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Now lets discuss Bid/Ask on precious metals.

gecko109gecko109 Posts: 8,231 ✭
in Precious Metals
Hopefully we have resolved the glaring difference in the terms "spot" and "melt" in the other thread. They certainly are not the same thing!


Now lets move on to the Bid/Ask spread on precious metals. Since dealers do not work off of less than 1/2 of 1% margins, why is this system used in precious metals? Where does it apply? Brokering houses? Only for paper contracts? Even then it seems that the spread is just too low for anyone to survive on. Thoughts?

Comments

  • OPAOPA Posts: 17,124 ✭✭✭✭✭
    For us "small time" Joe's, it's a quasi buy and sell formula for the "big fish" ... Does not apply to the buy or sell price of physical PM, but gives you an idea of what the "futures market price" is. How'd I do Professor? Did I get a passing grade with a smiley face?
    "Bongo drive 1984 Lincoln that looks like old coin dug from ground."
  • percybpercyb Posts: 3,328 ✭✭✭✭


    << <i>For us "small time" Joe's, it's a quasi buy and sell formula for the "big fish" ... Does not apply to the buy or sell price of physical PM, but gives you an idea of what the "futures market price" is. How'd I do Professor? Did I get a passing grade with a smiley face? >>



    Good points. The cost to carry is wrapped up in the purchase price as well....although now it is almost negligable because of the low interest rates.
    "Poets are the unacknowledged legislators of the world." PBShelley
  • RedTigerRedTiger Posts: 5,608 ✭
    Bid/ask is common terminology for financial instruments. Odds are that the specific reference is for "paper" contracts. However, almost everything trades with a bid (the current price for sellers) and the ask (price for buyers), the market maker sets the price. For physical metals, there is also a bid/ask. Go to any major metal dealer's website and they'll have a current buying price (the bid) and the current selling price (the ask). Depending on volume of the product and the particular market-maker/dealer, the bid/ask spread might be relatively tight or wide.

    High volume financial products are often penny-wide on $100+ value contracts, meaning there is only a one-cent spread per $100 transaction. The market makers make a very good living on that penny per, because the volume is many millions every day. Getting back to metals, a small local dealer might quote $2 or $3 wide per ounce on silver bars, eg: $15 buy, $18 sell. While a big national dealer might quote a far narrower spread because they do much more volume and can even hedge using paper contracts if need be.

    During fast markets, when prices are moving quickly, the spread will widen. It is the way markets work.
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  • OPAOPA Posts: 17,124 ✭✭✭✭✭
    It took you 2 paragraphs to say what I said in one line...image
    "Bongo drive 1984 Lincoln that looks like old coin dug from ground."
  • ttownttown Posts: 4,472 ✭✭✭
    I've never seen a grey sheet for bullion. You have to shop margins since they vary so much some are greedy just like a used car salesman. It's a piece when selling but a cherry only driven by an old lady when sellingimage
  • halfhunterhalfhunter Posts: 2,770 ✭✭✭
    I assume the OP is alluding to the PM bid/ask as stated on Kitco. As stated earlier this is for paper contracts.
    Whats funny is the major on-line dealers sell physical for an amount over ask and call it "spot". Like APMEX selling something for $2.29 over spot/ask. When they buy however spot miraculously becomes the bid price . . . Funny how that works ! ! !

    HH
    Need the following OBW rolls to complete my 46-64 Roosevelt roll set:
    1947-P & D; 1948-D; 1949-P & S; 1950-D & S; and 1952-S.
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