gold eagle premiums

ranger1202

I'm new to purchasing gold eagles and I'm curious why the premium on < 1oz eagles are so much higher than 1oz eagles? Looks like its around 10-15% over spot for 1/4s, 7-10% on 1/2s, and around 5% on 1oz. Being new, one would think the percentage premium would be close to the same on bullion gold through the line. Obviously I know the more weight you buy the less of a premium you pay but 10-15% seems really high. Why would anyone want to buy something that has to appreciate 15% before breaking even? I'm sure there is a logical explanation but i'm curious.

BAJJERFAN

Well, first off the Mint charges a FLAT RATE premium to its Authorized Purchasers for AGEs and ASEs. The premium is intended to cover ALL costs from purchase of the planchets to striking the coins. Costs such as advertising are included. The premium for 1 ounce AGEs is 3% over spot,; 1/2 ounce is 5% over; 1/4 ounce is 7% over and 1/10 ounce is 9% over. With the 1/10 ouncers they obviously have to handle way more coins than for the other denominations. The APs in turn add their own premium to cover costs and make a profit. Dealers who buy from APs to sell to the public likewise add their own premium/markup; hence the 15% over spot that you sometimes see. If you buy a 1 ounce AGE from some of the bigger places at their "normal" $70 over spot pricing, then you will need a $70 move in spot price just to break even. The market being very competitive, you will be hard pressed to resell your AGE at anything close to $70 over. You pretty much have to be competitive with the big boys on price. Further, they can offer a measure of "peace of mind" when shipping because they can provide insurance way cheaper than you or I can.

The premiums often persist in the marketplace, but they are not guaranteed to do so. The "premium" for say AGEs is that cost over what the same amount of gold will sell for in its most generic form which is bars or rounds. Dealers [and others] are free to offer what they want for gold be it rounds, bars, AGEs etc. but a dealer who won't even offer spot for an AGE in a robust market is one to be avoided IMO.

CaptHenway

Look at the price per can of buying one can of pop from a hotel vending machine vs. buying a 24-can case of pop at the supermarket.

ranger1202

@CaptHenway said:
Look at the price per can of buying one can of pop from a hotel vending machine vs. buying a 24-can case of pop at the supermarket.

Yes, but those are consumables and not an investment. If investing, why buy something (1/4 oz.) at a 15% discount to the sale value or intrinsic value when you can buy the same commodity at only 4x the volume (1 oz) for 5% discount? It really makes no sense to me. Maybe I'm missing something.

ranger1202

@BAJJERFAN said:
Well, first off the Mint charges a FLAT RATE premium to its Authorized Purchasers for AGEs and ASEs. The premium is intended to cover ALL costs from purchase of the planchets to striking the coins. Costs such as advertising are included. The premium for 1 ounce AGEs is 3% over spot,; 1/2 ounce is 5% over; 1/4 ounce is 7% over and 1/10 ounce is 9% over. With the 1/10 ouncers they obviously have to handle way more coins than for the other denominations. The APs in turn add their own premium to cover costs and make a profit. Dealers who buy from APs to sell to the public likewise add their own premium/markup; hence the 15% over spot that you sometimes see. If you buy a 1 ounce AGE from some of the bigger places at their "normal" $70 over spot pricing, then you will need a $70 move in spot price just to break even. The market being very competitive, you will be hard pressed to resell your AGE at anything close to $70 over. You pretty much have to be competitive with the big boys on price. Further, they can offer a measure of "peace of mind" when shipping because they can provide insurance way cheaper than you or I can.

The premiums often persist in the marketplace, but they are not guaranteed to do so. The "premium" for say AGEs is that cost over what the same amount of gold will sell for in its most generic form which is bars or rounds. Dealers [and others] are free to offer what they want for gold be it rounds, bars, AGEs etc. but dealer who won't even offer spot for an AGE in a robust market is one to be avoided IMO.

Definitely agree and understand the dealers are free to sell for what the market will bear. I just do not understand why someone wouldn't buy an oz eagle instead of a 1/4 eagle and save themselves 10%.

ricko

The real bargains were 20 years ago...... If you stacked then, you are smiling big time now... Cheers, RickO

BAJJERFAN

@ranger1202 said:

@BAJJERFAN said:
Well, first off the Mint charges a FLAT RATE premium to its Authorized Purchasers for AGEs and ASEs. The premium is intended to cover ALL costs from purchase of the planchets to striking the coins. Costs such as advertising are included. The premium for 1 ounce AGEs is 3% over spot,; 1/2 ounce is 5% over; 1/4 ounce is 7% over and 1/10 ounce is 9% over. With the 1/10 ouncers they obviously have to handle way more coins than for the other denominations. The APs in turn add their own premium to cover costs and make a profit. Dealers who buy from APs to sell to the public likewise add their own premium/markup; hence the 15% over spot that you sometimes see. If you buy a 1 ounce AGE from some of the bigger places at their "normal" $70 over spot pricing, then you will need a $70 move in spot price just to break even. The market being very competitive, you will be hard pressed to resell your AGE at anything close to $70 over. You pretty much have to be competitive with the big boys on price. Further, they can offer a measure of "peace of mind" when shipping because they can provide insurance way cheaper than you or I can.

The premiums often persist in the marketplace, but they are not guaranteed to do so. The "premium" for say AGEs is that cost over what the same amount of gold will sell for in its most generic form which is bars or rounds. Dealers [and others] are free to offer what they want for gold be it rounds, bars, AGEs etc. but a dealer who won't even offer spot for an AGE in a robust market is one to be avoided IMO.

Definitely agree and understand the dealers are free to sell for what the market will bear. I just do not understand why someone wouldn't buy an oz eagle instead of a 1/4 eagle and save themselves 10%.

Not everyone can afford to buy the one ouncers, thus the smaller denominations. By the same token, it makes little sense to me to offer fractional ASEs.

derryb

Think of it as getting a discount if you buy the larger size.

bronco2078

Not to mention if all you have is 1 ounce coins thats the minimum you can sell. That restricts who you can sell to and how you are going to get paid.

I tend to dump things on ebay , I'd rather sell fractionals on ebay it limits the damage if you get a thief for a buyer.

CaptHenway

@ranger1202 said:

@CaptHenway said:
Look at the price per can of buying one can of pop from a hotel vending machine vs. buying a 24-can case of pop at the supermarket.

Yes, but those are consumables and not an investment. If investing, why buy something (1/4 oz.) at a 15% discount to the sale value or intrinsic value when you can buy the same commodity at only 4x the volume (1 oz) for 5% discount? It really makes no sense to me. Maybe I'm missing something.

A portion of the bullion market has always been the survivalist faction that worries about the possibility of the collapse of civilization, for whatever cause. In such a collapse they assume that a barter economy would arise, and that in such an economy there would be an advantage to having smaller units for negotiation purposes.

During the run up to the Y2k madness the coin shop I was at sold tens of thousands of gold coins to the members of one church where the pastor was preaching the end of the world. One couple alone bought 8,000 gold 20 Franc coins. Nobody bought anything larger than a British Sovereign.

Think of the phrase "Don't keep all of your eggs in one basket."

BAJJERFAN

@bronco2078 said:
Not to mention if all you have is 1 ounce coins thats the minimum you can sell. That restricts who you can sell to and how you are going to get paid.

I tend to dump things on ebay , I'd rather sell fractionals on ebay it limits the damage if you get a thief for a buyer.

For most people it's just dumb to sell common gold on eBay. After PP/eBay fees plus shipping [plus the angst of waiting until it's delivered] it's better to walk into a shop [unless they are a rip] and walk out with a check or cash for your coin/s.

MoneyCollector

At APMEX right now 1 oz random year eagles are $68.99 over spot if you buy 9 or less. 1/10th oz would cost you around $135 over spot if you bought 10 of them. If you buy a 4 coin random year proof set (total 1.85 oz.) it's currently only $69.99 over spot and it goes on sale occasionally down to $59.99 over. So if you want some fractional gold eagles the proof set could make sense.

ranger1202

@MoneyCollector said:
At APMEX right now 1 oz random year eagles are $68.99 over spot if you buy 9 or less. 1/10th oz would cost you around $135 over spot if you bought 10 of them. If you buy a 4 coin random year proof set (total 1.85 oz.) it's currently only $69.99 over spot and it goes on sale occasionally down to $59.99 over. So if you want some fractional gold eagles the proof set could make sense.

^ yeah thats the way to buy if you wanted fractions. Bronco makes a fair point, I see how someone may want a fraction to have a larger market to sell to. CaptHenway, that pastor must have not read his Bible. If the end of the world comes, I won't be here. Thats not to say there aren't other possible economic situations where having varying gold weights to barter with would be a good idea.

Bochiman

On ebay, FROM APMEX, 2017 1oz GAEs are $14.99 over spot.
Maple Leafs are $9.99 over spot for 1oz.

Free shipping. Able to use credit card (ie...some of us get mileage or cashback from our CCs) and don't need to buy more than 1 if you don't want.

@MoneyCollector said:
At APMEX right now 1 oz random year eagles are $68.99 over spot if you buy 9 or less. 1/10th oz would cost you around $135 over spot if you bought 10 of them. If you buy a 4 coin random year proof set (total 1.85 oz.) it's currently only $69.99 over spot and it goes on sale occasionally down to $59.99 over. So if you want some fractional gold eagles the proof set could make sense.

jmski52

Looks like its around 10-15% over spot for 1/4s, 7-10% on 1/2s, and around 5% on 1oz.

Those premiums might be a tad high, but not outrageously so. Production costs may enter into the equation. Premiums also vary with a rising or falling market and the quantities that are sold in each transaction. You might pay a smaller premium for a 1 oz generic bar, but there is a more vibrant market for 1 oz AGEs, and the premiums will reflect that.

BAJJERFAN

@Bochiman said:
On ebay, FROM APMEX, 2017 1oz GAEs are $14.99 over spot.
Maple Leafs are $9.99 over spot for 1oz.

Free shipping. Able to use credit card (ie...some of us get mileage or cashback from our CCs) and don't need to buy more than 1 if you don't want.

@MoneyCollector said:
At APMEX right now 1 oz random year eagles are $68.99 over spot if you buy 9 or less. 1/10th oz would cost you around $135 over spot if you bought 10 of them. If you buy a 4 coin random year proof set (total 1.85 oz.) it's currently only $69.99 over spot and it goes on sale occasionally down to $59.99 over. So if you want some fractional gold eagles the proof set could make sense.

Even if they get relief from PP and eBay in the form of no or reduced fees [which some claim that they do], it's hard to see how they can sell at those prices and pay shipping and CC fees and reward points and still make money. Since they are an AP that price is below what they can buy replacement coins for. Oh well, good for the buyers. Why would anyone pay their outrageous regular price when with a little patience, deals like the above come along?

BAJJERFAN

@jmski52 said:
Looks like its around 10-15% over spot for 1/4s, 7-10% on 1/2s, and around 5% on 1oz.

Those premiums might be a tad high, but not outrageously so. Production costs may enter into the equation. Premiums also vary with a rising or falling market and the quantities that are sold in each transaction. You might pay a smaller premium for a 1 oz generic bar, but there is a more vibrant market for 1 oz AGEs, and the premiums will reflect that.

Those premiums reflect the markup by dealers and others after initial purchase from the mint.

jmski52

Those premiums reflect the markup by dealers and others after initial purchase from the mint.

True, and that probably accounts for more of the premium than production costs, since the Mint could pump them out all day long if needed at nominal marginal cost. Any method of distribution will have a set of costs. Cut out a middleman and you might save money, depending on whether or not you can find a good primary source that the rest of the market isn't aware of.

TwoSides2aCoin

Bad investment. Great for collecting. To think it was our money once ,that we worked for, is preposterous. Nobody cared, then. It’s always had an exchange rate and cost. Now that we have to pay more for it, It’s an investment. Buy wisely. Caveat emptor.

derryb

@jmski52 said:
Those premiums reflect the markup by dealers and others after initial purchase from the mint.

True, and that probably accounts for more of the premium than production costs, since the Mint could pump them out all day long if needed at nominal marginal cost. Any method of distribution will have a set of costs. Cut out a middleman and you might save money, depending on whether or not you can find a good primary source that the rest of the market isn't aware of.

But, in the case of bullion eagles the middleman saves the mint money buy ordering in bulk. Imagine the added costs of the mint having to sell and ship to millions of individual customers.

BAJJERFAN

@derryb said:

@jmski52 said:
Those premiums reflect the markup by dealers and others after initial purchase from the mint.

True, and that probably accounts for more of the premium than production costs, since the Mint could pump them out all day long if needed at nominal marginal cost. Any method of distribution will have a set of costs. Cut out a middleman and you might save money, depending on whether or not you can find a good primary source that the rest of the market isn't aware of.

But, in the case of bullion eagles the middleman saves the mint money buy ordering in bulk. Imagine the added costs of the mint having to sell and ship to millions of individual customers.

They do anyway for other issues so any added cost would/should be reflected in S & H charges. They could also impose minimum orders of say 5 rolls of ASEs. The worst part would be dealing with returns.

shorecoll

Those APMEX ebay prices are their end of year clearance prices, and you can bet a lot that APMEX is getting a deal on FVF.

1630Boston

@shorecoll
For my info, what is FVF ?
Thanks

shorecoll

eBay Final Value Fees (I think that's what they are called).

1630Boston

Thanks @shorecoll

BAJJERFAN

@shorecoll said:
Those APMEX ebay prices are their end of year clearance prices, and you can bet a lot that APMEX is getting a deal on FVF.

Those deals can be found throughout the year, not just at the end. And they can just as well be offered by APs and places who aren't an AP.> @shorecoll said:

eBay Final Value Fees (I think that's what they are called).

This, but it's hard to see how they can make money even if the fees are waived by eBay and PP. I doubt the CC companies waive those fees and APMEX eats any CC reward points.

BAJJERFAN

@ranger1202 said:
I'm new to purchasing gold eagles and I'm curious why the premium on < 1oz eagles are so much higher than 1oz eagles? Looks like its around 10-15% over spot for 1/4s, 7-10% on 1/2s, and around 5% on 1oz. Being new, one would think the percentage premium would be close to the same on bullion gold through the line. Obviously I know the more weight you buy the less of a premium you pay but 10-15% seems really high. Why would anyone want to buy something that has to appreciate 15% before breaking even? I'm sure there is a logical explanation but i'm curious.

Then again, you have to look around. I saw someone had a few tenth ouncers for about 6% over plus shipping.

derryb

cash flow is important to some outfits, even if is at a loss.

Kkathyl

welfare dictates pricing

ranger1202

@derryb said:
cash flow is important to some outfits, even if is at a loss.

Very true. I bought some antique furniture from a guy today at less than 1/3 of his asking price. He said it was less than he paid but he needed to make room for the new year and get some money in to buy new items. (who knows if it was bs or not but it was a deal either way)

jmski52

Tax-loss selling at the end of the year can be used to generate needed liquidity for the new items while knocking down the tax burden from the year's gains. It can be a logical part of the business model.