Declining premiums?
cinque1543
Posts: 400 ✭✭✭
I follow a couple of coin-related channels on YouTube, one hosted by a collector and one by a dealer. Both have commented on a decline in premiums on gold bullion coins and gold collectable coins. They link the decline in premiums to the rise in gold prices. But when I look on the websites of the major online retailers, and when I visit my LCS (which I did last week), I don't see a decline in premiums. They seem as high as ever. What am I missing?
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There is a significant decline in premiums when selling to a dealer. I did see the premiums erode away across the board when buying on the run up ($5 total spread on silver). That said, with the major drop, dealers are widening their premiums as a buffer to continued volatility (up to $20 total spread). Pre drop the buy/sell locally was -2/+2 across the board. After, I see -8 to -15/+5-8.
Normal cherry picking one-sided facts. Yesterday got an email from JMB that they were selling 90% silver at spot, a % decline over their normal premium. However they are buying 90% at a big discount, so its the spread that needs to be reviewed.
You are seeing shockwaves through the market trying to find a footing on true value, which obviously has an international problem with price discovery of some of the most basic metals known to man.
``https://ebay.us/m/KxolR5
They might be trying to keep up their profit margins, especially if they "bought high."
As gold goes higher, premiums dissipate. That is true for pre-1933 gold and even modern coins.
I can tell you for classic pre-1933 gold premiums have come down from as much as 100% to 25% for some of the Saints I have bought in the MS-66 grade; from 25% down to 5% for MS-65's.
When I was starting to stack Saints in mid-2004 the slabbed 64's ($635) cost 2X the spot gold price of $315. 100% premium.
And at the market peak in mid-1989 a Slabbed 64 was a $2000 coin.....a slabbed 65 - $4000.....with the peak price of gold at $421/oz in 1989.....reflecting the scarcity of the rattler gold slabs, very tough grading standards 1-2 pts tighter than today, and also the market hype of Wall Street $$ flowing into the market. A year later in 1990 those Saints cost half as much.
I went to all my usual shops yesterday. Premiums are way up. Smaller shops are still pricing silver like it’s $90 when it was $77 at the time. I inquired on graded silver eagles which were always $10 over there during the run up and was quoted $100 “because we are into them for that”. Same shop was previously $10-$50 over per coin on gold 1/10 eagles. They were asking $589 yesterday. Various other shops seemed to be pricing gold at $600 over.
Definitely put the brakes on any buying for me. Of course, sell to them prices are still very conservative so the spread is wide.
I got a kick out of the above. Imagine if a seller said “I want X amount because I am into it for that”. Guess what the dealer would say?
Many a used car dealer went bankrupt using that logic...