Invoicing for precious metals and the “factor” value.

On our quote form you will find a statement such as the following:

$400 Gold @ 0.0001 Factor, 1-0 pcs $125 Min. lot charge

The value that we call a “factor” is actually the amount of metal that will be plated on each part, or each 1000 parts.

If the pricing is per 1000 pieces, then the factor value is also per 1000 pieces. If the pricing is per each part, then the factor is per each part.

The customary practice among precious metal electroplaters is to pass along the volatility of precious metals pricing to our customers. Gold, rhodium and palladium are so expensive, compared to the labor cost of plating them, that the cost of our electroplated metal can be as high as 70% to 80% of the sales price of our service. Further, considering that the price of precious metals can double, or halve, or more, over time, electroplaters would either get rich quick or go broke quick if we didn’t pass along the metals pricing volatility.

For our customers it’s both good and bad news. You share the burden as prices rise, and you also share the benefit as metals prices drop.

The following example is typical of a PPi quote form:

Note that this project is priced as individual pieces, rather than per 1000 pieces. So the Factor will also be per piece.

The reference to $400 Gold states that the Price/Each of $0.310 is based on a gold price of $400 per troy ounce.

0.0001 Factor means that 0.0001 ounces of gold are plated onto each part.

The actual price that we will charge you on the date of invoicing will be above or below $0.0310, depending on whether gold is trading above or below $400 per troy ounce on the invoice date.

For example, if on the date of invoice, gold is trading at $390 per troy ounce, then take the difference between quoted gold price ($400) and daily trading price ($390), which is $-10, and multiply that by the Factor.

(Quoted price – Daily trading price) x Factor

($400 - $390) x .0001 = ($-10) x 0.0001 = $-0.001

So in this example, on the day of invoicing, the actual price for plating the part will be $-0.001 less than the quoted price of $0.310. The invoice price will be $0.299.

As you can see, the price change is usually pretty modest, if the quoted price of the precious metal is close to typical metals trading prices. Pay close attention to the stated price of metal on any precious metal quote. If it is not clearly stated, ask for clarification. It’s entirely possible to make a purchase decision between competing quotes based on what appears to be a lower price, when in fact it’s actually a lower calculating basis for the metal cost. When the invoice finally arrives, and actual daily precious metal prices are utilized, you may find a price far different than the quoted price.