MARKET LOSS POLICY

When investing in precious metals such as gold, silver, platinum, or palladium, it's important to understand how pricing and returns are affected by the fluctuations of the global market. One key element of buying and selling bullion is the Market Loss Policy, which protects dealers and ensures fairness in transactions. Below, we explain what a market loss policy is, why it matters, and how it works.

What Is a Market Loss Policy?

A Market Loss Policy is a standard practice in the precious metals industry that protects both the buyer and the dealer from the financial risks associated with sudden price fluctuations in the bullion market. It applies when an order is locked in, typically over the phone or online, and then later canceled, returned, or not paid for.

Once a price is locked, the dealer enters into a corresponding hedge or commitment to honor that price, regardless of market changes. If the customer later backs out and the market has moved against the original price, the dealer may incur a loss. The Market Loss Policy holds the customer responsible for this difference.

Why Is It Necessary?

Precious metals prices can be volatile, changing minute by minute based on global economic indicators, geopolitical events, and supply-demand dynamics. To protect against potential financial exposure, dealers hedge or source metals at the time an order is placed and the price is confirmed. If the customer fails to complete the transaction, the dealer could suffer a real monetary loss.

The Market Loss Policy ensures accountability and discourages speculative or non-serious ordering. It also allows legitimate buyers to lock in pricing with confidence, knowing that their transaction is backed by a secure and structured process.

How the Market Loss Policy Works

Here's a breakdown of how the policy typically applies:

• Locked-in Orders: Once you confirm an order for bullion, whether buying or selling, the price is locked based on current market rates.
• Cancellations or Failures to Pay: If you cancel the order, fail to complete payment, or return bullion for any reason, the dealer will determine the market value at the time of cancellation or return.
• Market Loss Calculation: If the market has moved unfavorably (e.g., the price of gold drops after you lock in a higher purchase price), you may be charged the difference as a market loss.
• Market Gains: If the market moves in your favor, most dealers do not credit the difference to you. The policy is designed to cover losses only, not to reward speculative gains.

Example Scenario

You place a purchase order for 10 ounces of gold locked in at a spot price of $2,500/oz, totaling $25,000.

A few days later, before completing payment, you cancel the order.

The current market price at the time of cancellation has dropped to $2,450/oz.

The dealer must now liquidate or restock that gold at the lower current rate, incurring a $50 loss per ounce ($500 total loss).

Under the Market Loss Policy, you are responsible for covering that $500 difference.

Important Notes for Customers

• Always be sure before you buy: When you lock in a price, it is considered a binding legal agreement.
• Understand the risk: Committing to a live price means you assume the market risk if you decide to cancel.
• Consult before selling: The exact same policies apply to customers selling bullion to dealers. If you lock in a buy-back price and cancel, you are responsible if the market moves against that position.

A Market Loss Policy is not meant to be punitive, but protective, for both buyers and sellers. It ensures that once a transaction is agreed upon, both parties are held to the same standards of fairness and financial integrity. We encourage our customers to ask questions, seek clarification, and proceed with confidence, knowing the policy is in place to create a reliable and stable trading environment.

For questions about our Market Loss Policy or to discuss a bullion transaction, please contact our team. We are here to help.