The precious metals market reached $250 billion globally in 2024, creating massive opportunities for new dealers. Starting a precious metal sales business requires strategic planning and proper execution.
We at Natural Resource Stocks have analyzed successful dealers across the industry. This guide covers the essential steps to launch your precious metals business profitably.
Essential Requirements for Starting Precious Metal Sales
Legal Compliance and Reporting Obligations
The IRS requires precious metal dealers to report specific transactions through Form 1099-B. Brokers must furnish this form to both the IRS and customers by February 28 for reportable precious metal transactions. Most states mandate business licenses for precious metal dealers, with requirements that vary significantly by location.
California requires a secondhand dealer permit, while Texas mandates specific precious metal dealer licenses. The Patriot Act forces dealers to maintain detailed customer records and report cash transactions that exceed $10,000. You must register with your state’s revenue department for sales tax collection (typically 6% to 10% depending on jurisdiction).
Capital Requirements and Initial Investment
Initial capital requirements start at $50,000 minimum for legitimate operations. Successful dealers recommend $100,000 to $200,000 for adequate inventory and working capital. This amount provides the foundation needed to compete effectively in the market.
Professional operations require substantial upfront investment to establish credibility with suppliers and customers. Undercapitalized dealers struggle to secure quality inventory and often fail within the first year.
Inventory Sources and Acquisition Strategies
Midsized pawnshops offer the best opportunities for new dealers, providing scrap metals at 70% to 80% of spot prices. Estate sales generate consistent inventory streams, with experienced buyers finding gold jewelry at 40% to 60% below retail values.
Safety deposit box auctions provide another reliable source for quality metals at competitive prices. Avoid platforms like eBay and Craigslist due to high fraud risks and authentication challenges.
Storage Infrastructure and Security Systems
Storage infrastructure costs range from $200 monthly for basic safety deposit boxes to $2,000 monthly for commercial vault services. Professional-grade safes rated TL-30 start at $15,000 but protect against most theft attempts.
Insurance coverage becomes mandatory for serious operations. Precious metals policies cost 0.5% to 1.5% of inventory value annually through specialized carriers like Lloyds of London. These policies protect against theft, fire, and natural disasters.
The next phase involves establishing relationships with refineries and mints to secure consistent supply chains and competitive pricing structures. Many experts believe we are entering a bull market in natural resources, making this an opportune time to establish your precious metals business.
Building Your Precious Metal Sales Business
Direct Refinery Partnerships
Johnson Matthey and PAMP Suisse represent the gold standard for precious metal refineries. These companies offer wholesale prices for qualified dealers. Most refineries require minimum orders of $100,000 and proof of established business operations before they approve dealer accounts.
The Perth Mint and Royal Canadian Mint provide competitive rates for bullion products. They typically charge 4% to 6% premiums over spot prices for popular coins like Gold Eagles and Maple Leafs. These relationships take 6 to 12 months of consistent orders and payment history to establish.
Smaller regional refineries like Elemetal and Republic Metals often accept new dealers with lower minimums but charge higher premiums. Direct relationships eliminate middleman markups that can reduce profit margins by 1% to 2% per transaction.
Market-Driven Pricing Models
Successful dealers maintain spreads of 8% to 12% between purchase and sale prices for bullion products. Gold jewelry commands higher markups of 15% to 25% due to craftsmanship premiums and testing requirements. Silver products typically require 10% to 15% spreads due to higher volatility and storage costs per dollar of value.
Market conditions dictate price adjustments throughout trading days. During high volatility periods, spreads widen to 15% to 20% to protect against rapid price movements. Professional dealers use software like CoinTracker Pro or MetalsPro to maintain real-time margins based on London Metal Exchange quotes.
Customer Verification Protocols
The Bank Secrecy Act requires dealers to collect customer identification for transactions that exceed $3,000 in precious metals. Forms 8300 must be filed within 15 days for any cash payments over $10,000 (this includes multiple related transactions). Most dealers implement Know Your Customer procedures that include photo identification, address verification, and transaction history tracking.
Digital systems like PawnMaster or BrokerEngine streamline compliance while they reduce paperwork errors. These platforms automatically flag suspicious transactions and generate required government reports. Customer verification failures result in federal penalties that start at $25,000 per violation.
The next phase focuses on customer acquisition strategies that target high-net-worth individuals and collectors who drive the most profitable transactions in the precious metals market.
How Do You Find Your First Precious Metal Customers
Target Collectors and High-Net-Worth Individuals
High-net-worth individuals represent a significant portion of the precious metals market. These customers purchase substantial amounts of metals annually and maintain long-term relationships with trusted dealers. Wealth management firms like Morgan Stanley and Merrill Lynch maintain client lists of individuals with investable assets that exceed $1 million.
Investment advisors at these firms receive referral fees for qualified precious metal transactions they facilitate. Financial planners who specialize in alternative investments become your most valuable partners. They understand which clients seek portfolio diversification through physical metals and can introduce you directly to qualified buyers.
Private wealth management events and investment seminars attract serious collectors who pay premium prices for rare coins and certified bullion. The American Numismatic Association hosts regional shows where dealers connect with collectors who make substantial transactions.
Connect with Estate Planning Professionals
Estate planning attorneys represent an untapped referral source, as wealthy clients often liquidate precious metal holdings during estate transfers. These professionals work with families who inherit substantial precious metal collections and need immediate liquidation services.
Trust officers at major banks handle estate settlements that frequently include precious metal assets. They require reliable dealers who can provide accurate appraisals and fair market prices for inherited collections. These relationships generate consistent transaction volumes throughout the year.
Build Authority Through Educational Content
Educational content generates more qualified leads than traditional advertising. Precious metal buyers research extensively before purchases, consuming multiple pieces of content during their decision process.
Video content that explains gold purity testing methods and market analysis attracts serious buyers who value expertise over sales pitches. Weekly market commentary that explains spot price movements and geopolitical impacts establishes credibility with sophisticated investors.
Host Investment Webinars and Seminars
Investment webinars that cover portfolio allocation strategies for precious metals generate qualified leads worth substantial potential transactions. Financial advisors attend these sessions to evaluate dealer knowledge and determine referral worthiness.
Email newsletters with specific price forecasts and market timing advice build trust with existing customers while attracting new prospects through referrals. Content that addresses tax implications and IRS reporting requirements demonstrates professional competence that high-net-worth clients demand from their precious metal dealers.
Final Thoughts
Successful precious metal sales businesses require three fundamental elements: proper legal compliance, adequate capital, and reliable supplier relationships. The $250 billion global market offers substantial opportunities for dealers who execute these basics correctly. Market conditions favor new entrants as economic uncertainty drives increased demand for physical metals.
Professional dealers who maintain 8% to 12% spreads on bullion transactions generate consistent profits while they build long-term customer relationships. Your next steps include securing $100,000 minimum capital, obtaining required state licenses, and establishing relationships with regional refineries. Focus on high-net-worth customers through financial advisor partnerships rather than retail approaches.
The precious metal sales industry rewards expertise and professionalism over aggressive sales tactics. Dealers who provide accurate market analysis and maintain transparent pricing structures build sustainable businesses that grow through referrals. We at Natural Resource Stocks provide comprehensive market analysis and investment insights that help precious metal dealers understand macroeconomic factors (including geopolitical impacts and emerging market opportunities) that influence precious metal demand at Natural Resource Stocks.
