And often they are cheap. Real cheap.
If you are still buying Ohio Precious Metals' OPM silver bars and especially gold bars, you may not have heard why the refiner went out of business. In case you think that this laudable refiner - branded for its recycled metal - is still up and running, it is not.
OPM was shut down as part of the Elemetal scandal that came out in mid-late 2017. We'll talk about the big picture in another article. Evidence came out that traders were sending billions of dollars in narco-trafficked gold through Miami and into Ohio, among other places.
What a remarkable blow when it was removed from this prestigious association in 2017. Likewise, when COMEX suspended them from their Good Delivery. For those who are unfamiliar, these designations certify that the refiner is audited and meets the highest regulatory standards. As such, the refiner can sell directly into the market...
To add insult to injury, according to the Miami Herald, 280 employees were laid off at the Jacksonville, Ohio. These employees had nothing to do with what happened. If you own OPM product - as I do - then you got hit the same way. Although certainly not in the same proportion. If you are still buying OPM silver bars, you should be at least a little concerned.
The real problem with OPM silver bars is that LBMA refiners can't repurchase them. To understand what that means for Joe the bullion buyer requires understanding the supply chain of precious metals. Miners take the metal out of the ground. Think Barrick Gold here. To meet responsible sourcing standards, they have to follow basic regulations, like not damaging the environment and supporting local laws. They also need to make sure - you would think this would be the natural part - they are not in business with drug traffickers, money launderers, or other shady elements.
While governments police this, the most robust controls often come from within the industry. For refiners to meet the tight regulation required to be able to sell their refined bars direct to the market (at the spot), they need to follow strict compliance requirements. That's one primary reason the mines have to. If a refiner is caught compromising the physical integrity (purity) of the gold or the precision of its assay (testing), it will be kicked out of the club that gets direct access to public market money.
This is kind of like securities laws with the aim of investor protection. Much like the comprising the physical integrity of the bar, the last thing anyone wants is for a refiner to compromise its ethical integrity. Think about blood diamonds here; do you want red gold?
On the bright side, it's very much possible your silver bars are recycled, and the metal never came into contact with drug traffickers. On the other hand, as part of the Elemetal group, OPM was kicked out of the club. And when you're kicked out of the club, people don't want to work with you. And here's the kicker, your product.
So let's say you are okay with buying OPM product because, in reality, it is probably fine. You go to a reputable dealer who has some left in inventory or buys it secondary market. Then what? A few years go by, and you want to sell it. So you go back to the dealer. The chances are that a retail and even a wholesale-level dealer may purchase it from you. Depending on their compliance regulations, they may be fine doing so. But here is the problem you face: you will get a much lower premium than you would from almost any other product.
The fact is that since they cannot sell it back to an LBMA refiner, they are either going to sell it to a private refiner who is going to probably pay less, and resell it to the market. At this point, they are probably going to sell it for less than LBMA bars, and the lower demands mean you are again getting paid less. Long story short, you lose money.
There are a few things you can do to avoid conflict in and around your precious metals. First, look for current gold and silver bars manufactured by LBMA Good Delivery Refiners. Second, buy from trusted precious metals brands such as Republic Metals Corporation and the Royal Canadian Mint. Finally, and it may sometimes help you buy silver cheap, you should check online markets for gold and silver, e.g. bullion on eBay, for average resale prices by looking at completed and sold listings.