Gold Rush Is Also a Boon for the Refinery Biz
Investors aren't the only ones rushing to profit from their precious metals.
Aug. 11, 2011— -- Investors aren't the only ones rushing to profit from the booming value of gold. Refiners, who buy scrap gold from dealers and private owners, say they are also seeing an upsurge in activity.
"It is great for business," says Terry Hanlon, director of the metals division of Dillon Gage, which operates a gold refinery in Texas. He says revenue from the gold refinery business has increased 200 percent in the last year, while silver is up 300 percent.
With gold worth $1,775 an ounce, "it comes out of the woodwork," he said, with individuals bringing their items to dealers, who in turn sell it to refineries where it is melted down to its purest form.
More people are selling gold because they have become aware of its high value in the current economy—and because they have to. "People of course need money," says Candy Frankel of Midwest Refineries in Michigan. "Most people are very pleased with their settlement."
Individuals who want to cash in on their gold jewelry or coins usually sell them to dealers, who in turn bring scrap gold to a refinery, where it's melted down. A sample is sent for a process called assay, where the purity of the gold is determined. The higher the karat, the greater the value: 18 karat gold is 75 percent pure gold, for example, while 12 karat is 50 percent gold.
Dealers are also bringing in silver, now selling for $39 an ounce, says Hanlon—flatware, serving trays, tea sets. "Many people who have silver look at it and say, 'We never use this, we tuck it away,'" he says. They don't always realize that not all their flatware is sterling silver—knives, he says, have stainless steel blades and only the outside of the handles are sterling.
He says business is booming, and Dillon Gage moved last month to a much larger space. Frankel also described the refinery business as "extremely" good right now.
Steven Polinksy, owner of Dvir and Stoler in New York City's diamond district, has a gloomier outlook.
"At this point the scrap business has slowed down," he says, because people who want to sell their jewelry have already done so, while wealthier people will hold onto their gold despite the soaring price.
Polinsky says the gold boom has dealt a knockout blow to the jewelry business because pieces cost too much. Even couples who are getting married have cut back, he says."They're buying thinner wedding rings, 12 karat instead of 18 karat."
He warns that people who are selling gold to be careful. "A lot of these people that are selling jewelry are being taken advantage of," with some buyers offering only 70 percent of value, he said.
But Polinsky thinks the gold rush is far from over. "Gold makes the world go round," he said. "Gold will always have a value. You may one day have to pay for your groceries with gold."
"I absolutely don't think it's a bubble," says Hanlon. "This is a reaction to financial issues and currency values around the world."
He says that when refiners buy scrap gold, "you're buying into a million stories. It's pretty much a special occasion associated with every piece of precious metals."
But, he says, the gold that gets melted down gets a new life. "It all goes back to the market for someone to celebrate one more time. It's all recyclable."
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