On a weekday afternoon in February, Josh Morelock, the general manager of Gold Refinery of San Diego, scooped glinty gold objects from a bowl and placed them into smelter fired up to 2,000 degrees Fahrenheit. Gold rings, bracelets, coins, chains, heirlooms, now scrap. Whatever they had once meant, a t that moment they were worth their weight in gold. The refinery is very busy these days because of the high price of gold, sliver and other precious metals, which has people turning their metal to cash. “We have seen a huge spike,” the owner, Carmine Mannino, said in a recent call, adding that he is seeing five times more clients a day compared to normal. “The transaction size is up way as well, because the gold and silver prices are higher.” Gold’s price per ounce crossed $5,000 in January and was around $5,150 in late-February. Silver hit a record of around $120 an ounce in January and was around $88 in late February. Reasons for the price growth include inflation and purchases by central banks, as institutions and investors who hope gold offers security in the face of geopolitical and economic uncertainty. It may be a boom time for bullion, but navigating this market is fraught with risk. Merchants are aware that prices of metals could backtrack or keep jerking upward. Some businesses, merchants said, have had trouble offloading gold and silver to larger refineries, which are backed up, resulting in potential or real cash-flow challenges. Go time For sellers, it’s go time. “People … see on the news, ‘Oh my God, Gold got past $5,000. Silver’s over $100. This is insane that it’s so high. Time to, just, cash in,’” Mannino said. People are not just selling now, they are selling more. Instead of offloading a few coins or one piece of jewelry, people are bringing in larger quantities, sometimes entire collections, he said. The reasoning: “It’s just time to just sell it all and really cash in and take advantage of these all-time highs.” Alex Pourat, the owner of PB Pawn Jewelry on Garnet Avenue, said his business has been especially busy in the past two months. “They’re going through their old jewelry boxes and stuff, or things that they just don’t wear, and selling it for the cash,” Pourat said in early February, adding that he is buying gold jewelry and bullion in equal parts. He refurbishes the pieces that are likely to sell and melts the rest, which he sends for further refining. Dan Harlan, who owns Presidio Jewelry Pawn, said most of his sellers are elderly. “They don’t need it anymore or they want to sell it and divide it up with their heirs, or they want to just take the money and go on a vacation,” he said. At Harlan’s Point Loma jewelry store, glass cases are filled with silver pieces, mostly in Native American and Southwestern styles. He used to have more gold for sale on display, but as that metal’s price rose, buyers thinned out. He pulled out a 5-gram gold chain and a transaction record book from a glass case. He flipped to the page that showed what he paid in September: $173.63. If he sold it as scrap metal on Feb. 10, that day’s date, he would get $795, he calculated. “That’s why I can’t sell the jewelry,” he said. In this market. jewelry “is worth more money to me to put it into the scrap business,” said Harlan, who has more than 50 years of experience buying and selling jewelry and coins. Scrap time Mannino’s refinery falls somewhere in the middle of the precious metals chain: an individual might sell to a pawn or jewelry business, which might bring it to this refinery, which sends its metal bars to a larger refinery out of town. His business, on Mission Gorge Road, blends in with the others in the strip mall. No giant, flashing neon signs announcing the precious metals securely housed inside. Inside, a brightly lit buying office shows the spot prices of precious metals. On a recent afternoon, the spot price for 24-carat gold was $5,026 an ounce. His refinery has minimum purchase weights of 50 ounces for net silver and half an ounce for net gold. Because of the minimum, he tends to deal with businesses — antique dealers, pawn shops, jewelry stores — though some clients are individuals. That might be a wakeup call for people who sell to antique or pawn shops, thinking their beloved ring or bracelet will find a happy new home in someone else’s jewelry box. “We melt it down. It gets destroyed,” Mannino said. In a back room at the refinery, bags of coins and antique silver sets were waiting to be turned into bars. The smelter is in a room roughly the size of a walk-in closet. To make a gold bar, Morelock placed gold rings, coins, chains and other items into an induction melting furnace. Several minutes later, he pulled out the smelting container, perhaps the size of a paint can, and poured the molten liquid into a mold. The room was warm, and he wore a heavy apron and a mask. When each gold bar was cool enough to touch, Morelock weighed it, tested the gold content, and did the math. In all, the three bars were worth around $369,000. Those were about to be shipped to the next stop, a much larger refinery, which would separate the different metals and turn the pure gold into bars. A bag of silver coins brought in by customers selling precious metal for cash at Gold Refinery of San Diego. (K.C. Alfred / The San Diego Union-Tribune) Dan Harlan is the owner of Presidio Jewelry Pawn in Point Loma. (K.C. Alfred / The San Diego Union-Tribune) A traffic jam So much gold and silver has been sent to refineries in recent months that they can’t melt it down fast enough. “The main issue with prices being so high is (that) all the large refiners are actually very backed up,” Pourat said. He used to see turnaround times of three to five days. In early February, he was quoted two weeks, while some peers were quoted a month, he said. “It’s kind of created this large bottleneck in slowing it down, trickling down for the consumers and us, where it’s a little bit harder to sell,” Pourat said. He called it a double edge, where customers are coming in with more gold than normal, which shops are eager to resell to refiners. But the shops must be prepared to wait. Jonathan Cavuoto, the owner of First National Bullion, with locations in San Diego County and Arizona, agreed that the high price of gold and resulting high volume have made it difficult for refineries to keep up. “This is unlike anything we’ve seen. In 2011, we did see kind of a mania for metals. This has been more sustained,” Cavuoto said. “This has been months, now, of where we’ve had lines and we’ve had even, you know, crazy amount of volume.” He also said some dealers are facing cash flow issues due to refineries getting backed up. “We’re buying from a lot of dealers just so they can free up cash flow,” he added. Mannino said some larger refineries paused shipments or are accepting smaller amounts and taking longer to process. Because of the slowdown and the increase in sales of gold and silver, Mannino has doubled the number of refining days per month, along with the volume of each session, he said. He is “receiving a lot of new onboarding requests from pawn shops, coin dealers, and jewelers. It doesn’t take much extra time for us to process more volume,” he wrote in a text message. “Once the smelter gets up to temperature, we can feed in as much gold as we want.” Josh Morelock of Gold Refinery of San Diego puts gold coins and jewelry into an induction furnace. (K.C. Alfred / The San Diego Union-Tribune) Gold coins and jewelry will be put into a furnace and melted into bars. (K.C. Alfred / The San Diego Union-Tribune) Melted gold coins and jewelry are poured into molds to form gold bars at Gold Refinery of San Diego. (K.C. Alfred / The San Diego Union-Tribune) Josh Morelock of Gold Refinery of San Diego holds a gold bar made from coins and jewelry. (K.C. Alfred / The San Diego Union-Tribune) Sell, hold or buy? Morelock said that along with an increase in sellers, there has also been an increase in buyers. “A lot of people do have the mindset that it’s going to keep going up,” he said. Mannino, even at today’s high prices, is buying and reselling gold, and he believes the value will keep growing. “We don’t want to buy at the peak of the bubble, and the bubble breaks and then all of a sudden, we’re left holding the bag. But, you know, I’m the owner. And I can tell you: I’m a true believer. I’m in the gold business because I love gold,” he said. “And I want to own gold. I like buying gold. I like silver. I am willing to take the risk and hope for the best.” After 20 years in business, he has learned to weather the ups and downs. “If you have a bad year, it’ll be OK because the next year will be a good one,” Mannino said. Cavuoto, with First National Bullion, said his business is a two-way market. “For everybody that wants to sell, we’ve got two people online that want to buy,” he said. He expects the price of gold to keep rising as a result of central banks buying gold, growing U.S. debt and a weakening dollar, he said. The higher prices of gold and silver, he said, are due to structural changes and not temporary trends. “I think that it’s a complete change in how we look at gold and silver,” he said. Even accounting for volatility, Cavuoto said he expects gold and silver prices to rise. Harlan said personal circumstances, not just markets, should determine how people proceed. “You have to know your risk tolerance, your own needs.” “In my opinion, it is,” he added, when asked if he thought it was a good moment to sell gold. He said, however, that he is holding on to the gold he owns as a part of his own investment portfolio. He jokingly said he asked his wife if he could sell the gold chain draped around his neck that holds his wedding ring. “She said ‘no’ to that,” he said. “But gold jewelry that you’re not wearing, or it’s gotten so valuable that you don’t want to wear it … what are you waiting on?” If money is needed for something key, like repairing a car, he added, “What’s more special: keeping your car or having a piece of jewelry?” He spoke of a lucky break, as he committed to selling some of the gold his shop had purchased. He planned to sell half. “A little voice said, ‘Sell it all.’ The day after that, it went down $500 bucks,” he said. “In terms of the price, we have no way to know whether it’s at an all-time high and the bubble is about to pop. We don’t know,” Harlan said. Pointers for selling and buying in today’s pricey metals market 1. Shop around. “Get several quotes before you decide,” Mannino said. 2. Sell to a refinery. “If you are able to meet the minimum and go to a refinery, you’re skipping the middleman and you’re going to absolutely get the most money,” Mannino said. 3. Buy from pawn shops over new jewelry stores. “We were jewelers before this,” Pourat said. “Because everything is secondhand, we’re not charging jewelry store retail prices. So we go through and refurbish everything that is good enough of a product to be refurbished, and then we tighten all the stones. It’s like you’re getting a new item, but you’re not paying that full, new price. … It’s almost like a wholesale level, essentially.” 4. Look for the county’s seal on the scale being used to weigh your items. San Diego County calibrates scales used for weighing precious metals. A seal shows that the scale is accurate, Harlan said. “You can cheat people with a scale,” Harlan cautioned. 5. When selling bars and coins, expect pricing transparency. “Any company that doesn’t list their prices, buy or sell, online, I would steer away from. It should be clearly marked,” Cavuoto said. There should be a small variation for common coins like silver eagles. For collectible coins, pricing will vary more and depend on in-person inspection, he added. ...read more read less