Premiums On ASE And Resellers

It should. The geologists tell us that the actual ratio of silver to gold in the Earth's crust is somewhere between 16:1 and 17:1. Assuming that it is no more difficult to mine one than the other, the amount available should determine the value ratio as well.

Historically, of course, this ratio has run all over the place for various reasons. At times, this has hit 80:1, which would be an outstanding place to sell gold and buy silver. Then, when the ratio gets back to something more typical, say 20:1, that's the time to sell the silver and buy gold. In relative terms, gold is sold when silver is cheap and silver is sold when gold is cheap.

Because of this changing ratio, bullion collectors can switch from gold to silver and vice versa depending on the ratio and increase the total number of ounces they hold. They can also sell off some ounces of gold or silver at these times to produce "dividends". Those who are unaware of this do not think that gold or silver produce dividends but it is certainly possible to create situations where free cash is thrown off, essentially creating our own dividends.

Since the subject matter is on "Premium" vs. Spot, I would like to share my "2cents" of thought (I'm no mean an expert though).

Many people have mentioned that "Spot Price" is the price on paper (ie: paper silver). For anyone to hold physical of the PM there are many cost associated w/ that: Minting/creating the bullion, delivery, storage, etc. In another word, whenever you choose to buy PM and physically taking delivery, there are extra cost (ie: Premium). Those of you dealing with Kitco would know.

Now, specifically, regarding "premium" on ASE.

First of all, ASE is a very popular bullion (ie: higher demand = higher premium). Brand name and recognition.

Secondly, it's a "hedge" again price rise or replacement cost. In another word: If I sell you an ASE for $43 when silver spot is at $40 then how much would it cost me to replace that "sold" ASE when silver spot go up to $42 the next day; it would cost $45, may be more; not only that, I may run the risk of unable to replace my inventory. Which mean I have to pay a higher "premium" to replace my "sold" inventory...... It's a business concept where "premium" increase in relation with the rate of change of the base price (how fast silver spot price change), NOT proportionally to the change of the spot price. This can also apply to rapid price decrease. Conversely, one would expect "premium" (price spread) should shrink when the price fluctuation is minimal.

Lastly, "premium" also associated with quality/purity of product. 99.99% purity would command a higher "premium" over 90% purity.

I hope this help.

The paper contracts being traded that determine spot are 5,000 ounces each.

An interesting aspect of all this is that supposedly there is about $100 worth of paper silver or gold for every REAL $1's worth. So... what happens if EVERYONE (or even 2% of them) who holds paper PMs demands delivery? That fluttering sound you hear in the background could be the house-of-cards Paper-PM system tumbling down around their ears. Not sure how invested in metal the SLV really is but a quick look at their NAV divided by their total (and independently audited) silver holdings in ounces had better be REAL close to the daily price of silver. If it isn't, and clients really can demand silver from their vaults, look out below!

I have been listening to pro gold / silver shortwave people like Alex Jones and Jim Cedarstrom for years, and I take most of what they say with a grain of salt. However they have indisputably been right on the money with their beliefs of the precious metal markets. If I had invested when I first started listening I wouldn't have to work anymore. One thing that is missing from their projections is the drying up of available gold and silver, and also the high premiums that they felt would be required to acquire gold and silver once the market took off. I am pro gold and silver and I am still accumulating some every week. If the market does go way higher the supply of easily available precious metals may dry up. At this point not only will the markets continue to climb due to a rarity of available material, but the premiums may rise sharply at some point as China, India, and the other nations are strengthening their currencies through precious metal acquisition. No one knows, but the time may be coming when you cannot just walk into your dealer and pick up ASE's for $6.00 over spot. Maybe that time is coming and maybe not. One thing is for sure and that is that these are very interesting times to be involved in this hobby. I would also like to say that the discussions on this forum are very civilized. I like the opinions of the bulls as well as the bears.

I am curious about this assertion. I have read on various web sites that this is not the case and that some ETFs do not allow clients to receive physical gold or silver from their "vaults". Additionally, conditions may be applied to these accounts such that only large clients can take physical possession of these PMs. Have you read the SLV prospectus? I haven't because I am not an investor in it. I would be curious about what they say about delivery of physical silver and any conditions that may be imposed on that.

If you bought ASE's last week at a premium the price you paid is UNDER melt price now.

Re 'taking possession of physical silver' , check out what happened to this woman :
http://www.gata.org/node/8837