On premiums over spot, buying and selling...a case study

morgantype

Hello all - I don't post often but enjoy the content.

I was recently afforded the opportunity to unload a significant portion (read 95%) of my holdings of gold and silver. I thought you would all enjoy hearing how the premiums above spot played out as I know this is always a hot topic on the forums.

First, I didn't bother to shop around I returned to the LCS where I bought a majority of these items as I prefer to unload EVERYTHING in one transaction. I mean everything from full Morgan's to proof ages, to blobs of .999 from someone's garage to JM/Engelhard bars. Below are my findings:

Gold:

For all of the gold I sold, I was paid above spot at a premium based off of the items. Much of my gold was in the form of ages (1/10-1oz) smaller fractional name brand bars (Engelhard, Pamp, Credit Suisse). I was laid a larger premium for proof gold ages.

As you know, ages carry a premium on the buy, and they carried a premium on the sell (albeit not as much) but I was still satisfied with the premiums paid. Much of the smaller (1g-10g) bars were picked up at spot or spot +5% and received around spot or spot+1-2% on the sell.

Interesting to note, I had a couple of MS 70 1/10 age for which only the standard premium +~$10 was paid rather than a higher price.

Overall, I was VERY satisfied with the prices I received for the gold. I could have shopped some of these items around or sold some of them one off on eBay/etc. but that would have obviously taken much more time, transaction costs and not to mention risks of returns and most important the shipping hassle.

All in all, I showed up with my stuff, handed over a bag of stuff sat down while the order was written up and walked out about 30mins. later with a check.

SILVER

This process was much more eye opening.

I had pretty much everything but the kitchen sink. Morgans, ase, Engelhard/JM bars ranging in size from 1-10oz, odd weight old pour bars, generic one ounce rounds.

They only items that received a premium were JM/Engelhard bars and ASE. They only wanted to pay split for Pamp, Credit Suisse, Maples, Onzas, philharmonics.

The premium paid was larger for ASE vs. Engelhard/JM. (Read 1.5 vs. .5). Premiums charged on the way out are generally (4 for ASE 2-2.5 for Engelhard JM).

However, I received spot for at least everything else. This is what I found the most interesting. Generic silver generally sells at spot, so had I bought generic silver rather than branded, I would only have had to worry about the fluctuating price of silver rather than the premium differential as well as the fluctuating price of silver.

Circ Morgans went for 18, xf/Wu went for more with uncs going for 26 or so. I thought this was a respectable price given that I try to only buy Morgan's when j can get them for 19-21 a piece.

90% traded for 10x when the spot price was 11.2. I didn't have anything like a $500 bag but could have gotten more had I.

OVERALL

I thought the convenience of cash and carry and moving everything in one transaction was of primary importance. Had I shipped out to APMEX or piece mealed the deal it would have not been to my liking.

Overall, it makes sense to have a relationship with a LCS if possible as they and this is the way to go when moving items in bulk.

BAJJERFAN

<< <i>Hello all - I don't post often but enjoy the content.

I was recently afforded the opportunity to unload a significant portion (read 95%) of my holdings of gold and silver. I thought you would all enjoy hearing how the premiums above spot played out as I know this is always a hot topic on the forums.

First, I didn't bother to shop around I returned to the LCS where I bought a majority of these items as I prefer to unload EVERYTHING in one transaction. I mean everything from full Morgan's to proof ages, to blobs of .999 from someone's garage to JM/Engelhard bars. Below are my findings:

Gold:

For all of the gold I sold, I was paid above spot at a premium based off of the items. Much of my gold was in the form of ages (1/10-1oz) smaller fractional name brand bars (Engelhard, Pamp, Credit Suisse). I was laid a larger premium for proof gold ages.

As you know, ages carry a premium on the buy, and they carried a premium on the sell (albeit not as much) but I was still satisfied with the premiums paid. Much of the smaller (1g-10g) bars were picked up at spot or spot +5% and received around spot or spot+1-2% on the sell.

Interesting to note, I had a couple of MS 70 1/10 age for which only the standard premium +~$10 was paid rather than a higher price.

Overall, I was VERY satisfied with the prices I received for the gold. I could have shopped some of these items around or sold some of them one off on eBay/etc. but that would have obviously taken much more time, transaction costs and not to mention risks of returns and most important the shipping hassle.

All in all, I showed up with my stuff, handed over a bag of stuff sat down while the order was written up and walked out about 30mins. later with a check.

SILVER

This process was much more eye opening.

I had pretty much everything but the kitchen sink. Morgans, ase, Engelhard/JM bars ranging in size from 1-10oz, odd weight old pour bars, generic one ounce rounds.

They only items that received a premium were JM/Engelhard bars and ASE. They only wanted to pay split for Pamp, Credit Suisse, Maples, Onzas, philharmonics.

The premium paid was larger for ASE vs. Engelhard/JM. (Read 1.5 vs. .5). Premiums charged on the way out are generally (4 for ASE 2-2.5 for Engelhard JM).

However, I received spot for at least everything else. This is what I found the most interesting. Generic silver generally sells at spot, so had I bought generic silver rather than branded, I would only have had to worry about the fluctuating price of silver rather than the premium differential as well as the fluctuating price of silver.

Circ Morgans went for 18, xf/Wu went for more with uncs going for 26 or so. I thought this was a respectable price given that I try to only buy Morgan's when j can get them for 19-21 a piece.

90% traded for 10x when the spot price was 11.2. I didn't have anything like a $500 bag but could have gotten more had I.

OVERALL

I thought the convenience of cash and carry and moving everything in one transaction was of primary importance. Had I shipped out to APMEX or piece mealed the deal it would have not been to my liking.

Overall, it makes sense to have a relationship with a LCS if possible as they and this is the way to go when moving items in bulk. >>



Of course not all LCS are created equal. Even paying $2 over spot for an ASE is better than they could do from an AP [who I assume wants to sell at a profit to them], assuming that spot doesn't make a stupid move. If spot moves high enough, I'd have no qualms about selling to my LCS at $1.50 over if it meant a profit for me. Right now, silver pricing is too stagnant to make money on.

The thing is that some refuse to accept that the premium is the Mint's markup and is simply to cover their COST of manufacturing, etc. That cost doesn't change just because spot drops by some arbitrary amount. It costs the same to mint an ASE whether silver is $7 or $27. Sounds like a situation of lazy accounting to me. We'll just add a flat $2 per coin to cover expenses and call it good. Down the line it just becomes somebody else's cost. Once it leave's the Mint's control, it's at the whim of the market. And since it doesn't seem to be affecting demand/sales I'd guess the Mint doesn't really give a rat's as$!

cohodk

Thanks for the first hand account of selling your stash. Much appreciated.



The thing is that some refuse to accept that the premium is the Mint's markup and is simply to cover their COST of manufacturing, etc

I have no problem with the Mint charging a premium for production costs. However, I feel that cost should just be passed on to the first buyer. Just as in the case of a new car, the cost of production is a burden of only the initial purchaser. (The car loses money as soon as its off the lot).

The market is content on maintaining and passing this premium to every user. If thats what the market wants then who is too argue with it. But, markets can change and this premium may or may not be acceptable in the future, especially if prices stagnate for an extended period.

jmski52

Thank-you for the great post, morgantype. It indicates to me that the market is functioning and that your LCS is legit. Congrats!

Timbuk3

Sweet, thanks for sharing your experience !!! :-)

OperationButter

appreciate you posting your experience on the sale.

DennisH

Excellent information, and I especially appreciated the smaller details and synopsis comments. Thank you!

BAJJERFAN

<< <i>Thanks for the first hand account of selling your stash. Much appreciated.



The thing is that some refuse to accept that the premium is the Mint's markup and is simply to cover their COST of manufacturing, etc

I have no problem with the Mint charging a premium for production costs. However, I feel that cost should just be passed on to the first buyer. Just as in the case of a new car, the cost of production is a burden of only the initial purchaser. (The car loses money as soon as its off the lot).

The market is content on maintaining and passing this premium to every user. If thats what the market wants then who is too argue with it. But, markets can change and this premium may or may not be acceptable in the future, especially if prices stagnate for an extended period. >>



As I said before if you pay the $2 premium cost when you buy coins from an AP don't you want to get it back when you sell? If you are in the business then you surely do want to get it back. If you are a stacker, but 6 months down the road you decide that you want out, you may not care if you get it back, esp. if spot falls to the point where you may not recover your cost. Once it goes from AP to dealer to customer it loses its distinction as a premium and instead just becomes cost. While I believe the APs are required to make a 2 way market in Mint products that they have exclusives on, they are free to pay whatever they want when purchasing from the public as are dealers and anyone else.

cohodk

As I said before if you pay the $2 premium cost when you buy coins from an AP don't you want to get it back when you sell?

Of course you want it back, but are you justified? Right now the market says yes you are, but that may not always be the case, especially if the market continues to stagnate. I agree with the rest of your post.

jmski52

The premium could always jump to $4 or $6 one day. It's not something you can control anyhow.

GrumpyEd

Sounds like your LCS was reasonable, I can understand wanting to sell as a lot and not wanting to send it and worry about being paid or problems with shipping or bad buyers.

Did they ask for your info to send a 1099?