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Sunday, May 28, 2023

Shine of Times

The price of gold was soaring. Santa Monica precious metals dealer Goldline International’s sales soared along with it, 362 percent in two years. The company’s commercials flooded Fox News and Glenn Beck’s talk radio show who touted gold as a hedge against the national debt and banking system.

That was four years ago.

Today, gold is down 31 percent from its all-time high in 2011. Goldline still operates a slick trading floor with charts and sales figures flashing on ceiling-mounted screens, but its staff has been cut in half. The company now sells about as much silver as it does gold. Its boss chalks up much of the company’s downsizing to a booming stock market that’s made gold a harder sell.

“Gold’s luster kind of came off,” said Goldline Chief Executive Brian Crumbaker.

Goldline’s traders sell coins and bullion to people calling in and are paid only in commissions. The company had earlier told the Business Journal it had revenue of more than $500 million in 2009, but it no longer discloses financial information or employee counts. Crumbaker wouldn’t say how many employees the company has now, but acknowledged it was about half its peak of 2011. Sales have not dropped quite that far, he said.

Goldline still advertises on television, radio and online, and still counts Beck as a spokesman. Customers tend to skew older and come from the Midwest, with the Northeast being the company’s weakest region. Its business is purchasing gold from wholesalers, mainly mints, and repackaging it in the vault beneath its office and shipping it to those callers.

“Our model’s very basic,” said Crumbaker. “We buy wholesale and we mark it up and sell it retail.”

The business itself might be straightforward, but Goldline’s had a bumpy ride over the last four years. In May 2010, then-Rep. Anthony Weiner (D-New York) alleged that Goldline overcharged customers and used misleading sales tactics. He called on the Federal Trade and Securities and Exchange commissions to investigate the company’s “shady business practices.”

No federal action ensued, but Weiner’s allegations got the attention of the Santa Monica City Attorney’s Office, which opened an investigation into the company.

Goldline chose to settle with the city in February 2012 in order to end the distractions to its executives and avoid the hassle and expense of going to trial, said Crumbaker. The company agreed to a $4.5 million civil judgment and allowed for a third party to monitor sales calls.

A year after that, the price of gold fell off a cliff. In mid-April 2013, the metal declined more than 15 percent in two days and eventually dropped nearly 30 percent over the year. Some opportunistic investors were buying on the dip, but overall sales at Goldline declined in 2013 compared with years past. Crumbaker did not disclose the extent of the slide beyond saying it wasn’t as steep as his staff cuts.

Scott Carter, who ran Goldline between 2010 and 2012 and is the current chief executive of Lear Capital, a West L.A. precious metals seller and Goldline competitor, said that Lear also struggled through the down cycle of 2013. The company sold more pieces of metal but at lower prices. Lear generates about $300 million in annual revenue and employs 90 people, including 55 commission-only traders. Like Goldline, Lear advertises through TV, radio and online and does not cold-call.

“It was a very solid year from a volume standpoint,” Carter said, “but you don’t really see it in the revenue.”

One major way L.A.’s gold sellers have adapted to the metal losing some of its shine has been by increasing their sales of silver. Silver is volatile, just like gold, but lately it’s been catching up to gold as the element of choice for precious metals investors.

“On a dollar basis, silver is getting close to what we sell in gold, where historically that wasn’t really the case,” said Crumbaker. “It’s certainly moved up in terms of its importance.”

Silver has become an even bigger part of Lear’s business. Three years ago, about 60 percent of the company sales were in gold, 35 percent were silver, and 5 percent split between platinum and palladium. Today, the split between gold and silver has been reversed.

“It kind of ebbs and flows depending on what’s happening in the market,” said Carter. “Gold is getting a lot of traction now and we’re actually seeing more interest in gold as the price has moved up over the last few weeks.”

Crumbaker is also betting on a resurgent gold market to carry his company forward. He said that even factoring in last year’s dip, the biggest change since the financial crisis has been more investments in gold as part of a balanced portfolio and fewer gold bugs looking to keep money out of the banking system.

A Century City private wealth manager, who spoke on condition of anonymity, said he used to recommend his clients keep 2 percent of their portfolio in gold but now doesn’t advise they hold any precious metals. He does, however, believe that gold has bottomed, and he invested some clients’ money in an index of gold mining stocks in the summer.

Crumbaker sees his company’s next act as selling gold to investors seeking to hold some of the metal in their portfolio.

“If you’re going to diversify,” he said, “this has got to be a part of the conversation.”

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