Buying physical bullion is only one side of the market. A functioning physical-metals desk must also be able to receive metal back, identify what is being offered and establish the price at which it is prepared to repurchase it.
This process is generally known as buy-back. Buy-back is important because physical precious metals are real products rather than abstract balances. Before a dealer accepts metal into inventory, it needs to understand exactly what is being returned.
A repurchase begins with the product
The first question is not simply, “What is gold worth today?”
The dealer needs to know what the client is selling.
Relevant information can include:
- metal type;
- bar or coin;
- weight;
- fineness;
- manufacturer or product type;
- serial number where applicable;
- condition;
- whether the product originated from the same desk.
A standardized 1 kg gold bar already known to the dealer creates a different verification process from unidentified scrap or a third-party bar with no existing transaction history.
Buy-back uses the bid side
As explained earlier in Alloy Academy, a physical desk can provide a two-way price.
The offer is the price at which the desk sells.
The bid is the price at which it is prepared to buy.
When a client returns bullion for repurchase, the relevant side of the market is therefore the bid.
The difference between the dealer's buying and selling prices is the spread.
A buy-back price should not automatically be assumed to equal spot, the original purchase price or the dealer's current selling price.
Why known products can be simpler
Metal originally supplied by the same desk may already have a documented history.
The original records may identify the product, specification and serial number. If the bar has remained within the same controlled custody system, the chain of identification may be particularly clear.
This can make the repurchase process operationally simpler. Alloy Capital Commodities states that it repurchases products it sells at a published spread. The precise commercial price still depends on the applicable market and transaction terms.
Third-party metal requires additional work
A dealer can also be presented with metal obtained elsewhere.
In that situation, the product may need additional inspection or testing before the desk is willing to settle against it. The desk must establish whether the item is what it claims to be.
That can involve:
identification → weighing → verification → assay where required → pricing
The objective is not simply to find a number stamped on the item. It is to establish reliable metal content.
Condition and form can matter
Precious-metal value ultimately relates strongly to metal content, but physical form can still affect the route to resale.
A standardized recognized bullion product can potentially move back into normal dealer inventory. Damaged products, unusual items or scrap may need to be treated differently.
The dealer may need to refine, remanufacture or otherwise process material before it can become a standardized saleable product again. Those differences can influence the economics of the transaction.
Buy-back closes the physical cycle
A simple physical-metal lifecycle can therefore be represented as:
Dealer inventory → Client purchase → Allocation or delivery → Client holding → Repurchase → Dealer inventory
Buy-back is what allows metal to move in the opposite direction from the original purchase.
For the holder, the central lesson is that selling physical bullion requires more than knowing today's metal price. The desk must know what the product is, how much qualifying metal it contains and what price it is prepared to pay for that specific asset.
