Gold Dealer Robert Fazio explains the attractions and risks [INVESTMENT]
Robert Fazio is the President of Goldline International, Inc., located in Santa Monica. His company offers precious metals investors and collectors a full range of products, including gold, silver and platinum coins and bars, numismatic and collectible coins, and rare currency. Fazio lives with his wife Chris and their children Robert Jr. and Rachel in Palos Verdes Estates.
Chaussee: How did you get started in the precious metals business?
Fazio: I began working in the business in 1986, in the New York financial district. The company I worked for was very small, but precious metals made sense to me as assets that would be around for a long time and had a value 2,000 years ago and would continue to maintain a value.
Chaussee: Were you always interested in precious metals?
Fazio: Growing up in New York I was always interested in the financial markets. Right out of college I started knocking on doors looking for a job in the Wall Street area. This year is my 25th year working in the precious metals field.
Chaussee: When did you come out to California?
Fazio: In March, 1991, my company was acquired by a California company and relocated to 100 Wilshire Blvd. When we arrived in California we only had three employees. Soon afterward we started hiring employees quite rapidly. Eventually we had more employees than the floor could fit so we moved from 100 Wilshire to our present location in Santa Monica. Today, Goldline has more than 300 employees and was recently ranked by Inc. magazine as the fastest growing private company among companies with more than $500 million in revenue.
Goldline traces its roots back 51 years. We’ve been operating under the Goldline name since 1991, but the corporate roots go back much further. We are one of the leaders in gold and precious metals with sales and revenues of over $750 million.
Chaussee: What exactly does Goldline offer to the investing public?
Fazio: We are a retail precious metals company. We help diversify portfolios in both gold and silver and we offer precious metals in coins and bar form. We offer bullion products, semi-numismatic coins and collector coins. The most popular products are coins.
Chaussee: When did gold start to gain in popularity?
Fazio: I like to call the 1990s the quiet time in the gold market. Stocks, especially Internet stocks were very bullish at that time. The change in gold market sentiment really occurred in 2001, after the Internet bubble popped. The low at that time was about $250 an ounce. In 1980 it had hit its high of about $800 and inflation adjusted today that would equate to approximately $2,400 an ounce. So, we are still below the previous inflation-adjusted high set in 1980.
Chaussee: How has silver done relative to gold?
Fazio: Silver hit a high of around $50 an ounce in the 1980s and again this year. The last three or four years, silver has really been a tremendous performer. Silver really caught up to gold and probably outperformed it. It has gone from approx. $15 to $40. However, it is also more volatile than gold.
Chaussee: Was it tough to make a living during the “quiet” time of the 1990s?
Fazio: I wouldn’t go that far. In the precious metals market there has always been a need and desire to own precious metals as diversification to one’s portfolio. It clearly wasn’t as popular in that decade as it is now, but there have always been events that have occurred that have given investors the interest in diversifying even a small portion of their money in this asset class. The popularity of the gold market, especially over the past few years, has really increased our business. But again, it has always had a place in a portfolio and that demand has been fairly stable.
Chaussee: Has the recent popularity of precious metals changed Goldline?
Fazio: In recent years, we have increased our marketing and education of the public in precious metals. And, from a staffing standpoint, we have grown from probably 150 employees to approximately 300.
Chaussee: You mentioned that you do not operate as advisors, rather as account executives, but your firm does help to educate the public.
Fazio: Yes, we try to stick to our specialty, which is physical delivery of gold and silver. We will educate potential buyers as to the features and benefits of the various coins and bars we sell. We suggest investors or collectors consider diversifying by allocating between 1 percent and 20 percent of their investable assets in precious metals. How people choose to allocate their overall portfolio is solely their choice. On goldline.com we offer everything from educational videos to a great section on frequently asked questions. It is important to become educated because most people are still new to this market. And, our website mygoldlineexperience.com will give you a narrative from some of our clients that might be helpful.
Chaussee: Do you offer investors account statements or portfolio statements of their holdings?
Fazio: Our clients buy for the long term. However, clients can request portfolio statements that provide the current bid prices of their holdings.
Chaussee: If a client wants to liquidate will they usually come back to Goldline to do so?
Fazio: Yes. Although the law states that we cannot guarantee a buy-back of our products, we have maintained buy and sell markets on all the products we sell for 50 years.
Chaussee: If a buyer purchased a coin or bar today and wanted to sell it back to you rather quickly, for whatever reasons, is he or she going to take a big hit on commissions or the spread between the bid and ask price?
Fazio: Again, our products are for long-term holders of precious metals. We recommend that investors look to buy and hold precious metals and rare coins for at least 3 to 5 years and preferably 5 to 10 years. We’d rather you not buy from us if you do not intend to hold for this length of time. In terms of the fees involved, that depends on the product. Bullion is the most liquid and then semi-numismatics and then numismatic coins. Bullion comes in bar or coin form and the gold American Eagle is the most popular bullion coin in the U.S. today.
As to the liquidation after purchase, most precious metals dealers are going to charge a spread depending on the product. As a general rule, you will pay less on bullion products because of the liquidity. When you purchase from Goldline you are paying for a round-trip transaction. But, if you purchase from one dealer and go to another to sell, they are likely going to pay less for those precious metals or rare coins as part of their own profit model. Additionally, Goldline is familiar with the quality of the products it sells. Another company potentially may charge a considerable spread when acquiring precious metals acquired elsewhere.
As an example, the range between the selling price and the buy-back price (ask and bid), on bullion products could be anywhere from 5 percent to 20 percent. On other products, you will see spreads between 30 percent and 35 percent.
Chaussee: So, given the large spread on some of the products, the investor or collector has to believe that his or her investment is going to rise by at least 20 percent in some cases, even to break even. Is that correct?
Fazio: People acquire precious metals for different reasons including the desire to own a tangible asset with intrinsic value. However, to see a profit, your acquisitions must appreciate enough to overcome the spread. Again, we don’t recommend a short-term purchase. While it’s impossible to know how precious metals will perform in the future, currently this year gold has risen approximately 35 percent.
Chaussee: If an investor thought that the price of gold was going to continue to appreciate and he was looking at it as a speculation, not necessarily a collectible, what would you recommend as a purchase? I assume it would be a product with a low spread built in that would potentially track the price of gold fairly closely.
Fazio: If cost is the sole concern, then many people would consider physical bullion and take delivery of their metals. It has the lower spread and would track the price of gold closely. The American gold eagle one-ounce coins have a spread of roughly 5 percent.
Chaussee: And what are the most popular coins being purchased lately and where are they from?
Fazio: The most popular gold bullion coin is the American Eagle. The older European coins are very popular with our clients as well. While these coins are more expensive than bullion coins, their premium over the spot price is not as great as the U.S. coins of comparable age and size. The popular coins are mostly minted by major countries. Many are minted by the U.S. government along with Canada, Switzerland, and France.
Chaussee: Given the popularity of precious metals right now, do you think we could be in a bubble?
Fazio: As a company, we leave it to reliable third-party analysts and experts to offer prognostications about the price of gold and silver. Still, it is obviously a popular topic of conversation in our field. Nobody knows for sure if these markets are in a bubble or not. What is interesting is that over the past 10 years, gold has appreciated every year. And, pretty much every year some “expert” has said we are in a bubble. What I would add to the argument is that the ownership percentage of gold, even today, is so small. You hear numbers like less than 3 percent of the population owns gold. This differs greatly from, say, the Internet bubble, when almost everyone owned some technology or Internet stocks. We don’t have anywhere near the same enthusiasm in precious metals so it doesn’t appear that we are near those bubble proportions.
You should also consider the global economy. If you believe the things that have influenced the price of gold moving higher — weak economies, stock-market volatility, falling bond yields, debt problems, declining U.S. dollar etc. – are going to persist, then precious metals prices may well continue to move a lot higher. If you think we are closer to solving these problems and these trends are going to reverse, then perhaps precious metals will decline.
I am not smart enough to have these answers and that’s why I think you should consider this for a part of your overall portfolio and look to the precious metals market as a way to further diversify.
Chaussee: Do you have clients who want to come in and see the product before they make a substantial purchase?
Fazio: Absolutely. We have a large facility here that we invested a lot of money in and clients come in all the time to see the product before making an investment. We do business on a national basis, and deliver directly to your home. We have had people travel here from across the country to visit before making a substantial purchase. However, working for a company that has been in business for over 50 years, we have developed a strong brand name and a reputation for client service.
Chaussee: What about new offerings? Are there new coins or other products that come out on a yearly basis?
Fazio: That’s a great question. There are some new products that come on the market, but it is not as frequent as you would think. Recently the U.S. Mint produced the America the Beautiful silver coin. This is a new product that the American public is very excited about. These are five-ounce silver coins.
Chaussee: Where do your clients store their precious metals?
Fazio: Most of our clients take delivery of their precious metals. Many clients choose to store precious metals in a safety deposit box. As a company we also offer an independent, third-party storage facility for clients, but the majority of our clients do take delivery. I don’t keep precious metals at my home and I recommend all owners safeguard their precious metals. And, they should be sure to document where they have stored their collection and the inventory.
Chaussee: What does the future hold for you and for Goldline?
Fazio: Hopefully more of the same. JP Morgan is calling for $2,500 gold, Citigroup between $2,500 and $5,000, Standard Charter is saying $5,000 gold. The future could prove to be unpredictable and volatile and that could be very positive for precious metals. Having said that, you fear what the overall economic situation might look like if we get to very high levels in the price of gold and silver.