How Gold Dealers and Gold Brokers Make Money

Gold buyers, gold dealers, Gold brokers - these terms are often used interchangeably but they aren't necessarily the same thing. Gold buyers or gold dealers buy gold from the public. Most of them are marketing companies that facilitate the trade without having to keep any inventory. Gold dealers take the gold that you sell and sells it for a profit to a large scale operation, possibly a refinery. Brisbane gold brokers on the other hand broker sales or provide drop shipping for large wholesalers. Sometimes dealers/ brokers run hybrid operations where they keep some stock and drop ship others.

Brokers may also deal with more than just gold but other precious metals.


Gold dealers do not make more money when the price of gold goes up nor do they make less when it decreases. Given the volatility of the precious markets, gold dealers are extremely risk averse. They hardly speculate on the price of gold at any point.


How do gold dealers protect themselves against the market volatility?


Gold dealers who hold inventory have to hedge it in the markets. Buying would be taking a "long" position on gold and by "shorting" the gold, the dealer protects themselves regardless of whether the price of gold goes up or down. Brisbane gold brokers on the other hand aren't affected by the movement of the gold spot price because they use the same price they are charged when selling to wholesales. Essentially, the wholesaler is the one who has to place the long and short positions of gold. Dealers try to mitigate potential losses by locking customer or wholesalers to a specific price. This is not a fool proof system. Brisbane gold brokers are affected by changing prices by wholesalers.


How do gold dealers make money?


Dealers make money on the premium (the price charged over the spot-price). After buying gold from gold brokers, a wholesaler (usually a mint) has to spend money melting, refining and minting gold into a new coin. Mints like the Perth mint may pay 3% premium for the gold it buys from dealers through a broker.



A lot of gold dealers offer commission-free selling, this means that the price you are quoted when you sell your gold does not include commissions. Most dealers do this especially for items that are in short supply but is in high demand because they know they can sell the item faster for a profit to someone else.


Most gold dealers do more than buy old gold or scrap gold destined to be melted and refined. Some dealers buy gold that they resell to customers who are interested in the gold as is. If you have gold coins that are in mint conditions, you may get more for it


Some dealers make money by selling items that are related to gold like air-tight storage tubes or other investment offers.


Commissions earned by brokers


Gold brokers mainly make money from commission. They receive bonuses and commission for the volume of gold they are able to broker. If you are dealing with a gold broker, it will help to know just how much goes to the broker for the transaction.