Silver Premiums just dropped.

jmski52 · August 28, 2009 12:40AM

Silver is up $0.52, but it looks like premiums for 500 oz. boxes just dropped $0.10 to $0.20.

Who tracks 10 oz. and 100 bars? Or 50 oz. to 100 oz. quantities of 1 oz. pieces? Have the premiums on these dropped as well?

SilverBaron · August 28, 2009 2:40AM

At the Blue Ridge show last weekend .....

5s & 10s were spot + $1 - $2 and 100s were spot + $.70 - $1.00.

I think you will find that as spot goes up, the premium goes down.

fc · August 28, 2009 6:09AM

i think you will find that as demand slows down premiums go down.

just look at the hysteria from several months ago and compare to today. it should be quite obvious why premiums have fallen so drastically. some sanity is returning to the silver market.

roadrunner · August 28, 2009 6:13AM

I don't know about the premiums but the larger refiners in my area were offering spot today on bars. During this week they were paying 10.3X face for 90% as it was in short supply. After today's move up they were probably up to 10.5 to 10.6X face. One of my local shops has buyers lined up to pay for all the silver he can buy, yet he won't pay even a fair price to get it. I picked up a few 100 oz Englehards this week for myself.

roadrunner

PreTurb · August 28, 2009 10:07AM

Roadrunner,

Who are the refiners in our area? I didn't know there were any!

preturb

Avon, CT

Norseman88 · August 28, 2009 1:10PM

I agree that there was an rediculous premium for Eagles and Maples along with Engelhard bars even the 100 ouncers but it was because of supply and demand.
The bigger question is when are Gold and Silver going to collapse in price??? I thought some of the experts here predicted a huge selloff that would leave precious metals in a perpetual state of low prices.

MoneyLA · August 29, 2009 2:30PM

It only makes sense that premiums have dropped because the fabricators have been able to increase their production to meet demand.

Remember, premiums are strictly artificial and have nothing to do with the price of the metal.

I'm going to give you the classic case: the premium on Krugerrands vs the premium on American Gold Eagles. Krugerrands have had a lower premium strictly for "political" and "social reasons." But K's had the same gold that AGE's had.

In the case of silver -- six months ago there wasn't enough "small silver" to meet demand so the premium went up. But the silver in one ouncers and five and ten ouncers was the same silver in 1,000 ounce bars. It was just that more people wanted to buy one ouncers and not 1,000 ounce bars.

bottom line: as long as the silver is silver and the gold is gold, I would think you would want the metal with the smallest premium.

jmski52 · August 30, 2009 2:20AM

I would think you would want the metal with the smallest premium.

I used to think that. I used to be on the order of fc, par excellance - searching out the absolute most advantageous buys in order to arbitrage a profit. But from a saver's point of view - there is also a definite utility in smaller increments that have higher premiums.

1) They can be sold piecemeal instead of having to liquidate one large position and then worry about what to do with the excess proceeds.

2) The higher premiums for smaller pieces (or lower premiums for politically unpopular pieces) usually still exist when you sell, as they did when you bought. So, unless the premiums have changed dramatically when you get ready to sell, it's basically a wash.

And, since the odds are equal that the premium will go up or down from the time you bought to the time that you sell, that risk can be disregarded. Although fc will probably tell you that is how he makes money, the fact is that in timing premiums sometimes you win, sometimes you don't.

3) Lastly - most of the time, as prices go up the premiums go down. And vice versa, when prices go down the premiums go up. So, you have a naturally built-in buffer on price fluctuations - even if prices are being manipulated on the Comex.

When backwardization in the futures markets occurs, it is demonstrating that a bird in the hand is worth 1.02 birds in the bush. That's becoming the case more often now, instead of what has been the norm for decades. People aren't as enthralled with the risk of future delivery at a nominally higher price.

The physical market is a real market and makes all of these adjustments on the fly, based on local supply & demand. That's where the real story is found. Trust in the big regulated paper markets is dissipating. Rightfully so, IMO. Their reporting isn't transparent, and the rules are there only to protect the big players, particularly the large bullion banks. Same s**t, different day.

MoneyLA · August 30, 2009 4:38AM

jmski... I agree that for utility purposes smaller pieces may be better to own than larger pieces.

but my comments about buying at the lowest premium applies to LIKE PIECES, as an example the Krand vs the Maple Leaf or AGE.

By the way, this also includes for quality gold. A gold one ounce coin from John's Mint might have a lower premium than a Maple Leaf, but if John's Mint is not widely known and accepted I wouldn't touch it even if it had a lower premium.

percyb · August 30, 2009 2:04PM

<< i think you will find that as demand slows down premiums go down.

just look at the hysteria from several months ago and compare to today. it should be quite obvious why premiums have fallen so drastically. some sanity is returning to the silver market. >>

I agree. Hysteria creates the premium to the pm market prices..

Norseman88 · September 1, 2009 1:01PM

I'd still like to know from the so called experts here when Gold and Silver is going to collapse and why they would dare say that PM's will stay low priced forever???

MrOrganic · September 1, 2009 10:28PM

<< I'd still like to know from the so called experts here when Gold and Silver is going to collapse and why they would dare say that PM's will stay low priced forever???

>>

Experts? LOLOLOL

Norseman88 · September 2, 2009 12:47PM

<< 

<< I'd still like to know from the so called experts here when Gold and Silver is going to collapse and why they would dare say that PM's will stay low priced forever???

>>

Experts? LOLOLOL >>

You know who I'm talking about, all you have to do is look for the litle braggart continually patting himself on the back for always being right.

fc · September 2, 2009 1:13PM

<< 

<< 

<< I'd still like to know from the so called experts here when Gold and Silver is going to collapse and why they would dare say that PM's will stay low priced forever???

>>

Experts? LOLOLOL >>

You know who I'm talking about, all you have to do is look for the litle braggart continually patting himself on the back for always being right.

>>

deadhorse is that you?

fivecents · September 2, 2009 1:39PM

Board member fc's contary PM opinions actually help this board a great deal. He makes good points and counterpoints. Without him some of these threads would go nowhere or have everyone patting each other on the back and singing kum by ya.
That said I do agree more with roadrunner that with fc. But fc is an asset to this PM board. jmho

COINB0Y · September 3, 2009 2:55AM

COINB0Y · September 3, 2009 3:01AM

<< I'm going to give you the classic case: the premium on Krugerrands vs the premium on American Gold Eagles. Krugerrands have had a lower premium strictly for "political" and "social reasons." But K's had the same gold that AGE's had.. >>

Now, my problem Alan, what to do?

I feel like selling into this metals rally except when I see the Weekly $VIX about to break out of a declining wedge.

Text Book

Silver Premiums just dropped.

Comments