What environment is best for dealers? Low, high or volatile prices?

[SpacePete]

I am curious about what sort of market environment is best for silver bullion dealers? My naive thinking is that it would be an environment that results in high turnover. Maybe low spot prices? Or rapidly increasing prices? And I am sure economic sentiment plays a big part.

 

[Holdfast]

S Pete, this is a very good video produced and directed by oz copper.

[youtube]http://www.youtube.com/watch?v=5OP3H4POM6w[/youtube]

 

[SpacePete]

S Pete, this is a very good video produced and directed by oz copper.

Perfect! Great explanation. Thanks, and thanks to if he happens to see this thread

 

[Pirocco]

An ideal price is a stable price.
Volatile prices make financial planning hard, which is especially for products used in monetary roles a pest.
For anyone including dealers.
Those that like volatile prices are those that after other peoples property without having to give something in return.

 

[goldpelican]

Volatility drives volume, doesn't matter if it's up or down. Stable prices mean low volumes.

 

[clear]

that's bullshit mate, volatility creates emotion and tests (rewards) good judgment.

An ideal price is a stable price.
Volatile prices make financial planning hard, which is especially for products used in monetary roles a pest.
For anyone including dealers.
Those that like volatile prices are those that after other peoples property without having to give something in return.

 

[Altima]

Dealer always win? Cos of wholesale prices?

 

[AG Hamster]

Then there is the hedged model where bullion dealers use CFD's, futures, options, etc to hedge their exposure to spot.

 

[Pirocco]

Volatility drives volume, doesn't matter if it's up or down. Stable prices mean low volumes.

1) I don't get the logic of that, or I'm missing your point.
There are trading days with huge volumes, yet, the price remains, and vice versa, trading days with low volumes, yet the price changing alot.
Volume is just the amount times property changes ownership during the measurement period. If I own a Lunar Dragon 1oz and I sell it to you, and you sell it back to me, whether or we repeat this 1000 or 100000 times today, and whether or not we change it to a billion Lunar Dragon 1oz, it won't have had any net effect on the price - todays end price will have been unaltered by our high-volume swapping.
2) Actually the same applies to volume as to volatility: who does it benefit? It's the opposite: it inflicts costs instead. Much like a baker that is visited by a customer that orders a bread, then immediately leaves, re-enters, orders again a bread, immediately leaves again, keeping the baker away from his work, and ending his day with not a single bread sold.

 

[Pirocco]

that's bullshit mate, volatility creates emotion and tests (rewards) good judgment.

An ideal price is a stable price.
Volatile prices make financial planning hard, which is especially for products used in monetary roles a pest.
For anyone including dealers.
Those that like volatile prices are those that after other peoples property without having to give something in return.

Your "emotion" is bullshit mate, price volatility just makes financial planning harder, more risky, more costly, and rewards the "judgement" of thieves.
Definition thief: somebody that wants something in return for nothing.

 

[BeHereNow]

Volatility drives volume, doesn't matter if it's up or down. Stable prices mean low volumes.

1) I don't get the logic of that, or I'm missing your point.
There are trading days with huge volumes, yet, the price remains, and vice versa, trading days with low volumes, yet the price changing alot.
Volume is just the amount times property changes ownership during the measurement period. If I own a Lunar Dragon 1oz and I sell it to you, and you sell it back to me, whether or we repeat this 1000 or 100000 times today, and whether or not we change it to a billion Lunar Dragon 1oz, it won't have had any net effect on the price - todays end price will have been unaltered by our high-volume swapping.
2) Actually the same applies to volume as to volatility: who does it benefit? It's the opposite: it inflicts costs instead. Much like a baker that is visited by a customer that orders a bread, then immediately leaves, re-enters, orders again a bread, immediately leaves again, keeping the baker away from his work, and ending his day with not a single bread sold.

Are you not talking about the market, and did the OP not ask about effects on dealers?

Dealers make money on transactions.
Fluctuations cause activity.

On these high or low volume trading days, are you assuming the activity at dealers is the same?

It seems to me that markets include dealers, but activity is not necessarily interdependent.

If I am a dealer, and you sell me a kilo, then buy a different one, sell that back to me, and so on, I am making money at every transaction, and the market never saw a transaction, felt no ripples, no movement up or down.
As your dealer, I do not really care, I made money.

 

[goldpelican]

Volatility drives volume, doesn't matter if it's up or down. Stable prices mean low volumes.

1) I don't get the logic of that, or I'm missing your point.

The original question was asking about dealers, not ETFs etc on the market. I'm speaking from experience with my day job as a bullion dealer - when prices are volatile, sales volumes are higher.

 

[Yendor]

Volatility drives volume, doesn't matter if it's up or down. Stable prices mean low volumes.

1) I don't get the logic of that, or I'm missing your point.
There are trading days with huge volumes, yet, the price remains, and vice versa, trading days with low volumes, yet the price changing alot.
Volume is just the amount times property changes ownership during the measurement period. If I own a Lunar Dragon 1oz and I sell it to you, and you sell it back to me, whether or we repeat this 1000 or 100000 times today, and whether or not we change it to a billion Lunar Dragon 1oz, it won't have had any net effect on the price - todays end price will have been unaltered by our high-volume swapping.

But the dealer doesn't buy and sell for the same price.

Eg.
You buy 100x 1966 50c (from W. Davis): You pay $905
You sell 100x 1966 50c (to W. Davis): You get $855 back (enough to buy 94 coins)
You buy 94x 1966 50c (from W. Davis): $850.7
You sell 94x 1966 50c (to W. Davis): You get $803 back (enough to buy 88 coins)
You buy 88x 1966 50c (from W. Davis): $796.4
You sell 88x 1966 50c (to W. Davis): You get $752 back
Etc...
Every time you buy->sell-> buy from a dealer, you end up with fewer coins.

Even if the price doesn't change, the bullion dealer still wins.

 

[Pirocco]

Volatility drives volume, doesn't matter if it's up or down. Stable prices mean low volumes.

1) I don't get the logic of that, or I'm missing your point.
There are trading days with huge volumes, yet, the price remains, and vice versa, trading days with low volumes, yet the price changing alot.
Volume is just the amount times property changes ownership during the measurement period. If I own a Lunar Dragon 1oz and I sell it to you, and you sell it back to me, whether or we repeat this 1000 or 100000 times today, and whether or not we change it to a billion Lunar Dragon 1oz, it won't have had any net effect on the price - todays end price will have been unaltered by our high-volume swapping.

But the dealer doesn't buy and sell for the same price.

Eg.
You buy 100x 1966 50c (from W. Davis): You pay $905
You sell 100x 1966 50c (to W. Davis): You get $855 back (enough to buy 94 coins)
You buy 94x 1966 50c (from W. Davis): $850.7
You sell 94x 1966 50c (to W. Davis): You get $803 back (enough to buy 88 coins)
You buy 88x 1966 50c (from W. Davis): $796.4
You sell 88x 1966 50c (to W. Davis): You get $752 back
Etc...
Every time you buy->sell-> buy from a dealer, you end up with fewer coins.

Even if the price doesn't change, the bullion dealer still wins.

Of course he doesn't pay the same price he sells at, if he would do, he would perform the job in the distribution of silver for free.
The real question is whether or not the high spread can be justified with price risk, or is just some 'profit reservation', much like banks do along intrest rate differences.
Normally, competition should balance this profit reservation to something acceptable.
So how well does the competition work between dealers? I don't know. I lack the data to know.
What I do know is that dealers also compete with any other silver stock owners willing to sell. So if they would make their buyback price too low, people would sell to those other silver stock owners instead. And if the buy price would be too high, people would by from other silver owners. So there is a degree of balancing / competition, and it origins from all of us. See, while your example story is true, it's not a forced upon story, and it applies as well to the dealer, if he buys back your 50c's, you are basically 'offloading' the job to find a willing buyer, and the corresponding risk, to him, and that service, well, .. comes at a price, usually corresponding to the current price risk.

 

[wrcmad]

Volatility drives volume, doesn't matter if it's up or down. Stable prices mean low volumes.

1) I don't get the logic of that, or I'm missing your point.

I have pointed this out to you before Piccalo, only to be patronised.
If you take the time to understand the important interaction between volume and price, you may gain a better understanding of market dynamics. You may even be able to pick better buy prices than in the past.
(You may even be able to understand a little bit of why T/A is more successful than many like to believe).

 

[Pirocco]

I have pointed this out to you before Piccalo, only to be patronised.
If you take the time to understand the important interaction between volume and price, you may gain a better understanding of market dynamics. You may even be able to pick better buy prices than in the past.
(You may even be able to understand a little bit of why T/A is more successful than many like to believe).

I haved pointed this out to you before wrcclad, only to be personalized.
If you try to get other peoples property, by frontrunning and misleading them, you are nothing better than a market thief.
And that, has little to do with understanding, just with a lazy butt.

 

[wrcmad]

I haved pointed this out to you before wrcclad, only to be personalized.
If you try to get other peoples property, by frontrunning and misleading them, you are nothing better than a market thief.
And that, has little to do with understanding, just with a lazy butt.

As much as you wish, markets do not exist to be an ideological fairy-tail friendship between participants.
All transactions are performed with the intent of economic benefit - there is no other reason to transact.
While ever you tell yourself that making a profit through trading is akin to "thieving", you will be chewed up and spat out - as has been shown to be the case so far.
While ever you deny yourself the acknowledgment of how markets really work, you will keep losing money. Each to their own.

 

[House]

Can we please have a Stellaconcepts $50k type challenge for Wrcmad and Pirocco?

 

[sammysilver]

There is also the fact that about 750,000,000 ounces of silver are mined each. Most is bought for industrial uses along with the 250,000,000 ounces of recycled silver. The remainder is sold to collectors through bullion or jewelry.

This is basic commerce. There is no thievery, People can choose to purchase or not. I don't know where Pollyanna, oops sorry, Pirocco, is coming from, but I believe he has been stung big time, and rather than blame it on his own stupidity, he is looking to blame the market.

 

[wrcmad]

This is basic commerce. There is no thievery, People can choose to purchase or not. I don't know where Pollyanna, oops sorry, Pirocco, is coming from, but I believe he has been stung big time, and rather than blame it on his own stupidity, he is looking to blame the market.

+100