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With the paper price drop recently, sales of AGEs (and I would presume ASEs) have soared. They're halting sales of 1/10 oz eagles and not 1/4, 1/2 or 1 oz. - so far.
All along the $200 price crash in the POG has smelled more market driven than fundamentally based. The proof will be if the divergence between paper price and street price manifests itself in either supply shortages OR increases in premium. It's Econ 101 supply/demand curves where the price is either controlled or otherwise kept artificailly lower than would be set by a free market. Nixon gas price controlls resulted in everyone running out gas. Sorry, we're all out. Same/same with the current liquidity trap. The Fed is keeping interest rates (the price of money) artificially low and bankers do not care to loan money long term at these rates. A 30 year fixed at 3.5%? Sorry, we're all out. Now if you want to pay 5-6%, we'll maybe they can scrape up some money.
I not only held but bought some silver on sale. feh. It was stuff I would normally buy or the course of a year, but on sale . . . please.
@Ron, when you sell physical gold what sort of price are you getting? Unless you are a dealer isn't it the paper POG minus commissions which I understand it quite lucrative to the dealer. Conversely if you buy you are buying with a pretty hefty commission added to the paper price. It is like a load on both purchases and sales.
Or is this something like claiming that you own gold in a different currency...
With physical bullion purchases and sales there is always the premium to deal with. It varies with size and volume but also with the quality of the bullion. Consider it the mark up between wholesale and retail. The vigorish, if you will. And yes, just like all forms of vig, it applies to both buying and selling. The PM market is no different form any other market. And for a person buying precious metals as a bullion investment, you want to minimize the premium while not buying garbage that might not be fungible. By this I mean that in additon to size and volume discounts, premiums vary by the quality of the bullion product. And you want to minimize the premium while not buying some garbage you might find hard selling. I can sell an AGE at most McDonalds but if you try to sell an ingot minted by BillyBob'sBowlingAlley, Revival Center and Mint . . . well, it might be a bit tough.
For example, the premium on AGEs (american gold eagles) at my local store is 5.2% over spot for 1 oz. but 13% for 1/4 oz. However, the premium on a plain vanilla 1 oz. gold ingot is only 3%. Same goes for silver. My local store is OUT of most silver product but has most gold. Supply is drying up for silver.
But yeppers, you're correct that you have to wisely play the premiums on both the buy and sell. Sort of like when you go to sell a car and buy a new one. The dealer is going to discount your old care and mark up the new and you are going to try your best to minimize the spread . . . or vigorish.
Comments
With the paper price drop recently, sales of AGEs (and I would presume ASEs) have soared. They're halting sales of 1/10 oz eagles and not 1/4, 1/2 or 1 oz. - so far.
All along the $200 price crash in the POG has smelled more market driven than fundamentally based. The proof will be if the divergence between paper price and street price manifests itself in either supply shortages OR increases in premium. It's Econ 101 supply/demand curves where the price is either controlled or otherwise kept artificailly lower than would be set by a free market. Nixon gas price controlls resulted in everyone running out gas. Sorry, we're all out. Same/same with the current liquidity trap. The Fed is keeping interest rates (the price of money) artificially low and bankers do not care to loan money long term at these rates. A 30 year fixed at 3.5%? Sorry, we're all out. Now if you want to pay 5-6%, we'll maybe they can scrape up some money.
I not only held but bought some silver on sale. feh. It was stuff I would normally buy or the course of a year, but on sale . . . please.
and so it goes,
peace,
rono
Or is this something like claiming that you own gold in a different currency...
With physical bullion purchases and sales there is always the premium to deal with. It varies with size and volume but also with the quality of the bullion. Consider it the mark up between wholesale and retail. The vigorish, if you will. And yes, just like all forms of vig, it applies to both buying and selling. The PM market is no different form any other market. And for a person buying precious metals as a bullion investment, you want to minimize the premium while not buying garbage that might not be fungible. By this I mean that in additon to size and volume discounts, premiums vary by the quality of the bullion product. And you want to minimize the premium while not buying some garbage you might find hard selling. I can sell an AGE at most McDonalds but if you try to sell an ingot minted by BillyBob'sBowlingAlley, Revival Center and Mint . . . well, it might be a bit tough.
For example, the premium on AGEs (american gold eagles) at my local store is 5.2% over spot for 1 oz. but 13% for 1/4 oz. However, the premium on a plain vanilla 1 oz. gold ingot is only 3%. Same goes for silver. My local store is OUT of most silver product but has most gold. Supply is drying up for silver.
But yeppers, you're correct that you have to wisely play the premiums on both the buy and sell. Sort of like when you go to sell a car and buy a new one. The dealer is going to discount your old care and mark up the new and you are going to try your best to minimize the spread . . . or vigorish.
peace,
rono