Why are Kitco and Ampex willing to sell gold bars at just 2-3% or less over spot?

CalGold

If there is a short squeeze on, with a reasonable likelihood of a big spike in gold prices, or if the “backwardization” thing means that no one is willing to sell gold at spot, wouldn’t these dealers demand a much higher price or just stop selling in the near term? Or are they clueless about what is going on in the market, unlike the authors of the blogs that have been posted here?

CG

OPA

<< <i>If there is a short squeeze on, with a reasonable likelihood of a big spike in gold prices, or if the “backwardization” thing means that no one is willing to sell gold at spot, wouldn’t these dealers demand a much higher price or just stop selling in the near term? Or are they clueless about what is going on in the market, unlike the authors of the blogs that have been posted here?
CG >>




APMEX selling gold bars at 2-3% over spot? You neglected to mention that you had to buy them by the kilo ... just try to buy a 10 oz or less for 2-3 over spot

MrEureka

APMEX selling gold bars at 2-3% over spot? You neglected to mention that you had to buy them by the kilo

Wouldn't buying them buy the kilo ensure even bigger profits? Wouldn't the smart rich guys buy by the ton if they could?

OPA

oops... a kilo would set you back about $27k ... You need deep pockets for that kind of change. Don't know about 1 ton bars, but I'm sure there must be 50lb bars available somewhere... ps you need extra deep pockets for that

MoneyLA

of course I agree with CalGold. there is no shortage of gold, but there is a shortage of small, fabricated bars, coins and rounds, and demand forced up the premium on those small size gold pieces.

if there truly were a shortage or delivery crisis looming in the gold and silver markets, bullion prices (paper prices) would be surging.

they are not.

of course if you are selling subscriptions or selling the metal, you want people to think there is a shortage of the metal or there is a delivery crisis looming...

eventually the fabricators will catch up with the demand for one ounce, five ounce and ten ounce pieces, then the premiums will collapse back to close to "paper prices."

jmski52

Toilet paper and money can be, and are - created much faster than gold can be mined and refined. And supply probably isn't the determining factor anyway.

However plentiful you think gold is, when confidence is lost in the dollar it doesn't take much of a bump in demand to affect the availability and price of the metal. Note - metal, not futures.

It doesn't take a mental giant to figure out that the governments don't want gold to rise as an alternative to printed currency. The rest is common sense.

MrEureka

It doesn't take a mental giant to figure out that the governments don't want gold to rise as an alternative to printed currency.

You could say the same about peanut butter as an alternative currency, but few in the government obsess over that risk.

ttown

So how long do you have to wait to get them? What's the shipping cost involved, hundreds of dollars? Have they been assayed and come with certification? I'm sure you're aware that when it comes time to sell you can ship them off again to get them assayed before the sell. So how much over spot does it cost? Seems to me by the time you run to sell them a lot could have happend. JMO

jmski52

"When a coin is cleaned or doctored, it loses its magical ability to transport me to its time of issue." - MrEureka

You could say the same about peanut butter as an alternative currency, but few in the government obsess over that risk.

Come back to 2008, Mr. E. You could say that coins doctored with peanut butter impart a magical ability to transport you into the future as well, but I was talking about why governments don't want gold coming back as a monetary standard.

Do you know the reason? Imagine this. If you were a coin dealer who specialized in say, early American coins, and you had a couple million invested in inventory - how would you welcome the knowledge that the Chinese had just "discovered" a huge cache of early American coins that are identical in quality, composition, weight, metallurgy, and minting characteristics to the very ones you own?

Let's say that nobody trusted the dollar and that people refused to accept it in exchange for anything worth having, simply because it became common knowledge that not only the North Koreans were dumping acceptable counterfeits onto the US market, but so was the Fed, only on a much larger scale?

Gimme a break. Of all people, you should know what is happening in the money supply.

When Wall Street firms are creating their own financial instuments and then reneging on them, so that the Treasury has to create enough extra cash to bail them out (pay no attention to the fact that no work is being done, no products are being created, and that no people are put to work when this is happening), and nobody is going to jail because they are all in the same financier's club, after all - how much of their paper do you really want to own?

When the guys who own most of the gold can still sell a bunch whenever they are forced to do it, in order to manage the price of gold, lest it impact their massive holdings of paper crap too much - yeah, then it's possible to see 2-3% premiums over spot for kilos. Let's see how long it lasts.

Hey, at least the price of a Senate seat is coming down these days. On the other hand, maybe the asking price was too cheap. And you trust these guys?

MoneyLA

so please answer this question:

the world does not fall apart, there is no major calamity, we do not have hyper inflation, and everything within reason is beautiful...

so what happens to all your "security gold" then?

my answer is: its worth what gold is worth, that is, its normal price structure. and that is indeed how and why I would own gold... for its normal price structure.

but if you have a different idea, let me know.

thanks.

MrEureka

When the guys who own most of the gold can still sell a bunch whenever they are forced to do it, in order to manage the price of gold, lest it impact their massive holdings of paper crap too much...

Help me out here. Who are these "the guys who own most of the gold" and "massive holdings of paper crap", and why would they be so scared of making profits on their gold positions? And while you're at it, please explain how a change in the price of gold "impacts their massive holdings of paper crap" at all.

jmski52

Who are these "the guys who own most of the gold" and "massive holdings of paper crap",

You need to read the news or at least turn on the TV once in a while. You know who they are - the ones who invented CDOs and CDSs, traded them on the OTC market at 40:1 leverage, collected commissions on the sales - you know, the private banking institutions - the JP Morgans, Goldman Sachs, Credit Suisse, Citibank, Merrill Lynch, Morgan Stanley - who keep getting more US taxpayer money to finance their next takeover. Surely, you've heard something along those lines? You know, the alma maters of Robert Rubin and Hank Paulson? They make Blagojevich look like a schoolboy in comparison, although I admit he was more straightforward in his dealings.

And while you're at it, please explain how a change in the price of gold "impacts their massive holdings of paper crap" at all.

I can explain it for you, and you know what I'd say. So, instead of doing a little tapdance just for your benefit, I'll be brief. There's alot more paper crap than gold out there, and as long as people buy into it, the corrupt bankers and the corrupt governments are fine. As soon as they lose their grip on commerce, they lose the game. And IF they lose the game, they know that gold is what they want to be holding, which is why they are loathe to sell any. Obviously, they think that they can still maintain the game or they wouldn't be selling gold for any reason.

jmski52

so please answer this question:

the world does not fall apart, there is no major calamity, we do not have hyper inflation, and everything within reason is beautiful...

so what happens to all your "security gold" then?

my answer is: its worth what gold is worth, that is, its normal price structure. and that is indeed how and why I would own gold... for its normal price structure.

but if you have a different idea, let me know.

Alan, I hope nothing causes society to fall apart. That would be the ideal scenario. I live in a more stable place than L.A., by the way, and I still feel that at any time, I could be subject to a home invasion, a robbery at gunpoint, or a mall shooting. I grew up in the '60's and 70's when I never had to worry about those types of things. So, in terms of what I grew up with, society IS falling apart.

My point is that it doesn't have to happen in one fell swoop. It's happening in little bits and pieces. Throw terrorism threats into the mix, along with the steady loss of privacy and civil liberty and creeping socialism and you get a mucky compromise that doesn't resemble a free society. It's happening that way out of necessity, which is a darned shame.

On top of those sad facts, toss into the mix a fine mess caused by greed and stupidity in the economic and banking systems, and we have a witches' brew that money can't solve. So yeah, in a way it really doesn't matter whether you keep your assets in dollars or gold because the larger questions revolve around trying to keep what's important in proper perspective. And life goes on.

roadrunner

In the Ampex and Kitco business models they buy and sell. As long as they can get the product they make money by turning it over. Obviously they have sources where they are buying at spot. The majority of the coin shops and other smaller sellers apparently don't have such sources or they too would be buying at spot (or back of) and selling at 3-6% over as they have been doing for the last few years. When everyone is back to buying at spot or just back of, then we can call off the shortage in small gold coins/bars.

the world does not fall apart, there is no major calamity, we do not have hyper inflation, and everything within reason is beautiful... what happens to all your "security gold" then?

There is little to no chance of not having a calamity of sorts from the current financial unwinding and the follow on stagflation. What we've seen so far is unfortunately just a sampler. We'll see higher levels of deflation and inflation that anything seen since the 30's. Probably both at the same time. It will be the first time in many decades where gold will need to function as money again.

Let's face it. The top 10-20 banks are completely insolvent. Who really doubts this? A number of major insurers and many key corporations as well. As much white wash as is being wiped over the current mess now, really doesn't solve anything. It just gives bankers more time to grab their parachutes before they jump ship.

roadrunner

MoneyLA

thanks for the replies. but while banks might be insolvent (if they are insolvent) the public still trusts our currency.

and that's what makes a dollar worth a dollar -- public trust.

I honestly doubt that you could go to your neighborhood gas station today and try to pay for a fill up with a 1/10 AGE or some silver eagles. I think if you tried, you'd get some very funny looks.

I know what your point is -- someday you might HAVE to buy that gas with gold or silver.

My point is, that "future day" is inconceivable to me.

And I am sure you hope it doesn't come either.

So back to my point about owning gold: gold will have its ups and downs as it reacts to market conditions and fluctuations and news and events. When it appears gold is making a move up, I will invest in gold.

But I will not buy gold in anticipation of the "breakdown" that mekes gold a security blanket. I will buy gold becuase in a vibrant economy it will have trading ranges and spurts higher.

cheers.

CaptHenway

<< <i>

When Wall Street firms are creating their own financial instuments and then reneging on them, so that the Treasury has to create enough extra cash to bail them out (pay no attention to the fact that no work is being done, no products are being created, and that no people are put to work when this is happening), and nobody is going to jail because they are all in the same financier's club, after all - how much of their paper do you really want to own?

>>



What about all the paper gold "created" by some trader or bank selling a gold contract or two or ten thousand that they don't have a single ounce of backing for? What happens when those sellers file for bankruptcy? Will the Fed deliver the gold to bailout the sellers and/or to keep the buyers solvent?

CalGold

What about all the paper gold "created" by some trader or bank selling a gold contract or two or ten thousand that they don't have a single ounce of backing for? What happens when those sellers file for bankruptcy? Will the Fed deliver the gold to bailout the sellers and/or to keep the buyers solvent?

What about it? The same rules apply as in all commodity futures contracts, as has been the case for decades in the futures markets. The short position is subject to the margin rules. If the price rises against the holder of the short position, the short gets a margin call. If they don't meet margin, their position gets closed out and they are liable to the house for any deficit. If they go bankrupt the house loses. Maybe some longs putting on a squeeze won't be able to collect as much as they would like from the bankrupt short. So what? The longs in the futures market don't own any gold either. They only own a contract to take future delivery. What if they don't make their margin call when the price falls? Someone knocks on their door, so to speak, and says "here's your gold, where's my money" and they say "I don't have the money to pay for this and I can't lay it off on anyone else because the price has fallen." The same result applies.

None of this of course addresses the questions I asked in the post.

CG

CaptHenway

I'm just asking what's to keep some crook from selling a ton of gold contracts, then taking the money and running?
There was a story the other day about a well known and respected trader who got caught running a ponzi that may involve FIFTY BILLION DOLLARS!!!!!!
TD

MrEureka

I'm just asking what's to keep some crook from selling a ton of gold contracts, then taking the money and running?

Whose problem is that? Certainly not the small investor. And it's the small investor that's paying stupid premiums for small quantities of bullion.