january’s wild gold and silver ride left mom-and-pop dealers scrambling to survive February
January felt like a fever dream for the precious metals market. Gold hit $5,300 an ounce, silver nearly touched $120, and investors were losing their minds. Then February arrived like cold water to the face. Prices stabilized, and reality set in. But while Wall Street traders celebrated normalcy, local coin shop owners were having the worst month of their lives.
The reason? The same volatility that makes headlines also destroys profit margins. When prices swing wildly, inventory piles up. When refineries get overwhelmed and stop accepting materials, cash flow stops moving. For small businesses buying and selling precious metals, this is a nightmare scenario.
The speed of market moves is genuinely terrifying at the retail level. Tim Heuer, who manages University Coin & Jewelry in Madison, Wisconsin, witnessed it firsthand. A customer walked in wanting to sell silver when the spot price was $98 an ounce. By the time Heuer finished writing the check, silver had dropped $3.50. The customer got less cash, and Heuer’s margin got thinner. This isn’t theory it’s real-time transaction by transaction.
“These price moves have done a lot of damage all across the line,” said James Steel, a precious metals analyst at HSBC. He wasn’t exaggerating. Local coin shops are the unsung infrastructure that keeps physical precious metals circulating. Someone bought a gold bar from Costco a year ago. Now they need cash. They go to a local coin shop. These businesses bridge everyday people and refineries that process metals into new products.
The recent mania flooded shops with sellers. High prices tempted people to offload old silverware gathering dust, inherited coin collections, and bars from past crazes. Shops buy it all because that’s their business model. But then what? They need to sell it to refineries to be melted down. Except refineries are completely overwhelmed.
Refineries hit pause
Back in October when silver crossed $50 an ounce, triggering a seller frenzy. Jarret Niesse, president of Precious Metal Refining Services in Chicago, watched his company get buried under scrap silver. His refinery stopped accepting new material because they were already drowning in backlog. The domino effect is brutal. Much of what refineries process gets exported to Asian markets where demand runs hot. With refineries backed up, they’ve stopped accepting material from coin shops, meaning shops can’t move inventory. They’re tying up capital in metal they’re holding but can’t sell financial quicksand.
Coin shop owners are stuck.
They can’t stop buying because communities rely on them to convert metals to cash for taxes and medical expenses. Tom Spoerl, manager at Rick’s Olde Gold in Madison, summed it up: “If you do this wrong, you run out of capital really fast.”
Both shops recently started placing daily purchase limits on individual customers. It sounds counterintuitive turning away business but it’s smart. By capping purchases per person per day, they serve more customers with available capital and avoid getting underwater on inventory. They also can’t take on debt to finance holding metal. Banks don’t love lending on precious metals, and financing storage long-term destroys profit potential.
The long game looks decent
if shops can survive the short game. Gold is up 76% year-over-year, and silver is up 147%. Someone who bought a year ago is sitting on massive gains. “If you look at a one-year investment, you still almost tripled your money,” Heuer said about silver. The average cost ratio remains strong, keeping hope alive that volatility will eventually be a minor blip in a larger bull market.
For now, Spoerl and Heuer are taking it day by day. “For us to stop buying now would be a little odd,” Spoerl said. “This is something that we haven’t seen before, so it’s just kind of going with the flow and figuring out what to do in the moment.” They’re threading the needle between staying relevant to communities and protecting balance sheets. It’s exhausting work but the alternative is letting down people who depend on them.
