silver premiums

Discussion in 'Silver' started by INV, May 21, 2021.

  1. INV

    INV New Member

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    Hi, sorry for possibly noob Question, am new to the precious metal world.

    Why is the premium on Silver so large?

    example, 5kg Silver bar from ABC is advertised @ $6070, spot price is about $5750, 5%

    Compare with gold

    50g minted bar from Perth mint @ $3990, spot price is about $3900 so less than 2% markup
     
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  2. Tin Can

    Tin Can Active Member

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    Gold tends to have a lower % premium when compared with silver.
     
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  3. INV

    INV New Member

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    ah ok, so historically this is just how it is? i saw some of the lower weighted silver coins have 10%+ premiums, these higher premiums have always been like this or something new?

    How flexible are retail dealers on their advertised rates?
     
  4. IfUdonotholditUdonotownit

    IfUdonotholditUdonotownit Active Member

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    They are flexible if you are buying in volume. But if you are just a tiddler purchasing crumbs from them, there's no reason why they should be flexible - if you don't buy it, there's 100 others who will. Most dealers already state this re. flexible pricing per volume. The premium is of course a higher percentage on the smaller coins (e.g. 1/20, 1/10, 1/4) because at the end of the day, your fabrication (i.e. making the coin) cost is stable. Its best (cost-wise) to accumulate gold in ounces, unless you are giving them as gifts - in which case the smaller coins will suffice.

    PS: And with the ongoing silver manufacturing crunch, that helps to explain your current silver premiums. Premiums change with the times and circumstances.
     
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  5. INV

    INV New Member

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    thanks for your answers, cheers.
     
  6. Jason1

    Jason1 Well-Known Member

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    thank a reddit group called wall street silver for the premiums, over the last few month they have been group buying silver from dealers and buying them out of stock, its driven premiums up, its a friggin joke
     
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  7. JohnnyBravo300

    JohnnyBravo300 Well-Known Member Silver Stacker

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    The premiums are for physical metal, spot is for paper.
    Two totally unrelated things.
     
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  8. Jason1

    Jason1 Well-Known Member

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    premiums are for "retail" physical silver products.
    you buy silver at retail which is why you see a separation, doesn't work that way for a silver miner selling their physical silver dore to a refiner, they arent selling at a premium.
    Stackers always ignore the fact they are retail buyers, the end user.
    every aspect of the silver market uses spot as its basis, so it is related, Like it or not.

    when you see people on reddit buying out dealers of a retail product with no care in the world as to the price of that premium is, dealers use it as an excuse to jack prices (premiums) to make more money because they can and people happily are paying it.
     
    Last edited: May 22, 2021
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  9. alor

    alor Well-Known Member Silver Stacker

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    P450 seems similar in other currencies as well
    [​IMG]
     
  10. JohnnyBravo300

    JohnnyBravo300 Well-Known Member Silver Stacker

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    Yep it's worth whatever someone will pay for it premiums and all. I dont think its dealer greed as market forces and shortages.
    With premiums varying so wildly I'd say they arent related except in name anymore.
    Physical still needs to find it's TRUE market value and will eventually no matter what spot does.
    Physical price will probably keep diverging further and further and we could see a total disconnect.
     
  11. Stackem High

    Stackem High Member

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    Looks like a few people in the silver circles are starting to show their hands. Ive been watching this market for around 15 years. Some amazing interviews in this space at the moment. Suggest digesting as much info as you can then making a decision on whether higher premiums are worth paying. All the best.
     
  12. alor

    alor Well-Known Member Silver Stacker

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    must be spot is rubber
     
  13. Alloy

    Alloy Active Member

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    That doesn't make sense. Retail silver is already at its true market value. There's nothing preventing it from being priced normally. There is no such thing as a "true" market value different from whatever the market value actually is. That notion is usually just gripes by people who wish the price were different, but there's nothing fundamentally true-er about their personal preferences.

    There's never going to be a divergence between spot silver price and retail silver price, or between spot and any other silver price. Total disconnect between the wholesale and retail price of a good is impossible.
     
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  14. Alloy

    Alloy Active Member

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    Premiums have been extraordinarily high for a little over a year, basically since the early days of the pandemic. I have an online premiums spreadsheet from early 2020 where you can see how things looked before, at least in the US: Google Sheets link.

    Silver always has higher premiums than gold. The primary reason appears to be the huge difference in price, basically the economies of scale. A troy ounce of silver is usually in the $20 - 30 range, while an ounce of gold is going to be around $1,700 - 2,000 in recent years. The same sorts of processes and equipment go into manufacturing or minting the retail coins, rounds, and bars for both silver and gold, so it makes sense that the gold has lower premiums. To make any money off of a $20 - 30 product, you'll typically need a few dollars worth of markup, which will be a chunky percentage like 10% or more. If for example, you want four bucks of margin on your one ounce silver products, well that's going to be a 20% markup/premium if your cost was $20, whether it was spot price or whatever. By contrast, you can make $50 easy on an ounce of gold, which given the spot price comes to a much smaller percentage.

    The premiums on retail silver seem much smaller than normal retail premiums in other sectors, like clothing or computers, such that I've asked how dealers even make money. It seems like a threadbare business model.

    Note that, as alluded to above, the premiums on gold are still much higher in absolute dollar amount, e.g. it could be $30 - 100 on an ounce, which is more than the entire price of an ounce of silver, where the premiums are normally just $1 - 5.

    The current high premiums on retail silver are presumably temporary, caused by a huge surge in demand related to the pandemic and now perhaps by Biden's extravagant attempts to bankrupt the US with unprecedented spending increases in a context of an already accrued massive debt load. Demand will eventually taper, and I think retail silver premiums might already have started to drop. I have no idea how long it will take to get back the pre-pandemic premiums – it could be another year or two, maybe longer. But even after retail premiums normalize, silver will still have larger premiums than gold. A 5% premium is actually pretty low for silver – I haven't seen less than 4% on any product in my spreadsheet, and you might be hurt by the fact that a 5 kilo bar is very niche and not normally sought (I've never seen or heard of one in the US – 100 and 1000 oz bars are the most common for >1 kilo sizes here (a kilo is about 32 troy oz)).. There were lower premiums on smaller sizes before the pandemic: 4.1% on both 1 kilo and 10 oz bars, as seen in my spreadsheet.
     
  15. JohnnyBravo300

    JohnnyBravo300 Well-Known Member Silver Stacker

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    Its priced at fair market value now higher than spot since they have diverged more.
    There is no premium, just the price for paper or physical.
    Get the paper a little cheaper of course. Cant get the metal for that price.
    A ten dollar difference in price is the divergence.
     
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  16. Polar.bear.Stacker

    Polar.bear.Stacker Well-Known Member

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    Can i get thoughts on this?

    I tried off loading some silver recently and found it wasn't very liquid without taking losses when I should have broken even.
     
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  17. JohnnyBravo300

    JohnnyBravo300 Well-Known Member Silver Stacker

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    Theres many ways to sell it, some better than others.
    How did you sell? A dealer or a private sale?
    When did you originally buy it? Maybe just hold for now if you'll lose money on it.

    It's usually looked at as a long term hold for wealth preservation.
     
  18. Aurora et luna

    Aurora et luna Well-Known Member Silver Stacker

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    I had a look at one of your sales tread on this forum. Your current pricing is about right!
    Unfortunately the description you ascribed to the coins was scant or non-existent. No mention even of it's low mintage or its condition. Also you should have taken some quality obverse and reverse pics of each coin; not grouped them altogether.
    As a hobbyist dealer buying and selling silver isn't going to make you a fortune. A gross profit margin of $1 - $3 per oz for bullion or semi-collectables is about as good as it gets on this forum.
     
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  19. Polar.bear.Stacker

    Polar.bear.Stacker Well-Known Member

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    I put it on here and on gumtree. Sold on gumtree F2F in cash. Made a slight loss, but my concern was just how illiquid it could be and the losses you would have to make if you were forced to sell fast.
    I don't have that issue with gold and crypto
     
  20. JohnnyBravo300

    JohnnyBravo300 Well-Known Member Silver Stacker

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    Selling in a hurry was probably the biggest thing against you. Especially if you havent had it long. That's a hard learned lesson there but not the end of the world.

    Make sure you dont buy metals if theres a chance you might need that cash anytime soon because it's a long term play.
     
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