In search of a new career, precious metals dealer Sandra Ward opened Gold and Silver Exchange in a strip mall near NW 17 and Portland Avenue in November after seeing how well a friend was doing in the cash-for-gold business.
“I saw they were making pretty good money and thought I would give it try,” she said.
Ward's business is situated in a sparse storefront about the size of a walk-in closet. It is one of more than 160 licensed precious metals dealers in Oklahoma. A neon sign in the window proclaims “I buy gold.”
Ward isn't the only new cash-for-gold business setting up shop.
The number of precious metals dealers in the state has grown over the past several years because of the rising price of gold since the last recession.
The Oklahoma Department of Consumer Credit, which regulates precious metals dealers in Oklahoma, has also seen a corresponding increase in the volume of complaints it receives about such businesses. The agency has drafted new legislation to increase its regulatory oversight of the dealers.
Ward has noticed several other cash-for-gold businesses opening in her neighborhood.
“It seems like to me like they're kind of popping up everywhere — there's probably three others within half a mile,” Ward said. “To me, this is kind of like the modern version of gold mining, only you don't have to dig in the ground.”
Price surge reflects demand
After stagnating since the early 1980s, gold prices have risen steadily since 2008, hitting a high of about $1,900 an ounce in late 2011. In recent weeks, gold prices have hovered around $1,650 an ounce to $1,750 an ounce.
Because the Federal Reserve has taken actions to keep interest rates artificially low since the onset of the financial crisis in 2007, more people have looked to gold as place to invest with higher rates of return, said Justin Lewis, vice president for Oklahoma City-based commodities brokerage firm KIS Futures Inc.
A weaker U.S. dollar also means that investors can buy more U.S. gold with foreign currency, giving rise to higher international demand, he said.
“The reason why there are so many of those cash-for-gold places on every street corner is that the price of gold is basically three-and-a-half times what it was seven years ago,” Lewis said. “As gold gets higher, people will be more likely to sell that ring they've been holding onto.”
Nikki Uselton, who opened the Edmond gold and silver dealer Southwest Bullion & Coin with husband Mike Uselton about seven months ago, said business has been good for the couple because of higher prices.
“It's absolutely the higher price of gold,” Uselton said. “If you have a missing earring or a broken gold chain, it's going to cost so much more to fix it, so we get those broken pieces and make some money off of it.”
The increasing price of gold has led to rapid expansion for Oklahoma City-based precious metals dealer APMEX.
The business was started in 1999 as a storefront coin and precious metals dealer in Edmond, and has since grown to become the state's largest precious metals dealer. The business moved to the stately Federal Reserve Bank building downtown in 2010.
In 2012, the company formed a partnership with eBay to become the online auction site's exclusive gold bullion dealer. The company sells silver, gold and coins at its eBay store, earning a 3 to 5 percent commission on each sale.
APMEX CEO Michael Haynes declined a request for an interview for security reasons.
Several local precious metals dealers The Oklahoman interviewed said they purchased their gold and silver bullion inventory from APMEX.
State agency regulates dealers
The higher number of precious metals dealers in the state has led to a growing need for more regulatory oversight of the industry, said Roy John Martin, general counsel for the state Consumer Credit Department.
The department received 11 written complaints regarding precious metals dealers in 2012, compared to five written complaints in 2011. Those numbers don't include complaints via phone that the agency fields.
The agency began saving data on precious metals dealers only a year ago, so it doesn't tell the full story of how much the business has grown in the state.
Martin estimates there were 30 to 40 licensed precious metals dealers in the state five years ago. There now are 162 precious metals dealers licensed with the state, down slightly from 183 precious metals dealers a year ago.
“I think there were a few that just didn't do well this past year and have just chosen to let their license go,” said Lindsie Lundy, administrative programs officer for the agency.
The department has hired eight examiners to help investigate complaints of unlicensed activity and violations of record keeping and storage requirements for precious metals dealers.
Licensed precious metals dealers are required to hold on to all items they take in for at least 10 days. The department also has drafted legislation to modernize state laws that regulate gold buyers. The Legislature is expected to take up the issue when it reconvenes in February.
State law requires the precious metals dealers to pay licensing and inspection fees to the state and also carry a $10,000 surety bond for each location they open.
Martin said precious metals dealers also must be fingerprinted and undergo state background checks. Applicants can't get a license to become a precious metals dealer if they have been convicted of a felony or crime involving fraud, theft or possession of stolen property within five years.
Current law outdated
Despite these regulations, most of the law regulating precious metal and gem dealers in Oklahoma was drafted in 1981 and is outdated, Martin said.
While the Consumer Credit Department checks for compliance issues when precious metals dealers apply for annual licenses, the agency has no authority to inspect the businesses and the precious metals and gems they purchase from the public. Current state law doesn't even allow for precious metals buyers to store their purchase records electronically. The statute requires dealers to record all of their transactions with ink on paper in a bound book.
Senate Bill 107, sponsored by State Sen. Roger Ballenger, D-Okmulgee, would give the agency the ability to inspect precious metals and gems that dealers in the state purchase.
The bill also would require dealers to display their state license numbers on advertising and give the agency the ability to assess civil penalties of up to $5,000 against precious metal dealers who violate the laws.
To me, this is kind of like the modern version of gold mining, only you don't have to dig in the ground.”
Gold and Silver Exchange