REX SOLOMON OF Houston Jewelry made $12 million annually buying gold, jewelry and coins during the Great Recession. He took out full page ads in the newspaper that encouraged hundreds of people to line up every day to sell their wares.
It’s still paying off.
“This is what got us through the financial crisis, through multiple hurricanes and through the pandemic,” he says. “I can’t see how an independent can be without it.”
Buying gold and other precious metals is a good source of cash flow, but Solomon has found diamonds to be the key to his OTC enterprise. At least 50 percent of inventory in his showcases comes from loose diamonds or gemstones bought from the public or made in his shop with recycled gold, often set with stones he has salvaged. Solomon sends promising diamonds to the GIA for certification and a grading report and brands them as his own; he may also send it to a cutter to make it the best diamond it can be.
“Now I have a diamond that I price competitively and can undercut online sellers and be profitable on it,” he says. “That’s where the independent can beat the chain every time because the chain cannot be nimble like that.”
To prevent security problems, Houston Jewelry’s OTC buyers ask for ID and photocopy the items being sold along with their ID immediately.
Solomon cautions that every state and city has different regulations regarding OTC buying, including how long the purchased pieces must be held before being melted. In Texas, to purchase crafted precious metals, the buyer must be registered with the commissioner of consumer credit. The city of Houston also requires a license and an FBI criminal background check every year. Every purchase transaction must be recorded within 24 hours to either the chief law enforcement of the county or the chief of police.
Another thing to realize is that crafted precious metal dealers are considered financial institutions under the Patriot Act. Jewelers can use a free service called Leads Online to capture the image of the seller and their electronic thumbprint to satisfy IRS reporting requirements. “Those kinds of records will save you tremendous stress, heartache and potential fines,” Solomon says.