disconnect between paper and physical

Alfie

Alfie

Active Member
I notice the "premiums" being charged on, for example a 2013 1 oz Kookaburra today are:
In no particular order
Bullion Bourse $30.59
Bullion Deals $36.83
Bullion Money $ 29.80
Gold Stackers $30.15
Bullion Mark $31.34
ABC Bullion $29.70

Therefore from my sample, the average price for 1 Oz 2013 Kookaburra is $31.40
As at 22/6/2013 the spot price for silver is $21.77 The difference is $9.63 which is a 44% increase from the spot price

Acknowledgements:
Die making cost
Manufacturing cost
wholesale cost
rent/insurance/transport cost
profit margin
Huge smack-down on silver yesterday

Assumptions
The prices obtained are live or updated prices

I am beginning to think that the sellers would rather hold than sell at these manipulated paper prices and the margins are about physical price v paper price

What does the forum think?
 
I think the disconnect between paper and physical is only widening. When fantasy meets reality you know who ultimately wins. I can see a time coming when producers themselves will set their own (much higher) price based on cold hard reality and not the fantasy land of SLV. And the world will have no choice but to accept that cheap silver, like cheap oil, is a thing of the past.
 
There's no disconnect between paper and physical as far as I am concerned.

This is just dealers not wanting to sell at a loss... I guarantee you that if spot price rose to $40/oz tomorrow, the disconnect would be VERY minimal.
 
Yet you can walk into any jeweller or antique dealer and buy "scrap" coins or medallions for spot + 10%. Maybe get it for spot + 5% if the dealer has a few random singles lying around which he wants to get rid of. And it's not uncommon to find scrap at the auction houses for below spot - after all, where do you think the dealers get it from?
 
crojo said:
I think the premiums are an absolute joke.
Click to expand...

If you think that a 44 percent markup from a raw bar of silver to a coin that has to be manufactured with all of the costs listed above, a wholesale markup and some markup for the retailer to pay rent, wages and other business costs and to make a tiny profit are an absolute joke then you must shake with anger over the cost of a cup of tea from a cafe. They make a much bigger margin that that. In fact a 44 percent increase in cost for the final retail price of a manufactured item over the raw materials cost is tiny. I doubt that anything that you buy from any business on any day has less than 5 times that markup based in raw materials cost. The raw materials cost of a car tyre is less than $6.00, but you pay at least $70.00 for the cheapest of them. Isn't that an absolute joke?
 
Call around, they're out there. Don't know any NSW dealers (yet). Higher end places are better because they buy stuff from expensive auction houses, which are more likely to have some random silver among their lots. As for auction houses, for example check out http://www.smallandwhitfield.com. Their next auction includes about a kilo of sterling cutlery, and a few sovereigns. Prices are on the high side in this one - looks like they haven't updated their "expected value" since Wednesday - the lower estimate is about at spot or even a bit higher (then you have to add in 13.75% buyers premium).
 
RetardedMonkey said:
There's no disconnect between paper and physical as far as I am concerned.

This is just dealers not wanting to sell at a loss... I guarantee you that if spot price rose to $40/oz tomorrow, the disconnect would be VERY minimal.
Click to expand...

Well doesn't this support the comment about the disconnect, if the paper market says tomorrow its worth $40, and as you suggest, the dealer's margin would be less, the dealers are in effect saying the gap between physical and paper is more realistic?
 
Although, while we're on the subject of manufacturing premiums, I know this has been posted before but I love this:

[youtube]http://www.youtube.com/watch?v=http://www.youtube.com/watch?feature=player_embedded&v=Qmo_-1G6Tq4[/youtube]

And all this for a 17% premium! I agree it's good value - but I still think when it comes to sell, it'll only be worth bullion.
 
If I was a coin or bullion deaaler, I'd promote the "thought" of disconnect between paper and physical.

What you can do is support those dealers that give you a good deal, but beaware that....the 1oz Kooks and Lunars are sold-out and of course, just like you and me, I'd expect dealers to "up-the-price" on coins that are sold-out.

If dealers can purchase 1/2, 2, 5, 10, and kilo silver bullion coins from say...Perth then there's no reason for rediculous mark-ups and all the BS we are fed about the disconnect.

Some of the larger dealers have more buying power and get a better deal, some of the smaller businesses, have less buying power but still give a very good price; so go figure. :)

Believe me, there's plenty of silver miners that made very good profits back in the 1990's and early 2,000 when prices were low and those same miners have been making bumber profits over the last few years. Having said that, high demand = an increase in price from un-hedged miners and of course from dealers.

Personally, I think there's plenty of silver in the ground but there's a bottle-kneck in the production line and it starts at the mint.

There's quite a few dealers doing it tough at the moment because people aren't selling back to them or they can't get stock from Perth.

Perth have many businesses in the palm of their hand and...if they don't ramp-up production greater than what they are doing, there's a good possibility imo of some dealers closing shop.
I just hope they don't take our cash without delivering.

Some dealers are hanging onto your cash for 5 or 6 weeks before delivery; I'm still waiting on a delivery that was ordered mid May 2013 and it won't turn-up this weekend.

Remember to shop around for your silver but also beaware that lower premiums may mean super slow delivery.

Cheers

H
 
Alfie said:
Well doesn't this support the comment about the disconnect, if the paper market says tomorrow its worth $40, and as you suggest, the dealer's margin would be less, the dealers are in effect saying the gap between physical and paper is more realistic?
Click to expand...

Not when you get do private trades for much less than the dealers are offering.
 
RetardedMonkey said:
Alfie said:
Well doesn't this support the comment about the disconnect, if the paper market says tomorrow its worth $40, and as you suggest, the dealer's margin would be less, the dealers are in effect saying the gap between physical and paper is more realistic?
Click to expand...

Not when you get do private trades for much less than the dealers are offering.
Click to expand...

ummmm......... this thread is about the difference between current Spot price and a DEALER'S sale price. The 44% difference, "premium" could be a sign of paper and physical disconnect
This has NOTHING to do with private trades fulla, your answer doesn't even answer my question to you!
 
Drutters divergence... the paper price and physical demand are heading in completely opposite directions, with physical demand skyrocketing while the paper price plunges to lows not seen in years. This is not characteristic of a market that is behaving in any normative fashion. It is a completely dysfunctional market in which there is no price discovery.
 
I think it's a joke due to the fact when silver was $49 I was buying for $50-$55 each, when silver was $30 I was buying for $33-$35, now silver is $21-$22 I'm still paying $30+

So yes it's a joke.
 
crojo said:
I think it's a joke due to the fact when silver was $49 I was buying for $50-$55 each, when silver was $30 I was buying for $33-$35, now silver is $21-$22 I'm still paying $30+

So yes it's a joke.
Click to expand...

What type of silver crojo...Kooks, Lunars, Koala's, bars and which brand.....etc???

Cheers


H
 
Crojo^^^What you posted above, I agree with 100%. However it must be remembered that when POS was at $49, it was only at that price for a few days if I remember correctly.

It went up an down very quickly in the $40 to $50 period of trading.

It seems to me that you just can't take spot plus 10% as being a set price,

Maybe spot plus $5 to $10 might be realistic for coins. Bullion may well be spot plus 10%,

Just in the last week I saw some $10 coins at $15 each and I thought that \were a good buy but alas the cookie jar is down a bit at the moment so I'll just have to bid my time and hope no one buys them all.

Regards Errol 43
 
As above. I don't think you're using a very good example using kooks which has reached its mintage limit. When you talk about disconnect between paper and physical you need to use a generic round or bar with no mintage limit. Otherwise the disconnect you're seeing is the collectors premium. For now I don't think there's a disconnect. The premiums you saw from a couple of months back was from wholesalers price gouging because of the demand which has come back down to normal.
 
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