What is acceptable dealer premium on new and buybacks of PM

Discussion in 'Gold' started by Ipv6Ready, Jul 25, 2019.

  1. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    Hi Members,

    As collectors and or investors what is acceptable premium you are willing pay when buying or selling.

    Im amazed how brick and mortar dealers stay a float?

    Gold example
    1. miner charges spot $2,040
    2. refiner adds a fee
    3. mint adds fee
    4. wholesalers adds a fee
    5. dealers adds a fee
    6. retail buyer pays $2,078


    Below are some of the lower cost items in australian online dealers with shop/offices
    Silver spot $23.68 listed for $27.68 = 16% -> everyone in the supply chain in total divided up $4
    Gold spot $2,040 listed for $2,778 = 1.8% -> everyone in the supply chain in total divided up $38

    Of course I am looking at single low end items but bearing in mind in the gold example dealer margin would be a fraction of $38 as all the supoply chain have to make a profit.

    EDIT: for clarification, Im not looking for cheap dealer premium. Im just curious as to how a dealer stay afloat, with margin of 2% on a main item?
     
    Last edited: Jul 25, 2019
  2. Oddjob

    Oddjob Well-Known Member Silver Stacker

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  3. alor

    alor Well-Known Member Silver Stacker

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    check around, then make comparisons of a few prices
    check your own paying price, so when there is item ready...then execute order 66
    it is useless to have low price but sold out
    it does not make sense to over pay, when there are ready supply of 100
    spread for gold is lowest, followed by silver

    it is more like a scale market, when just a few coins can be advertising items
    items replacement costs
     
  4. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    If I was a miner, I would NOT sell gold below spot to refiner?

    my question is how do dealers survive
     
  5. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

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    A lot of businesses survive by cashflow. Cash in > Cash out means you can still survive.

    From my small talk with a local LCS (the one which I bought my kilo goat from for $730 early this year), it appears that hedging comes with a cost, so it doesn't cover the risk entirely, so a rising gold and silver spot market helps the dealer a lot and may even provide capital gains. Perhaps the dealers amongst us here can share more info?
     
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  6. Pendragon

    Pendragon Active Member

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    Miners sell below spot
     
    dozerz and dollars like this.
  7. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    I was told they do not sell under spot. But they do pay a fee for to refiners for refining from dore to 99.9
     
  8. dozerz

    dozerz Well-Known Member Silver Stacker

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    this is true, i know from logistic companies that mints take delivery of refined at 10% under.
     
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  9. Aurora et luna

    Aurora et luna Well-Known Member Silver Stacker

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    One of my mates who used to be a part owner in a large gold buying business once bought a batch of dore for below spot!
    When he got them refined, they found a steel bolt inside one of the bars.
     
  10. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    Even if it is ten percent under spot or call it a fee for refining dore the spread is still very thin isn’t?

    I actually would have thought the fee to refine 20kg dore to 99.9 to be more than 10%
     
  11. Nino

    Nino New Member

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    High volume combined with the spread between the sell rate (above spot) and the buyback rate (below spot) is how dealers 'stay afloat'. Think about it, even with spreads as low as 2% on a 1 ounce gold bar valued at AUD$2000, that equates to $40 profit when a dealer buys the bar and another $40 profit when they sell it, if prices remain stable. Now this is where volume comes in, if you have just 10 customers buying and 10 customers selling said 1 ounce bar a day then your total profit is $800. Not a bad day's work i reckon.
     
  12. Stoic Phoenix

    Stoic Phoenix Well-Known Member Silver Stacker

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    ^It doesn't equate to $40 profit each time..you haven't factored in any associated costs to a business such as wages, rent, electricity, insurance, advertising, equipment etc, etc etc.
     
    Last edited: Jul 26, 2019
  13. Pendragon

    Pendragon Active Member

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    The margins are thin but the liquidity is very high compared to other commodities and the storage and transport costs are much lower than other commodities as a percentage of the value of the commodity.
    Say compared to wheat or oil?
     
  14. Nino

    Nino New Member

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    Agreed, one must factor in overheads.
     
  15. JohnnyBravo300

    JohnnyBravo300 Well-Known Member

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    They say afloat by moving their inventory as fast as they can. Same as any profitable lcs.
     
  16. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    Once you factor in a retailer isn’t buy8ng spot for any new items, it’s a tough business!
     

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