Why such the huge premiums on 1/10 oz gold coins?
CoinHusker
Posts: 5,033 ✭✭✭
I realize this has been asked before, but why are there such big premiums on the price of 1/10 oz gold coins? Raw, common date bullion coins selling for $20-$40 over melt on a tenth of an ounce is huge, isn't it? Do dealers pay that premium when they buy or is that premium only something passed on to the buyer? ie. If I took 10 1/10 ouncers in to sell what are the chances of me getting over a grand for them? Not likely I would guess. So, why the premium and why are people willing to pay it?
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Dealers must try to make a profit.
Unless you are buying quantities of these, you can expect to pay at least $20 over spot for a common date, at this time.
There are some scarcer dates, like the 99-w commercial striking and the 88 that sell for much more.
I firmly believe in numismatics as the world's greatest hobby, but recognize that this is a luxury and without collectors, we can all spend/melt our collections/inventories.
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WH
You're a dealer. Collector A comes into your shop and wants to consign a $800 coin to you to sell. Let's say you quote him your standard 10% consignment fee. He agrees. You write up a receipt for the coin, book it into inventory (with a zero cost since it is a consignment), photograph it for your website, write up a description. Then you include it in your ads, haul it to shows, speak to potential buyers about it and finally sell it. You write an invoice to the new owner, remove it from inventory, take down the web listing, prepare a report and check to the consignor.
Then, Collector B comes into your shop wanting to consign an $80 coin. You're going to do the same work to sell this coin as you did Collector's A's coin. You were compesated $80 for selling Collector A's coin. Are you going to quote Collector B the same 10% consignment fee and make $8 this time? The only way to get paid the same $80 for this work again is to quote him a 100% consignment fee.
I used a consignment scenario to focus on the work the dealer is doing for his fee. It is the same if he buys the coin outright. He is still working for the difference in buying price vs. selling price. The difference with an outright purchase is that the dealer is also tying up his own capital. Thus, there are added costs associated with the opportunity cost for the money used to buy the coin and the risk of ownership (market volatility (price and interest), that the dealer may have missed a problem with the coin, etc.).
In short, simple economics dictate that prudent dealers will buy and sell lower prices coins at levels that represent greater spreads than seen on higher priced coins.
WH
Customer sells me 10 1oz coins on Sun at a show... lets say golds $800..... if I make 5% per coin that would be $4 per coin....
here is the biggest problem, gold does not hold steady..... it can go up or it could go down..... anyones guess...
For many dealers to lock up $800 to make $40 and take a chance that it will go down.... not worth it.... that is why a lot of dealers offer 5%-10% back of melt when buying......
and many dealers do not stock bullion so they do have to order it wholesale when a customer orders it...
Just to be fair, Harlan J. Berk downtown quoted me a price of $97 each, but I also got prices of $89 and another place where I bought 8 more at $86 as well. Bottom line is if you cant get them at around $6-$8 over melt, your at the wrong shop.
I sold 22 generic 1/10 ounce eagles the other day for $87 per, and have none left.
Therefore, the only 1/10 ounce gold eagles I have right now are the 2007's at $97 per.
I have generic 1/4 and 1/2 ounce eagles left if you are interested.
TD
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TD
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K S
<< <i>Raw 1/10 gold coins can be purchased from dealer for a small percentage over melt but in most cases 1/10 gold eagle command a premium only because they are easier on the pocketbook. If you look at any dealer that sells all denominations it gets cheaper per oz the larger the coin. Makes sense to some, sounds like a crock to me. They are usually the highest minted which I understand is partially due to people hoarding the small denomination because it is easier to make change once the current monetary system collapses.
I have no problem with the higher denom, the cheaper per oz. Thats basic economics. It costs more to make 100 small somethings than one large something just from a labor standpoint. My problem is that no dealer should be selling common date 1/10ths for $20-$40 over melt. Thats just crazy. Unless the dealer is paying $10-$15 over melt when a customer walks in with a few to sell. The facts are that dealers usually pay BEHIND melt on AGE's, and that MOST of the 1/10th eagles in a dealer's inventory are aquired in this way. If you want an '07, you have to pay what it will cost to replace, plus the dealer profit. That could reach $20/coin. But for common dates, $20 over melt on a 1/10th is simply a greedy dealer.
<< <i>I know people will pay over $100 for them on ebay. I hope these are just collectors because if they're investing that's not w sise way to invest >>
Thanks, that gets back to my original question,
<< <i> So, why the premium and why are people willing to pay it? >>
Jeffs
<< <i>Gecko no offense but if your going to buy 1.5 oz why not take a K rand and save the premium? >>
Im not very comfortable with the "stigma" surrounding the 'rands. And actually I bought 4.3 ounces today.
<< <i>these have more relative numismatic value then larger gold coins because they are way more widely collected. i was working on a set myself - till gold started to jump. i only have 24 coins, but am gonna dump them at the end of the year
K S >>
Kidding aside, dk has got to be one of the most well-rounded numismatists in this chatroom -
<< <i>The facts are that dealers usually pay BEHIND melt on AGE's, and that MOST of the 1/10th eagles in a dealer's inventory are aquired in this way. If you want an '07, you have to pay what it will cost to replace, plus the dealer profit. That could reach $20/coin. But for common dates, $20 over melt on a 1/10th is simply a greedy dealer. >>
It's the dealer's coin- he can ask any price he wants. Unless he's misrepresenting it by claiming it's something it's not, I think it's just as unfair to call him greedy for trying to get a higher price as it would be to call you a cheapskate for trying to get a lower one.
The other dealers in my area pay 30% behind spot period. (this is no joke) even on the 1 oz eagles??
jim
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<< <i>Never accept less than spot price for any size American Eagles. >>
What about the one we bought the other day that had been used on a keychain?
Never say never.
TD
On a whim I ask the dealer, "What do you have to get for that $5.00 Gold Eagle."
He say's "this one?" , I say "no that one" pointing at the piece.
He says "Oh this is a 10th ounce ounce Eagle" as if to correct me.
"O.k." I say and repeat "Whaddya gotta get for it."
He says "$70.00" and I paid him promptly.
I get home and take a closer look and I see it's a 1988.
The PCGS price guide and the Redbook show a premium for that year but the one I picked up has a rim nick and a couple of contact marks.
Is it just bullion (off to the SDB) or is there a collector value for that year?
I think Griv hit the nail on the head about cash flow because the dealer had just been telling someone he hadn't sold a thing all day.
"Inspiration exists, but it has to find you working" Pablo Picasso
<< <i>It's easy to buy crap gold at mere dollars above spot from some dealer needing to up their cash flow. Gecko acts like he's some kind of magic man buying gold where no gecko has gone before. Be real. Buying crap gold is not impressive. Show some certified grades from your big win. MS64s don't exactly float the boat unless you think buying crap at micro above cost makes you a hero.
Be real? Why dont you try rereading (or reading) the OP. He asks why dealers are asking between $20 and $40 above melt on COMMON RAW 1/10th eagles. Not better date slabbed coins. Furthermore, of the total 23 $5 AGE's I did buy that day at 6 bucks above melt, you would be very hard pressed to find a single one in 64. These are all sharp coins with no marks. Doubt any of them would make 70 or even 69, but if the economy ever sees a catostrophic collapse, I seriously doubt the local butcher is going to give a chit about the technical grade of my BULLION coin. I bought them for two reasons. Primarily as a hedge against inflation and/or a serious fiat money meltdown. And secondly just to prove to the thread starter that COMMON, RAW 1/10th can be had for FAR less than the $20 to $40 over that he was complaining about.
1/10 oz , and 9% over on 1 ounce . A B&M 50 miles away from us sells
1 ounce at about $20-25 over . Internet stores run different.
All depends on who the seller is to us ,and who the buyer is .
<< <i>gecko.. why have 100 1/10th oz pieces when you can have 10 1 oz pieces? >>
In the event that merchants stop accepting U.S. FRN's (as China already has done), 1/10ths will be easier to barter with than 1oz coins. Also, the difference in premium is small between the 1oz and 10 tenths. A 1oz at $800 spot would cost me about $850, whereas 10 tenths will cost me $860. To me, the $10 "penalty" is a worthwhile conveinence charge.
<< <i>These are all sharp coins with no marks. Doubt any of them would make 70 or even 69, but if the economy ever sees a catostrophic collapse, I seriously doubt the local butcher is going to give a chit about the technical grade of my BULLION coin. I bought them for two reasons. Primarily as a hedge against inflation and/or a serious fiat money meltdown. And secondly just to prove to the thread starter that COMMON, RAW 1/10th can be had for FAR less than the $20 to $40 over that he was complaining about. >>
I respect that but my point was that sure you can buy "bullion" at bullion pricing, well at least if you know how which you obviously do, but I was referring to the 68/69/70 market which does add a premium especially with the $5 and $20s. I didn't mean for my post to a judgment on your comments so if it was then I apologize.
I seriously don't think we will have a "money meltdown" like many are starting to warn of but it is a time to figure out what is of value today and what is of value tomorrow. Clearly gold is and I think it is a safe bet to make sure you have a good amount of your investments within the gold market. I also don't think a crash will cause drastic price changes in the 70s market as their are always someone with the cash to buy the very best even if it might be in yen.
$70? !!! Nice Snag!
A Folks, anyone 'hear' what Swamp just said?
Swamp, to me, it sounds like the guy was diabetic. Was he overweight? The speed of the prices have caught many of the Dealers in their carbohydrate-induced haze and they are forgetting where they are.
He was thinking $700 bucks was near the high for Gold and the price had falling back to high $680’s. His scaling was correct, but he was just a $100 short across the line.