most of jewelery stores will give you a fair market price of $0.40 to $0.70 per oz over spot on silver and $5-$10 per oz over spot on gold. The only problem is that unless they get a steady supply from a mint you will probably buy all of their bullion fairly quickly. If you do find a good store to deal with ask them if they will buy the bullion and that you will pay a fair market price for it. Sometimes they can get it through sources that otherwise wouldn’t deal with the public and get it for a better price.

Pawn Shop - Expensive. These places are all about a profit. I have never bought gold or silver from one and not sure if I ever will. If you can find an owner that will part with their bullion for cheap more power to you. I just wouldn’t spend a lot of time searching one out.

Online Source
Buying bullion online is really easy to do and can be the most cost effective if you buy in large quantities. You can either go directly through a mint or through reseller. Buying directly through the mint is the best idea. Their prices are around $0.70 over spot for silver and $7 for gold. If you buy from a reseller you’ll get a larger variety of bars but you will also end up paying more for each. Sometimes the variety will land you a couple bars that you can sell for more but the cost difference might be too much for it to be worth it.

Online Mints:
Northwest Territorial Mint - if you look on eBay this is where a large number of the bars come from. I never bought from them but if you do I don’t think you will have any problem selling them off.
The US Mint - the us mint sells a lot of rounds and not as many bars. For some reason the rounds don’t sell as high as the bullion bars on eBay.
The Perth Mint - In Australia this mint has some interesting pieces that might be worth something on eBay

I would also search out some phone numbers for mints online. You could just call them out of the blue and see what their prices are.

Online Resellers:
There are countless numbers of these, if you Google gold or silver bullion you’ll see what I mean. Some of the ones I reviewed and looked at going through are:
California Numismatic Investments - If you want to to buy a lot of gold or silver from a lot of places this seems like a great place to buy from. They have a variety of Mints and a variety of sizes.
Goldline - Sells pretty cheaply if you buy in bulk, down to $0.35 over spot for silver!
Bullion Direct - This place has everything you would ever need. Their prices can be a bit steep sometimes but they’ll have deals you just have to keep going back.

2. Gold or Silver, 1 oz or 100 oz?
Next you have to decide if you should sell gold or silver and what size you should sell. My personal experience is in the silver market. Unless you have a lot of money silver is going to be the easiest way to go. At current market price you can buy 100 bars for less than $1000.00 and make a decent profit. As I stated before for every 100 silver bars you sell you will probably make $200-$400. There are ways to make more you just have to optimize your process. Gold tends to be harder to sell and there aren’t as many people buying large quantities online. However, the profits are a lot greater. For 1 oz you could make $40 to as much as $100 profit. The only problem is if you notice the people that are bidding on it they are usually the same 30 or 40 people. This is a much smaller market to corner. Silver has a lot of people all going after bars from a few eBay dealers.

Which do you sell 1, 5, 10, or 100 oz? These are the most common sizes of silver bars. In my experience your profits can be greater with 1 oz. bars. The reason for this is because you can sell them in lots of 1 or more. I found that selling silver bars in lots of 3 brought the greatest profits. People routinely are buying three bars for $35 or more plus paying $7.95 shipping. Doing the math; let’s say each bar you bought was worst case $0.70 over spot so you’re at $8.85 X 3 = $26.55. Then shipping supplies $1 and shipping with insurance $3, your total cost is $30.55, worst case. Now if you sold the 3 for $42.95 that would produce a profit of $12.40. Not bad considering you can sell them with a 3 day auction on eBay and you can comfortably have 10-20 auctions up at any given time. (There are bullion sellers that have 40+ auctions up at any one time)

The 5 oz bars and up are good to get a variety out there but they don’t offer as much flexibility in your sale price. I never tried this but I am sure there is a way to optimize profits here and find a great market for larger silver bars.

3. Setting up an eBay and Paypal Account
Setting up an eBay and Paypal account is pretty easy. Just go to eBay and follow the instructions then go to Paypal and do the same. If you need further instructions on how to create and use eBay try this site.

4. Posting your Silver or Gold
Picture, you need a picture. You shouldn’t post anything on eBay without a picture, and definitely not bullion. People who are buying it need to know that it isn’t tarnished or damaged. Most buyers also want the silver to come in a protective case. Protective cases usually mean that the silver hasn’t been scratched which could cause it to loose value from a loss of metal. Here are some examples of the pictures that I have posted.

Use different combinations of pictures and see what works best for you.

Make the pictures show how shiny the silver is. If you bought good silver this shouldn’t be a problem. You also need to remember to try and show the name of the mint the bars came from and also the serial number. Silver bars usually have a serial number on them so show this and try and mention it in the text section of your post.

I would keep the category as silver bullion but there is some cross referencing you can do that might optimize profits. Look around and see where others are posting.

5. Shipping
Ship priority mail. It’s the cheapest. Also you don’t need anything fancy, just ship in a bubble envelope and wrap your bullion in newspaper. You may start getting fancy with custom labels that promote your new bullion eBay store but this isn’t needed. Also make sure to ship with insurance and include this in the price. It isn’t that expensive and most people want it. Plus it saves you from fraudulent buyers claiming to never have gotten their product.

Use US Postal Service online. You can print labels right from your own printer and have your mail person pick the packages up. You can do it all while sitting on the couch watching TV. This is the easiest method and most cost effective. You can estimate weight or buy a scale. Each piece is 1 oz and the envelope will weigh less than half and ounce.

6. Optimizing Profits
The following are tips I used to make the most selling silver on eBay.

1. Offer multiple item shipping discounts for items bought within a certain time period. This entices a lot of people to bid on that extra piece of silver they might not have otherwise bid on. If they win, fine just drop the extra bullion in their envelope and be done. If they don’t that’s fine too, they just helped up the price of your bullion.

2. Multiple bar sales! Sell single 1 oz bars but don’t over do it. Profits can be greater when you sell in multiples. I have seen bids exceed $5 per oz over current spot on auctions containing 7 bars. That’s a $30 profit (after you deduct what you payed over spot) before you even include shipping and handling.

3. Don’t make your money on shipping. Too often I see people charge double what it actually costs to ship. Why? As a consumer I just search for a different vendor and I expect you would too. Charge a fair shipping and handling fee. Remember that it takes time to package and ship the product so you don’t want to under charge. The US Postal Service has everything online now so you can weigh your items, create a label and print your postage right online with your own printer. You can also have them pick it up from your house at no extra charge! People know this and will pick out a shipping fraud when they see one.

4. See what people are buying. Sometimes a certain mint or Assayer’s bars will be going for more than others on eBay. I am not sure as to the reason because I am not a collector. If you know, then you might have an advantage and can see it before another seller does. If not don’t worry. Just keep an eye out for what other people are selling and their final sale price. When one bar type sells for more try and get your hands on it. Doing so could mean some extra profits for a small bit of research.

There you have it. That’s how I started a business on eBay. Pretty simple and s I mentioned the process can be refined a little more for greater profits. Just stick with it and you could easily be making an extra $500 a week from an eBay business.

This entry was posted on Saturday, November 26th, 2005 at 10:14 am and is filed under Entrepreneurial Musings. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.