Now that the price of silver is down, are your local coin shops dropping their selling price for sil
PerryHall
Posts: 46,325 ✭✭✭✭✭
Just curious. I'm sure they've dropped their silver buy prices. What are your local dealers paying for 900 silver and common circulated Morgans and Peace dollars?
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I don't think it works quite that way with a one-two day drop. Oil is down, you seen the gas prices drop any at the pump yet?
<< <i>"Now that the price of silver is down, are your local coin shops dropping their selling price for silver?"
I don't think it works quite that way with a one-two day drop. Oil is down, you seen the gas prices drop any at the pump yet? >>
Actually is DOES work like that if you have honest dealers that you deal with. A local shop sells at a specific dollar amount over spot from day to day. If that number is $1.50, for example, then he charges $37.50 when silver is $36, and will charge $36 the very next day if silver is $34.50.
The only deviation I see from this is when silver becomes hard to find....like what happened in 2008 when premiums were at an obscene spot + $2.50 - $4.00 even on generics when silver spot was just $9.50.
If you have a dealer who sells silver for exactly the same on "day A" when silver spot is $36, as he does on "day B" when silver spot is $34.50, then its time to find a new dealer!
Unfortunately he is out of most everything lately. He did scrounge up some one ounce bars and .999 fine odd weights yesterday though.
It seems everyone is buying in my area and he has nothing coming in.
"Law of Supply and Demand"
on here, some people get confused and upset!
<< <i>Be careful, gentlemen! If you try to explain the
"Law of Supply and Demand"
on here, some people get confused and upset!
Not to be confused with his notorious, but related cousin "price gouging".
<< <i>
<< <i>"Now that the price of silver is down, are your local coin shops dropping their selling price for silver?"
I don't think it works quite that way with a one-two day drop. Oil is down, you seen the gas prices drop any at the pump yet? >>
Actually is DOES work like that if you have honest dealers that you deal with. A local shop sells at a specific dollar amount over spot from day to day. If that number is $1.50, for example, then he charges $37.50 when silver is $36, and will charge $36 the very next day if silver is $34.50.
The only deviation I see from this is when silver becomes hard to find....like what happened in 2008 when premiums were at an obscene spot + $2.50 - $4.00 even on generics when silver spot was just $9.50.
If you have a dealer who sells silver for exactly the same on "day A" when silver spot is $36, as he does on "day B" when silver spot is $34.50, then its time to find a new dealer! >>
Don't forget about the impact a dealer's inventory-on-hand figures in to the equation. If a dealer feels he is too short on a particular precious metal, he might up his buy price. If he feels he is too long, he may lower his buy price. The same on the sell end. This isn't a matter of honesty. The dealer isn't trying to lie to you. It is more of a matter of comfortability and risk aversion. Put yourself in the dealer's shoes for a minute. Let's say a guy comes in your store and sells you 2000 ounces of silver. You already have 3000 ounces of silver on hand, and you typically don't sell but 1000 ounces of silver on average per week. Your bank account is getting low with all this money tied up with physical silver, plus silver just went up, so now you owe money on your short position you purchased to cover your a$$ on all the silver you are long. In this scenario, you might decide to lower your buy and sell prices in the hopes to attract more buyers than sellers. That wouldn't be dishonest of you. It would be a smart business decision. Trading in physical metals isn't typically commission based, with a broker. These guys are buying and holding, or shipping it off to another dealer at a discount, so I'm certainly not surprised when dealers become more comfortable taking a long position when a big dip occurs.
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Here come the flamers!!!!!!!!
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But seriously, folks, that the way the world works. Just before I retired I had a guy come into the coin shop to buy three 10 ounce silver bars. We had been selling them like mad at +$1.50 per ounce, our posted sell price, and we literally only had three bars left in stock. I quoted him +$1.50.
The guy spent 20 minutes whining and piffing and moaning that two months earlier we had sold him bars at +$1.00 an ounce. I agreed that that was true, but told him that that was because when he came in two months earlier we had just bought in 200 10 oz. bars from somebody's stash, and were discounting them to reduce our inventory. He kept insisting that we had to sell them to him at the previous price. I told him no. After he called his brother twice to tell him what was happening, he told me again that I had to sell him the bars at +$1.00. I said no a bit more emphatically. He left in High Didgeon, not to be confused with Hai Karate.
Within the hour somebody else came in and bought them, at +$1.50.
TD
If a dealer normally sells $35 silver at a + $1.00 premium, and it then becomes a + $1.50 premium a few days later because silver corrected down by 5-10%, then what is most likely happening is the dealer is trying to get you to pick up part of the tab on his losses. If its really true that he is raising his sell premium because of a shortage, then it follows logically that he is also going to raise his buy prices to replenish stock. I NEVER see that in my experiences.
So again, I stand by my claim that the laws of supply and demand are real....but so is the closely related price gouging.
<< <i>It has been my experience that the "+ $x.xx" does not fluctuate on a day to day basis. Look at APMEX, Tulving, and Gainsville. They do not raise/lower their premiums daily, or even weekly based on spot price fluctuations. And since the OP specifically asked about the effect of premiums because of the short term fluctuations of spot price, then thats how I answered. You will notice that I did add a caveat on the "supply" part of the equation in regards to how it affect premiums in my first response. But that is not a daily event.
If a dealer normally sells $35 silver at a + $1.00 premium, and it then becomes a + $1.50 premium a few days later because silver corrected down by 5-10%, then what is most likely happening is the dealer is trying to get you to pick up part of the tab on his losses. If its really true that he is raising his sell premium because of a shortage, then it follows logically that he is also going to raise his buy prices to replenish stock. I NEVER see that in my experiences.
So again, I stand by my claim that the laws of supply and demand are real....but so is the closely related price gouging. >>
I understand your point of view, and I can see how you came to your conclusion, but I disagree with it. I don't follow Gainsville, but I do observe APMEX and Tulving changing their buy and sell spreads fairly regularly, so I can't agree with your claim that their markups remain fixed. Heck, just in the past few weeks their buy and sell on silver eagles have jumped substantially. 1oz rounds have been all over the place the past 12 months or so, and platinum bars at one time cost spot + $5 at Tulving and now only cost spot.
With regards to your belief that a dealers is attempting to get his customers to pick up part of the tab on his losses when silver corrects, I'm going to have to disagree with you once again. Think about it. If you were a dealer whose objective it was to make smart business decisions based on educated assuptions, and you were long on silver, and silver dropped 5 to 10%, and you felt pretty confident silver was going to rebound, but were not 100% certain, what would you do? Would you increase your buy price along with your sell price and risk having your position become longer than your comfort level? Would you try to preserve your current comfort level by increasing your sell price but keeping your buy price fixed? Or, against your better judgement, would you keep both prices fixed and risk your current long position.
I do agree with you on one point. Companies that want to be considered serious bullion traders, like APMEX and Tulving, will pay close attention that the practice of having varying spreads is avoided as much as possible by having the ability to easily rebalance their position.
I'm not trying to start a debate here, and I don't trade precious metals professionally, but I have been pretty successful in business over my life. I have a feeling someday you might want to get in the precious metals business. The way you follow the precious metals markets, you would probably be pretty successful at it. The only reason I'm giving a you a differing opinion (and perhaps a little bit of a hard time
<< <i>It has been my experience that the "+ $x.xx" does not fluctuate on a day to day basis. Look at APMEX, Tulving, and Gainsville. They do not raise/lower their premiums daily, or even weekly based on spot price fluctuations. And since the OP specifically asked about the effect of premiums because of the short term fluctuations of spot price, then thats how I answered. You will notice that I did add a caveat on the "supply" part of the equation in regards to how it affect premiums in my first response. But that is not a daily event.
If a dealer normally sells $35 silver at a + $1.00 premium, and it then becomes a + $1.50 premium a few days later because silver corrected down by 5-10%, then what is most likely happening is the dealer is trying to get you to pick up part of the tab on his losses. If its really true that he is raising his sell premium because of a shortage, then it follows logically that he is also going to raise his buy prices to replenish stock. I NEVER see that in my experiences.
So again, I stand by my claim that the laws of supply and demand are real....but so is the closely related price gouging. >>
Phil, as you know, there are posted Buy/Sell prices, and negotiable Buy/Sell prices. You used to get good customer prices because you knew to ask. We seldom changed our posted prices, but did discuss them amongst ourselves often, and knew when we could stretch and when we couldn't.
When you are ready to buy or sell, and not just kicking the michelins, ask nicely what people can do for you. It might work.
TD
not all shops have a steady supply of silver coming in and going out, so I would expect the premiums to increase or decrease with supply and demand.
case in point: A dealer pays spot for XX-ounces of silver at $35 spot and usually charges a $1.50/oz premium. He doesn't sell any for 2 days and silver drops to $33. The afternoon of the drop someone comes in and wants X-ounces. His premium goes up to $2.50/oz over spot to still be in the black but decreasing his profit margin -OR- he tells the customer that he doesn't have any for sale.
Would you:
A) Always keep the same premium over spot and loose money?
C) Make the customer angry by telling him that you don't have any when you're tripping over Monster Boxes behind the counter?
Too many positive BST transactions with too many members to list.
That would not be good business. I know my dealer, and I assume most others, simply move the silver to the back ,
and simply say they do not have any available to sell .(Pretty much every dealer in the country did this when silver went
from $ 21 down to $ 9 a couple years ago) The only other option is to keep it priced at a fair premium above what they paid for it
(which causes customers to complain about the high premiums).
Dealers work with a paper thin profit margin on metals already , selling off at a loss would be just plain stupid business.
I am sure their are some that do , but you can bet you don't find many examples of this type of conduct elsewhere in life.
As mentioned above, even if the price for a barrel of oil drops , you don't find the price of a gal of gas droping the same hour .
That's because the gas you are buying was bought at the higher price , and that's the gas you are buying . You are not buying gas
that will be the stations next shipment , that the station may get at a lower price ,you are paying for the gas they already have on hand
that was bought at the higher price. Why should metals be diffrent ?
I guess you can rationalize it by saying they can sell you silver at a loss because they can turn around and buy
more inventory today , at a lower price , but I don't personally see that as a good business practice.
The primary goal of a business is to make money . How are you going to make money , if you are loosing money ?
Lewis
The dealers do not hedge MY losses, and I dont expect them to. Why should I be expected to hedge theirs? I wont do any business with any dealers that play a rigged game. If your normal premium is + $1.00, then that should be completely independent of any short term (1-3 day) spot price swings. Wanna play a fair game? Im in. Want to hedge your losses on my next purchase? Im out.
<< <i>
<< <i>Be careful, gentlemen! If you try to explain the
"Law of Supply and Demand"
on here, some people get confused and upset!
Not to be confused with his notorious, but related cousin "price gouging".
I realy believe this statment!
(x2,Meltdown),cajun,Swampboy,SeaEagleCoins,InYHWHWeTrust, bstat1020,Spooly,timrutnat,oilstates200, vpr, guitarwes,
mariner67, and Mikes coins
<< <i>Ok, my final thought on this (subject to rebuttals). If you are both willing and happy to hedge a dealer's silver inventory by paying a higher than normal premium on silver that just took a correction hit, then have at it! I refuse to either feel sorry for, or help pay for a short term loss on a dealer's inventory when that dealer does not do me any favors in the event of a short term price rise. In other words, if the dealer bought in XXX ounces of silver yesterday at $34, and the spot rises overnight to $37......and his normal premium is +$1.00, do you think he'll be selling you silver at $35 today? Of course not....and what logical person would expect that? However, if he bought in XXX ounces yesterday at $37, and it fell to $34 overnight, I dont expect him to be selling today at $38 just because thats what his price was yesterday.
The dealers do not hedge MY losses, and I dont expect them to. Why should I be expected to hedge theirs? I wont do any business with any dealers that play a rigged game. If your normal premium is + $1.00, then that should be completely independent of any short term (1-3 day) spot price swings. Wanna play a fair game? Im in. Want to hedge your losses on my next purchase? Im out. >>
And if you are willing to miss buying opportunities because of your perception of a dealer's profit margin, then have at it. I'll continue to make my buying decisions independent of my personal speculation of what a dealer paid. All I'm concerned about is how much I have to pay and if I think it is a good deal. I could give rat's a$$ what the dealer paid.