What Happens To Gold And Silver Next? Look Out Below?

I thought I would give an interlude in this conversation and talk about "Premiums".

Most of you know I'm a dealer. So the following is a dealers perspective. Premium is just another word for greed. No more, no less.

I hear a lot of dealers moan when the price of Silver and Gold go down; about how they can't sell at spot.

Well....my question is "Is your policy to buy and sell based on spot. Or is your policy to squeeze as much money from the public as possible".

In other words is your police based on an ethical policy or a greedy policy? Put into those words 99 percent of the dealers I talk to get angry and upset and start to justify their actions as to why they need to put into place a premium. To my mind I think people like to think they are ethical even when they are acting contrary to ethics. That was also my observation when I was a Detective...lo those many years ago.

This is what I mean:

If your price is based on spot then it should move with spot. Whatever your formula is then that it should remain. If you buy at Spot minus 2 dollars;and sell at spot plus a dollar then it should remain that way even when it tanks.

Why? Well, that is where ethics comes into play. When this all started to balloon there were dealers that had large stocks of 90 percent that they bought below five dollars an ounce that they were suddenly selling at 15; 20; 30; and up to 45 dollars an ounce. Why sell at those prices when you bought at the old price? Because that was what the market ( as Yup puts it) was saying was the price; ala Spot. Well and good. I did the same and made a fair amount of money. It was ethical to do so because you based your buy and sell prices on a tangible and verifiable index. But for you to continue to be ethical you need to reduce your prices when that index trends lower. I made so much when it went up that my losses during the downtrend are negligible. The fact is that the industry standard for holding bulk silver is less than a week. So unless you got caught in one of the spikes downward you never lost money. Even this time. Let me explain. before this spike down most dealers were buying at 12 to 14 times face and whole selling around 15-16 times face. So if you are holding silver you bought at 12 to 14 times face then right now you can still whole sell at 14 times face and break even. Or do what I do. Put your dimes and quarters in 2x2's and sell them at 20 times face and watch them race out the door.

So why premiums when you can still break even ( and remember this is short term, as you will soon buy at the new lower price)? I can hear the chorus' singing "to make money". That is why we are in business, right? Why premium's when that is against your stated policy?

Because they are not an ethical business person. If they are fine with that, and most are, then continue on. But don't tell me you are ethical. ; just fall into the dark side and embrace your Greed!

Two thoughts before I jump off the soap box.

The first is that the more successfull long term businesses like mine tend to be the more ethical businesses. The greedy ones tend to do well for a short time and are gone, or they leverage up and become a publicly traded entity ( tongue in cheek).

The second is an observation. I KNOW a number of Dealers who were sure that the recent price action is just temporary and are sitting on large inventories of ASE's. They put up such a large premium on their ASE's that no one was buying at $22/oz. What do you think they are thinking right NOW that silver has gone under $20/oz and most experts are throwing in the towel and supporting silver in the $12-$15 range by Q4?

Greed( Premiums)...not always a good thing.

Jm completely agree with everything you said. If you have a stated policy for your silver buy and sell prices someone should stick to it. If those prices are just what ever you feel like at least be honest about it. The ironic part is they're going to lose more money being stuck with them trying a squeeze a few extra bucks out than they would have just selling and turning over their stock restocking at the lower price where they can make money again.

I would add that if they aren't comfortable with the risk they should stop stocking them. Like northern mentioned people do remember things like that and they may have cost them selves future business. If someone wants to buy and sell over spot that's fine, but don't buy for 2 under and sell for 8 over.

I hope more people realized the extra premiums are temporary this time around and well get through that phase faster.

jmkendall,

Do you often willingly sell merchandise at a loss? How is that working out for you? No dealer has an obligation to sell anything at ANY price. I am a dealer as well, and I *am* adjusting my bullion prices with spot, but only on new stock. Anything bought at previous levels remains priced accordingly. Silver will go back up, and the bullion I carry comes at a premium anyway (Maples, J&M Bars, etc), so it's justifiable. Additionally, praytell, who is selling silver for $2 over spot? Let me know, and I will pay you $1 an ounce, because the market is paying up to $7/oz over spot every day of the week since the initial crash.

I think thats exactly what it is. People want all the reward without the risk when thats just not how business works. Some people may be able to sell it for huge premiums for a bit but only for so long and that could be costing them future business when people figure it out.

Sitting on things for every to say you didnt lose much on it ultimately costs more than just turning over the inventory and get the money working for you again. I tip my hat to you for sticking with your pricing and bet you get more customers because of that.




Nothing suggests it will be anytime soon.




On ebay maybe, if your local market it then more power to you but it can easily be found for about half that.

Ummm yeah. I believe that is what I said. Though to be fair it is rarely at a loss. Usually at worse it is breaking even.

Sure you can sell at any price. That wasn't the jist of the posting.It was ethics. Not the Corporate America "anything that makes me money is ethical"; ethics. But real ethics.

And yep those are my prices. Or will be once I come back from vacation ( My Little Girl Graduated!!!). And no, I don't sell to anyone on this forum. Why? because a LONG time ago I made the commitment that this is the place where I come to kick off my shoes and participate in discussions not colored to making my customers happy or ticking potential customers off. I can be myself without fear of loss of profit. If you start to sell to fellow forum members then your comments....could...at times be taken as self serving. As advertisement.

The stated objective of this forum is to discuss our hobby not further our commercial interest, and this I adhere to strictly.

I just checked the sold listings on ebay for "10 dollar face silver" and "5 dollar face silver". You know what is absolutely fascinating? Not ONE sold listing for June 21st. NOT ONE. At $7 over spot that may be the reason why. At $20/oz, it is $15.40 times face for Morgans and slightly less for 90 percent. At $7 over spot it would translate to about 20 times face. Which is, roughly, 10 percent MORE than it was last week.

Obviously, dealers are charging what they do because the marketplace allows and supports it. I still cannot understand why folks rush out to buy and overpay.

Nor can I fathom why everyone wants to rush out and buy gold and silver when they are dropping hard. They are dropping hard because their run is over with.

It is also unwise and foolish to think that prices will stabilize and rush higher.

Look, I had been saying for weeks that even the long bond was dying and it has been big time. All safe havens (sans the USD) are in the toilet and that includes gold and silver. Not even the melt down that's happening in China is supporting prices (so much for the constant chatter and obsession with saying China will support prices of gold and silver, we can see that myth has been obliterated) nor in other emerging markets.

I would imagine in the coming weeks and months the lamenting will start in earnest and the chorus will grow how everyone A- would,could/should have sold at higher levels when they had the chance B- many will wish they had not been buying for the past 2 years and just waited for much lower prices.

Remember, commodities don't have some sort of "value" metric where another type investor steps in and buys it because it has come down in price.

I don't see any reason to be holding gold going forward. I liquidated my long GLD holding this week, which I have held since the funds inception. I remain short gold.

BTW- completely off topic but to support my much earlier statement that China will NEVER be a super power- the pathetic bond offering that failed miserably last week proves how far away China is from being a superpower, again I say, no way, no how.

Ok, late night update-

First lets look what happened Friday and what can I say, not much, just the typical bounce. As I stated earlier, if you wanted this selling to just get done and over with, you would like to see just straight up puking on heavy volume, day after day until the sellers are exhausted. Instead we caught a bounce, which will just allow the short sellers to get in line to sell the PMs short and trailing stops will be hit by those with profits even at these levels in gold and silver.

Gold and silver are slowly unraveling here and its going to be painful to watch. Now that said, does that mean we are just going to rip right down? No. As you have seen, we could have retracements, attempts at filling the gap, in fact we could STILL see a gap fill and a major move up in gold and silver. Nevertheless, should something like that happen in terms of price, it doesn't mean that its all clear for gold and silver.

Price has memory, and these points where gold and silver are below will turn into resistance if the price tries to change direction.

Before I get into the proxies let me highlight some points with these levels-

* silver, looking for a continued probe of below 20. below that I expect a range to be tested 15-19

* gold, looking for a continued probe of below 1300. I expect a range to be tested between 1250-1300.

* expect a retracement and wild swings up. There will be plenty of traders who will attempt to sell short from much lower levels and we could see a short squeeze, furthermore, as the prices drop, we will run into areas of price support which may cause golda and silver to hold firm for a bit of time.

* trends are very powerful, they flow like water, they dont stop on a dime, they follow the path of least resistance. Its possible we see them flush harder, testing 1000 on gold and 10 on silver would not be unreasonable.

*TIME and PATIENCE are key. Be prepared for any scenario- a dramatic rally in price. Heavy and hard selling. Choppy and narrow range bound trade. Anything is possible but remember that gold and silver remain in a strong downtrend.

* Theres no need to rush and buy right now. The train is not leaving the station. Do not allow yourself to feel pressured into buying. Avoid the pundits on TV, especially those on the financial news media, and instead focus on the price action.

ok Friday-

GLD- lower high, higher low

SLV- lower high, lower low

lets see what this week brings us!

Just an update today-

gold is attempting to retest yearly lows. Does this mean it happens? Or are we going to get this same range bound trade, where we test yearly lows, bounce higher to the upper range of the gap and smacked down again...

this is what we should be monitoring.

more later