Premiums On ASE And Resellers

My dealer has stopped ordering any bullion from all sources. He is only buying what people are bringing in. Like me he seems to think that silver is in for a steep correction. All it would take would be for a few large entities with mega hoards to start dumping in order to take profits for this to happen. This could intern create fear in those who have been buying and have a few hundred ounces stashed away to rush to market with what they have, compounding the scenario even more. Buy low, sell high, drive the market down, buy low again.

To clarify

I am NOT talking about the price of silver rather the premium (above and beyond the spot) on ASE's.

There is a big difference in subject matter - Price VS Premium.

I agree with Mitch on this. We got into a genuine silver bull market via a complex mix of things that have occurred in the US and around the world in the past couple of years.

In my mind, the prime mover and shaker in the current commodities bull market is that they are all priced in the declining US dollar. As the dollar weakens further, all commodities, including the PMs, show more and more strength.

For this situation to reverse itself, we would have to see a strong dollar AND a strong dollar policy out of DC and probably a strong Euro policy out of Europe. Both of these would require much less currency printing AND rising interest rates. Neither of those is likely for the foreseeable future, IMHO, let alone both at the same time.

Far more likely, is a new basket type trade currency that supplants the US dollar as the world reserve currency. Such a currency is likely to be created by several countries around the world, most likely the exporting / creditor nations, and most likely one that is backed by a basket of commodities, including PMs. No wonder that both China and India are rapidly trading out of dollars and into PMs and other commodities, as well as the methods for producing them. Why just buy gold, for example, when you can buy a gold mine with potentially large reserves of gold ore and perhaps other PMs as well?

The real power of such a currency is that it is powerful discouragement for reckless monetary behavior because no one country can simply print all they want of it. They have to decide that issue by voting on it and blocking extravagant monetary expansion demands by 1-2 members would not be all that difficult. If any country wants more of this currency, they would have to EARN it. Novel idea, that.

This would, essentially, force the debtor nations, such as the US, to live within their means... kicking, squealing, whining, and crying every step of the way, no doubt.

It would also mean that the dollar's value would fall considerably, for without its status as the WRC, there would be FAR less demand for dollars around the world and much less of a reason to buy US government debt that repays the lenders with even more unwanted dollars.

All this points toward a very dark time for American and Eurozone citizens paper-based finances at some unknown and perhaps unknowable point in the not too distant future. Unfortunately, some of the essential pieces for this disaster scenario ARE already in place. I would feel a lot worse about this, but doggone it, we really did bring it on ourselves.

I am reminded of this TV commercial / slogan.

"A mind is a terrible thing to waste"



In fairness to Tim -- he is closer to the subject matter (premium).

I think JP Morgan could dump EVERY Physical ounce of silver
they have on the market.and it may drive the price down during the dump
But every bit of it would be fought over and snapped up
by the Chinese and people taking advantage of a temporary
dip in prices.
I think that after decades of being manipulated an held
low the price of silver is just racing to find it's
Historical value of 16 ounces of silver being equal to 1 ounce of gold

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.