Key Takeaways

• Mints primarily produce bullion at scale and rely on authorized purchasers and dealers to distribute products to the public.
• Authorized purchasers buy large quantities from mints and supply dealers, who then make bullion accessible in smaller amounts to investors.
• Buying through dealers creates a more efficient, competitive market, helping improve liquidity, pricing, and overall access for investors.

If you’ve spent any time with precious metals, you’ve likely had this question run across your mind. After all, it seems inefficient that you must go through an online dealer like JM Bullion or a shop near you in order to pick up more gold or silver.

The short answer is that it’s not the job of mints to serve as retail outlets for quantities of gold and silver bullion. Instead, they rely on a network of authorized providers to distribute bullion effectively to the public.

However, there is quite a bit more to discuss with respect to how the bullion market works and why the current business format is necessary. This page is your guide to the reasons why dealers are crucial for the bullion economy.

Do Mints Sell Gold and Silver Directly to the Public?

First and foremost, we need to clarify what we mean about mints not selling directly to customers. As it happens, some of them do sell products to individuals.

The difference is that the products you can buy directly are mostly numismatics or other collectibles. So, proof coins, reverse proofs, colorized, or other limited release products are often available from outlets like the US Mint, the Perth Mint, and so on.

Though there are some exceptions, you cannot purchase bulk bullion directly from mints. Bars and rounds are mostly distributed through intermediary dealers, rather than directly from the mints themselves. Those intermediaries tend to be part of a group known as authorized purchasers.

What Are Authorized Purchasers?

An authorized purchaser, or AP, is a member of a small group of financial institutions and dealers that are permitted to buy bullion products directly from mints. APs purchase large quantities of new bullion that they may then distribute in smaller portions to the public.

To be clear, APs cannot simply be precious metals dealers. They have to be large financial institutions or major distributors in order to meet the stringent requirements for the designation.

For example, consider the requirements that the US Mint uses for its Authorized Purchaser program. Authorized Purchasers are the primary avenue by which the US Mint distributes its American Eagle and American Buffalo coin series:

• APs must establish a two-way market to buy and sell from wholesalers and financial institutions.
• APs must agree to purchase bullion from the Mint in large lots. Orders must be no less than 100 ounces of platinum or palladium, no less than 1,000 ounces of gold, or no less than 25,000 ounces of silver.
• APs must agree to purchase at the Mint’s designated rates, which are the London Bullion Market Association’s PM prices plus a premium. The premium is either a percentage of the order or a flat per-coin rate.
• APs must abide by the rigorous compliance and financial standards designated by the US Mint.

At present, there are 13 entities that bear the Authorized Provider designation from the US Mint. 12 of them are based in the United States – German-based Bayerische Landesbank is the lone AP outside of the country.

APs do not gain universal access to the four different types of bullion that the US Mint offers. Some of them are designated as providers of “gold only” or “silver only.”

One of the 13 APs is Gold.com of Segundo, California. JM Bullion is a subsidiary of Gold.com, and thus, receives its allotment of bullion products from a genuine AP of the US Mint.

How Bullion Moves From Mint to Dealer

Here’s how it works:

1. The mint produces bullion, either as coins or as bars.
2. APs purchase bullion from the mint in the large lots prescribed by the mint’s requirements.
3. The APs distribute their bullion in smaller batches to dealers.
4. Dealers sell to retail investors.

It’s simple and linear. However, it might seem like there could be even fewer steps. However, the intermediary structure is necessary for several reasons.

Why Mints Don’t Sell Directly to Investors

Scale and Logistics

The first reason for the use of authorized purchasers and dealers is that most mints produce their bullion in large quantities. In fact, they produce at an industrial scale, which is too much bullion for individual investors to purchase on their own.

Furthermore, they do not have the organization or the personnel to handle the needs of the individual investor or the investing public at large. It would be slow, unwieldy, and inefficient for them to size their massive production runs appropriately for small-time investors.

Operational Focus

It’s also a question of the core competencies of the different parts of the bullion supply chain. Mints are specialty facilities that focus their efforts on manufacturing and quality control. In part, they don’t do direct selling because that’s simply not what they are good at doing.

Dealers, on the other hand, specialize in providing a superlative customer experience. They are experts in negotiating both purchases and sales with the investing public. They are also much better than the mints when it comes to specialized and focused distribution of bullion. Mints mainly send out bullion as a bulk order, and they are not set up for returns.

Market Efficiency

Within those smaller transaction sizes, dealers also create a much higher bit of liquidity for the bullion trade. Dealers bring buyers and sellers together more easily than mints ever could.

Furthermore, dealers – especially those on the internet – are subject to price competition for their products in a way that mints are not. Thus, there can be competition between the dealers to offer consumers far better prices.

In other words, keeping everything in-house would likely cause the cost of gold and silver bullion to go up, and not in a way that means the investment is appreciating.

What Dealers Actually Do

So, now that we understand what mints do, let’s clear up what dealers do. It may be mostly obvious, but it’s important to see where we sit in the supply chain. Here’s what we do:

• Offer quantities of bullion to fit a wide variety of sizes and budgets.
• Provide a selection of bullion products from more than one mint.
• Facilitate both sides of the transaction by offering items for sale and buying items back.
• Display up-to-the-minute pricing information and other details to help investors make smarter decisions.
• Take the lead on the shipping and insurance logistics surrounding precious metals transactions.

In other words, dealers ultimately make it possible to access bullion on a daily basis. Thus, a bullion investment is a very liquid investment because of the space that dealers occupy in the market.

To be clear, we’re not advertising or tooting our own horns here. We’re just clarifying that every step in the process of bringing bullion to the market is necessary and important.

Are You Paying More by Buying From a Dealer?

If you are a free market zealot, it’s likely that you perceive the presence of intermediaries as ultimately more costly than if you purchased your bullion directly from the mint or refiner. In other words, you wonder if having to buy from a dealer is causing you to pay more for your bullion. It’s a fair thing to wonder, and it deserves a fair response.

There is a kernel of truth in the notion that the fewer parties in a supply chain, the lower the costs tend to be. Some industries certainly suffer from inflated prices due to the presence of unnecessary intermediaries in the process.

However, the reality of the bullion market doesn’t really bear out that concept. Premiums exist for every step in the process. As we mentioned above, authorized purchasers must pay a prescribed premium themselves, and the work that takes place at each level has to be compensated to a certain degree.

In other words, nobody, especially the retail investor, pays the spot price. It is only through the competition between dealers that there is any downward pressure on the premiums.

Were you to purchase from the mint directly, it’s unlikely you would get a better deal. If anything, the mints would charge you more for the hassle of making them work outside their normal functions.

The bottom line is that buying through dealers is the most effective and efficient pathway to conduct your investing in precious metals. They are a core part of the market’s machinery, not an unnecessary additional link in the chain.