Premium over spot

Discussion in 'Silver' started by pastmaster2011, Jan 26, 2019.

  1. pastmaster2011

    pastmaster2011 New Member

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    Why when the spot price drops the premium does not ?
     
  2. Eureka Moments

    Eureka Moments Well-Known Member Silver Stacker

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    Fixed operating costs. When spot price drops, wages, rent and power still cost the same. Same applies to petrol retailing.
     
  3. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    Unless you are Elon Musk, who will deliver $35,000 model 3 for the last two years, next year.

    Some powerful manic Elon has since Tesla is only making 4% profit on $55,000 model 3
     
  4. DavidRich

    DavidRich Member

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    Premium drops only when the dealer has special discounts and lowers it
     
  5. SlyGuy

    SlyGuy Active Member

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    Secondary market premium usually follows spot and supply/demand. Premium will usually be a rough percentage... that goes up or down with spot. (ie, silver maples or kangaroos might have a 7-8% premium usually... but in a real cold silver market, you might find them at 5% premium or less... and in a real hot market, they might get 10% or more).

    For new stuff, as was mentioned, dealers just charge as much as they reasonably can. Shop around for sales. Ask for volume discounts.
     
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  6. alor

    alor Well-Known Member Silver Stacker

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    it was long ago when a lot of people recommended to buy the rounds, it did not turned out well for me for following the wrong advise on the internet
    I should have just bought those Pandas around 25 when ASE was around 18-19, now those ASE are still premium around the same, but those Pandas really never looked back
    that's all in the past now

    when making comparisons, there must be a few points to compare on similar standings etc, total mintage
    depending your local, some place have tax on metals
    market conditions
    ready supply and how attractive to the eyes of the beholders etc
     
  7. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

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    If I’m not wrong, those 2011 pandas only sell for $10 profit a piece if you sell one by one. This is too tedious and not worth the effort.

    We can get a 2 oz qb with only 2% mintage of a 1 oz Panda at a much lower premium of 18% for a qb vs nearly 50% for a 2019 panda.
     
    Last edited: Jan 29, 2019
  8. Jim4silver

    Jim4silver Well-Known Member

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    Silver panda coins in the US have lost so much value, I regret buying the ones I have. The current demand for them is so low that the "greysheet" dealer bid is around $16 per coin in original capsule, going back quite a few years. Some of the older ones still have a premium, but that premium has fallen much further than the price of silver. I was buying some older pandas for around $23-$24 US back when silver was $18 or so (2008-2012 year coins) because I could sell them at the coin shows where I have a table and make a few bucks. Back then the dealers would buy them back for $3 or so over melt (not that I sold any to dealers back then). Today they pay less than for ASE coins. For example I have some 2002 silver pandas I got "cheap" that I can't sell today because I would only break even at best. The last show I did I sold zero pandas and I was selling them lower than local retail. Sold a good deal of my Australian stuff but no pandas.

    If silver ever picks up again the premiums will come back I believe, at least hope.
     
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  9. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    No serious investor Deals in premium.

    For sure hobbyist can do it, but successful premium gamblers work x000 of hours, study the market continuously.

    However If getting $50 premium on 100 coins mean satisfaction, than it is a hobby and people have done well from it but no hobbyist I know average $20 premium on x000s of coins.

    One must remember a profit for small or larger hobbyists is very different compared to profit for a small or large investor and to make distinction even harder a large hobbyist but actually have more PM than a small investor.

    Note a dealer outlook is different to a hobbyist or the investor.
     
    Last edited: Jan 29, 2019
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  10. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

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    To some extent I agree but it also depends on where you are located. You could buy pm bars at almost spot easily in Melbourne or Sydney f2f or plus postage, but here in Singapore, there is virtually no secondary market, so I have to buy from dealers. Dealers charge like 6-9% premium on ‘low premium’ bars. On the other hand, qb and lunars could be bought for about 17-18% premium and if there’s a sale, as low as 10% premium.

    When silver prices plunged in July, I lost much more percentage wise on the low premium bars I bought because in a falling market, they are worth only spot. On the other hand, the qb and lunars I bought retained their premium even when silver spot plunged.
     
    Last edited: Jan 30, 2019
  11. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

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    How about the 150g Pandas with 60k mintage? This year's mother and baby Panda is pretty cute. I haven't got any Panda, I don't think it can appreciate much given that the Chinese mint will flood the market in the future years to come.

     
    Last edited: Jan 30, 2019
  12. JOHNLGALT

    JOHNLGALT Well-Known Member

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    Just unlucky, I guess. LOLOL. SARC. OFF.

    Or, because 'HE WHO HOLDS THE GOLD & SILVER, MAKE THE RULES'.
    _JOHNLGALT
     
    Last edited: Jan 30, 2019
  13. Jim4silver

    Jim4silver Well-Known Member

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    I was referring to the standard issue 1 oz silver coins. For 2012 to 2018 the bid price is $16 in original mint packaging per my greysheet (my last copy is the October 2018 greysheet, I only buy 4 times a year since they went monthly at $35 bucks a pop). Earlier years and lower mintage issues still go for more than that.
     
  14. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    Above when I state x000s of hours to keep up wit premium up and and downs, the hobbyist isn’t likely to consider that as work.

    The “work” is more than likely to enjoyable to the hobbyist where as it would be a chore to others.
     
  15. alor

    alor Well-Known Member Silver Stacker

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    hobby to one, nightmare for others
     
  16. goldpelican

    goldpelican Administrator Staff Member

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    Hedged dealers trade in premium, not spot.

    Almost all products have fixed dollar wholesale premiums - with limited exceptions (usually some types of gold) dealers pay the same flat rate over spot to a mint or manufacturer whether spot is $20 or $40. Products have different retail premium calculations that incorporate the cost basis in some way, sometimes tweaked for market competitiveness, but if a dealer is buying an item for $2 over spot and expect to make $2 over cost (as an example), then the premiums will always be $4 over spot, regardless of whether spot is $20 or $40. That means the premiums will vary between 20% to 10% of spot depending on where the market is, but if you look at just the premiums, there's been no shift.

    Adjustments to premiums usually get made when there's big shifts in spot over time - if spot doubles, customers don't magically have twice the money to spend on metal, so they buy less units (e.g. someone might buy 250oz of Kangaroos if spot was $40, but they would have bought 500oz if spot was $20). So when spot increases, it counter intuitively means that the dealers may be making less money, as they're selling less units for the same dollar value, and that puts upwards pressure on premiums. These changes in premium are just as likely to be driven by the manufacturer as by the dealer. Private manufacturers or wholesalers in particular adjust their wholesale premiums more often than a government supplier, and dealers usually use that as a signal to review their own margins.

    The world would be a lot simpler if every wholesaler just charged a percentage over spot, and dealers did likewise, but that doesn't reflect fixed costs such as the cost of manufacturing which is totally unrelated to the intrinsic value of the metal being pressed. One might think it would cost the same amount of money to strike a 1oz silver coin as a 1oz gold coin, but usually costs are amortized over a far greater number of units with silver than gold, so the wholesale cost per unit is cheaper.
     
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  17. bron.suchecki

    bron.suchecki Well-Known Member

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    While percentage over spot is the traditional pricing method for some coins, it doesn't make sense as you say because manufacturing costs don't change in line with the gold price.

    The amortisation (I note you're spelling with Z) over more volume is a factor (and gold and silver coins are done on completely different production lines to avoid cross contamination which creates red spot on gold coins), but also there is a small giveaway (excess weight) on coins which for gold given its price cost more.
     
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  18. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

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    The most efficient method will be 100g - 1kg kilo au cast bars, but they take away all the fun of physical metals. I rather have cool shiny 1oz qb dragon and Griffins.
     
    Last edited: Feb 1, 2019
  19. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    I buy few coins I like, like the beast, lunars and few other, but I wouldn’t buy 1000 x 1 oz lunars.

    Some people have the patience to sell them in rolls or singles at meet ups or packing them for post and that is brilliant for margins but personally I just don’t have the patience.

    I don’t think I sold more them one silver item by post lol. But have bought pieces from many members here.
     
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  20. Jim4silver

    Jim4silver Well-Known Member

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    I used to be an avid (addicted) coin roll hunter, searching for silver half dollars in bank rolls. I was very successful for a couple of years till everyone started doing it. When I quit CRHing, I put all the time, addiction and energy into finding semi numis and numis modern foreign bullion (silver) for close to melt. I started renting space at coin shows and now have dealers in state and out of state that sell to me for relatively cheap from time to time. I also started going to pawn shops all over the place trying to establish relationships with the store to buy their silver wholesale, etc.

    The "we buy gold" shops are the best if you can get hooked up with them. The ones I deal with don't pay much to the sellers, and the stores just want to flip the stuff as fast as it comes in. Funny how many coin dealers look down on cool foreign bullion, some even call it "crap" when I go to buy it. I say yes it's crap, but I'll take all you have (for cheap).

    What many stackers don't realize is that many coin dealers wholesale out most of the stuff they buy over the counter. They don't have the money to buy and hold all the cool stuff hoping for a customer to come in and buy it, nor do they have the counter space. My only "enemy" in my quest are the dealers who ebay the cool stuff. Surprisingly, most of the ones I know don't mess with ebay anymore. That is good for me.

    Over the last few years I have accumulated amazing stuff for $2-$5 over melt per ounce. Mostly Aussie, British and Mexican coins but also some Euro stuff, NZ, Pobjoy Mint, etc. However, one must be mentally ready for when something happens and the good source dries up. Some of my best dealers decided to close down over the past year or two and it sucks for me because it's like the faucet is turned off all the sudden. It can be somewhat depressing. Then time to go back out and find a new source.

    If I had to buy that stuff at the retail price I wouldn't have bought any of the coins. But for roughly the price of an ASE, I've been able to obtain coins that sell sometimes for double to quadruple over melt. My plan is to dump them and buy cheap generic bullion once silver demand picks up again and the price gets to $20 or so per ounce. In my experience, once the price of silver climbs too much, the premiums start to disappear and the price gets closer to melt. At least it did that as the price was rising to $50 in 2011.

    Here are two of my best scores. One is a pattern coin (either 60 minted or 500, depending on who you believe) but contains indigenous nudity (warning). I paid a couple bucks over melt for it and the other coin. The coins in the photos are not mine but examples.

    If someone is willing to put forth the effort (here in the US) they can obtain really cool stuff cheap, but you can't just walk into a coin store off the street and expect great deals.

    https://www.numisbids.com/n.php?p=lot&sid=975&lot=1031

    https://thelondoncoincompany.com/1995-Jamaica-Bob-Marley-50-Dollar-Silver-Proof-Coin-Box-Coa

    Jim
     
    Last edited: Feb 2, 2019
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