Silver at 50 cents below spot?

ARCO · February 28, 2008 3:00PM

Yeah, I know there are a lot of bullion threads, but guess what, if you don't like bullion threads and you are reading this, then you only have yourself to blame.

Anyway I am dying to hear from long time bullion afecionados. Tulving is offering junk silver at 50 cents below spot. I am curious to know if this just might be an overstock situation on Tulving's part, or is junk silver harder to sell with much higher silver spot prices? When silver was below $10 an ounce, the premiums were much higher. As silver as risen in value, the ask price keeps dropping at larger and larger numbers below spot.

Did this happen in the 79-80 run-up? Any hypothesis as to why junk silver loses demand and has to be sold below spot to sell it?

Here is a coin pic for you bullion haters that mistakenly opened this thread. It is a cheapo counterstamped Seated half that I bought for about $20.00 and have enjoyed more than I thought.

Colquhoun · February 28, 2008 3:09PM

on the 25th Kitco Radio was saying that junk is selling at a discount, and it could be an indication of the coming of the end of silvers move.

cladking · February 28, 2008 3:22PM

There are a lot of factors that affect the premium or discount of coin to 999 bar.

As this discount grows there will be a lot more silver coin getting destroyed. The
refineries are probably backed up already if the discount is so high. Figure they're
probably melting at a rate over 100 million ounces per year already. If this backlog
persists long enough the industry will simply expand capacity to capture market
share and profit.

In 1979/ '80 this backlog disappeared pretty suddenly. Partly it was caused by the
silver buyers starting to accept coin which caused the discount to become smaller.

There is some overseas capacity which might come online or possibly is already
coming online. They'd be melting US coin since there tend to be much more lim-
ited quantities of other silver.

Deadhorse · February 28, 2008 3:40PM

That's not a great deal. I can buy it locally in far smaller amounts for less than that.

When you are buying in bag or half bag quantities, there is always a discount.

Melt silver is never worth the actual value of silver, it is always discounted.

I don't feel like writing a book right now, but I've been dealing in this stuff for many years.

There are so many other factors that are figured into junk silver. It is nothing like .999 refined bullion.

For many years, I have been taking any profit, if there is one and putting it into .999 bars.

You won't see anyone selling .999 silver at 50 cents below spot.

They are also asking 29 cents above spot on 100 ounce bars, that's a bit on the high side as well.

Yes, this happened in the run up in '79-'80.

For example, with silver at $50 an ounce, $1 in 90% junk silver was actually worth $37.50 in silver value.

That would be 37.5 X face.

The highest I ever saw paid back then was 32 X face. That was at the very peak and it didn't last long.

Most were paying 30 X face and less. 26-28 X face was the common price range, only at the better/fairer shops could you find 30 X face. Those were the places where the lines were blocks long in some cases. One shop locally has pictures of the outside of their store and the incredible lines. Sometimes the Police had to get involved with the crowd control. I sold out at 30 X face myself. It amounted to nearly two years salary and with a new family and a terrible economy, it was a Godsend for us. Most everybody paid in cash in those days as well.

Dealers were a bit gun shy at those prices and with the smelters backed up, they had every reason to be. There were many rumblings of Government intervention and those rumblings turned out to be true.

This situation today isn't artificial like that was so I'd expect buy prices to be a bit better. Again, when there is a large spike like this week, dealers are gun shy. They don't want to get burned with a quick downturn and silver is famous for that.

As prices begin to stabilize, even if they rise in a gentle climb, the prices should be closer to where one would expect.

No matter what, 90% junk silver will always be heavily discounted when compared to .999 refined. The higher the spot price, the greater the discount.

In fact, the main brokerage houses just released new pricing guidelines Monday this week and further expanded the gap.

Expect more when the price continues to rise.

Deadhorse · February 28, 2008 3:46PM

<< <i>on the 25th Kitco Radio was saying that junk is selling at a discount, and it could be an indication of the coming of the end of silvers move. >>

Nope, not at all. The large brokerage houses released new discount guidelines on Monday.

This is why I have been converting 90% into .999 bullion for years and years now.

Silver still has long legs left, we have between 3 and 4 years more of this based on my studies.

Remember, 80% of the gains in any bull run are made in the last 20% of the time frame.

We are just getting started here. The real gains are yet to come and they will be staggering.

Overdate · February 28, 2008 4:02PM

Interestingly, in 1980 after silver crashed from its $50 high, junk silver bags went from a discount to a premium for a while. I guess the general public considered the lower prices a "bargain," and thought of junk silver coin as a good way to invest in silver. Many hard money advisors were recommending 90% coins as a good way to own silver.

Does anyone have estimates of what percentage of U.S. silver coins have been melted? With over 40 years of melting, I don't see that there can be that much left.

ARCO · February 29, 2008 1:02AM

Most interesting Deadhorse, thank you. I guess that below spot premium reflects potential refining costs as junk silver is not .999 pure like bullion. Ebay roll auctions (junk silver) almost always sell for silver spot and unc. junk fetches a premium usually. I wonder if the below spot mechanics for junk silver shows that silver is mostly viewed as a commodity and not money per se.

I buy junk and avoid bars because silver for me is not an investment, but a hedging position for economic and societal collapse. Rounds would probably serve the same purpose; known content and purity and small divisible units. Just my personal doomer viewpoint I guess.

I live in Salt Lake City and none of the dealers sell silver spot as low as tulving. Of course, I haven't visited any since silver was at $14.00 an ounce, but they all sell it at some small premium above spot. That includes Rust coin and Monarch, both large established dealers.

That is why I inquired about Tulving, for my experience, his prices are the lowest below spot I have ever seen.

I need to live where you live Deadhorse.

Tyler

moonshine · February 29, 2008 1:14AM

silver is bouncing up and down as if on a trampoline

jmski52 · February 29, 2008 1:27AM

Tulving is buying at .80 under spot and selling at .50 under spot. His spread is very decent. Junk silver (I hate to call it that, because it's more "real" as money than the stuff we spend every day) is .900 purity, which does reflect a refining cost. The spread varies, and so does the relationship to the spot price, as the market changes. Someday, we may see a time when 90% silver trades at a premium over spot. It just depends on the market.

Steve27 · February 29, 2008 1:31AM

"Someday, we may see a time when 90% silver trades at a premium over spot."

I'm surprised that 90% doesn't sell at a premium over .999 bars, since it doesn't have to be assayed.

mr1931S · February 29, 2008 1:32AM

Did this happen in the 79-80 run-up? Any hypothesis as to why junk silver loses demand and has to be sold below spot to sell it?

For what its worth:

Spot price cannot always be gotten by the dealer so rather than hold out for this price it is better to unload at a lesser price and still make some money than risk holding the bag, of Silver,in this case.

A dealer once told me that when silver ran up to the levels seen around 79-80 that he was mighty nervous about buying 100 ounce bars for over $3000 apiece.The price of Silver was so volatile that it was imperative to get rid of the Silver and make a little money rather than get caught holding it.Lessons were learned by many a dealer around 79-80.One of the main lessons learned by many was that "time is of the essence." Buy it and move it otherwise you can lose bigtime when dealing in substantial amounts.

Ultimately,"someones" out there do get caught holding the Silver at high price,right?

cladking · February 29, 2008 1:59AM

I've closely watched the premiums and discounts on silver since the mid-'70's
and paid it some mind since the late-'50's. This number has gone up and down
on all forms of silver all the time. Sometimes coin has a large premium and
sometimes it has a larger discount. Same with bars; thet tend to stay closer
to spot but they fluctuate independently as well. Sometimes 10 Ozt bars are
all the rage and sometimes it's something else.

Dealer buy prices are based on more factors than just current spot and the
discount. In early 1980 dealers did not want the market risk of owning large
amounts of silver especially over the weekends so unless it was pre-sold
they discounted it heavily. At that time there were very few buyers for most
silver so the location was extremely important. Many people were treating
silver like a hot potato and few wanted to hold it.

Silver is silver and the form doesn't matter to many buyers. The less they care
the more likely they are to end up with the lowest grade like 100 fine pesos or
war nickels. I can even remember when war nickels had a little premium.

RedneckHB · February 29, 2008 2:05AM

Yesterday at Baltimore, silver was trading at a $500 per bag discount.

And I believe that even in 1980 when silver hit $50 that very little even traded over $35. The older timers can correct me if necessary.

mr1931S · February 29, 2008 2:15AM

The most I ever got for silver coin around 1980 was 28 times face. I suspect that the dealers who were paying this much were "unloading" at around 30-32 times face.

I recall one dealer telling me that he was even sending XF and better Mercury dimes out as melt items.Didn't have time to check for scarce ones because didn't want to get caught with these at around $3 apiece with no buyers.

ttown · February 29, 2008 2:20AM

Well I was a few years out of high school in 79/80 and had a child but I was able to sell a Kenndy half for $20 at it's peak which wasn't long. Man I wish those days were back again (not the price) because I was broke but you could go to the bank and buy half dollars and find quite a few 90% and %40 still in circulation. I used that income to help with the bills

mr1931S · February 29, 2008 2:23AM

I should add that in 79-80 I lived in Denver, you know, where the '16 D and '21 D dimes were made.It was incomprehensible to me that if a bunch of mercury dimes came into my Denver shop that I wouldn't take the time to check them. I was told that that was the case,however. Time was of the essence. Get 'em in, move 'em out.

Coxe · February 29, 2008 3:12AM

Selling it at just "the other day's" price, still moves it out and participates in the run up presuming you bought it at "last week's" or prior prices. The bullion dealers are in the buying position moreso than the public on these big rises. And then retail buyers who do come knocking want sexy .999 bars and rounds, not dirty old 90% circs.

johnjinx · February 29, 2008 3:45AM

Where is a good place to buy silver? Should I buy junk silver or bars and rounds? I've been thinking about getting some but have yet to do so.

cladking · February 29, 2008 4:07AM

<< <i>Where is a good place to buy silver? Should I buy junk silver or bars and rounds? I've been thinking about getting some but have yet to do so. >>

I would buy whatever has the lowest premium if you're buying for long term. If you're
buying short term or might want out quickly then buy 999 bars with the lowest premium
or better yet, silver eagles.

Absolutely don't buy lower than 720 fine unless you know it's good silver. Most is but it
can be risky especially in large amounts.

johnjinx · February 29, 2008 4:11AM

Thanks. Should I buy from a local store or online? Which one would I get the best deal at?

Deadhorse · February 29, 2008 5:47AM

<< <i>Thanks. Should I buy from a local store or online? Which one would I get the best deal at? >>

Just check around.

It varies geographically.

For some, Tulving is better than their local shops, for others, Tulving is higher priced.

There was a time last year when prices in Houston were well below the nationwide average. It slowed my business quite bit.

Now, it's nearly the opposite. Prices are high and the spread is quite narrow as compared to other cities. The worst case is to be in an area where there is only one shop and no competition.

Buying online is one thing, and you will pay shipping and insurance.

Never sell online! You are at their mercy. They weigh and you will somehow "lose" some coins in that process. Then they will beat you down for wear on top of that.

If you want to sell, use the BST board or just PM me and I'll pay top dollar and get it over with quickly.

cladking · February 29, 2008 5:51AM

<< <i>Thanks. Should I buy from a local store or online? Which one would I get the best deal at? >>

It depends what you're buying and how fast you want to buy it.

If you want in yesterday then most major shops will probably have enough
to satisfy your needs or can lay hold of it in a few days. It's cheaper to shop
around and cheapest to look for old stock in dealers' showcases.

At these levels a disciplined approach might be wisest. Of course, there's at
least some risk of a buying panic and being shut out and as long as most are
bears on silver this could be a problem.

THEONLYTBONE · February 29, 2008 5:58AM

Some Good reading from you Old Timers.......................Thanks for the walk down memory Lane.................

Silver at 50 cents below spot?

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