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Precious Metal Premiums

 
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Author Previous TopicReplies: 6 / Views: 738Next Topic  
Bedrock of the Community
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United States
11578 Posts
 Posted 07/02/2022  4:36 pm Show Profile   Bookmark this topic Add CelticKnot to your friends list Get a Link to this Message
As spot prices dive, I was wondering how PM dealers set premiums.

Silver has dipped under $20 for the first time in two years (which is nice for stackers) and/however the PM dealers are still charging $4-6 per ounce for silver bars. Last time I bought a 10-oz bar (November 2019) the premium was $0.29 per ounce. Ok that was a good sale, but even still I was paying $0.49 - $0.69 consistently. I realize that was pre-covid and raw silver and blanks became harder to come by since then.

So is it simply supply + demand?

And what would cause premiums to come down? Dealers having more silver on their hands than they want?

Are premiums tied to market value at all?

Thanks all, and happy Independence Day weekend to my fellow denizens of the USA.
Bedrock of the Community
Australia
19864 Posts
 Posted 07/03/2022  01:44 am  Show Profile   Bookmark this reply Add sel_69l to your friends list Get a Link to this Reply
PM dealers have to link their premiums to their forward buying contracts, not the current PM spot price.

PM selling prices are linked to their buying prices ,and the bullion volume that can be sold for a reasonable profit to the business.

Like any other business, turnover volume and profits are linked to the above to maintain a healthy business.

As retail buyer or seller, it is necessary to shop around, as always

If bullion is your focus, go to a specialist bullion dealer; for me personally, I would never go to a coin dealer to buy or sell bullion bars or coins, my 6 x 1 ounce Pt coins came from a specialist bullion dealer.
A specialist bullion dealer is where you would normally expect to find the narrowest premiums, on both buy and sell.

On the other hand, the sort of numismatic items I may be interested in, have never been available from a specialist bullion dealer.

Bullion as a commodity, is like any other, - supply and demand.
Bullion has its own complex international influences relating to supply and demand.

On the other hand you may wish to trade in the commodity of pork belly futures on the Chicago exchange.
Or perhaps spot wheat, after the Russian invasion of Ukraine, U.S, farmers could do quite well out of that one, US farms is where Warren Buffet is currently investing.
Edited by sel_69l
07/03/2022 02:49 am
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Australia
14514 Posts
 Posted 07/03/2022  03:50 am  Show Profile   Bookmark this reply Add Sap to your friends list Get a Link to this Reply
General rule of thumb: when prices are going up, the price dealers charge for bullion goes up, pretty much straight away, and premiums are generally low. The dealer can afford to be generous with the premiums, since they make a clean profit just selling at the spot price if they bought when it was several dollars lower.

When prices are falling, the dealers aren't going to be wanting to sell at a loss. Prices don't come down anywhere near as quickly, or as far, as they rose. Dealers will either hold onto their stock and not sell (hoping prices improve soon), or if they need to sell, they'll try to charge premiums high enough for them to still make a profit (or at least, not an egregious loss) compared to how much they paid for the silver.
Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis
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United States
11578 Posts
 Posted 07/03/2022  6:12 pm  Show Profile   Bookmark this reply Add CelticKnot to your friends list Get a Link to this Reply
Thanks sel_691 and Sap.

I hadn't considered the futures angle of this.

When the price of silver was languishing around $14-17 for 3-4 years, I'm guessing dealers had plenty of stock on hand and were still buying at low rates (and futures were also low), which explains the low premiums?
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United States
4782 Posts
 Posted 07/27/2022  09:48 am  Show Profile   Bookmark this reply Add TheForce to your friends list Get a Link to this Reply
The ASE's seem to run premiums $10-12 over spot while others like SML, Krugerrands, Britannia's are much, much less. Makes the local silver seem like not a good deal.
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United States
1557 Posts
 Posted 07/27/2022  6:51 pm  Show Profile   Bookmark this reply Add Cujohn to your friends list Get a Link to this Reply
I'm like you Celtic, the last time I bought at .29 over. I just can't see spending $5 over now.
Valued Member
United States
491 Posts
 Posted 08/13/2022  08:19 am  Show Profile   Bookmark this reply Add livingwater to your friends list Get a Link to this Reply
It looks like silver premiums are going higher. I've watched recent Youtube channel videos about silver/gold bullion. Several dealers have said the wholesalers have been raising premiums on government bullion, generic silver, 90% constitution. Premiums for gold eagles have gone up recently. Yet some of the big dealers have said there is no slow down in buying. One online dealer reported near record sales last month, over $200 million. I checked sold bullion on eBay. Though premiums on silver eagles are very high, people are still buying them. I won't though.

In these uncertain economic times, it seems there's strong demand for physical silver/gold.

It's wise to watch for online sales and LCS deals, buy then.
Edited by livingwater
08/13/2022 08:35 am
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