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Thread: Premiums on silver are unacceptable. Starting to resemble fractional gold.

  1. #21

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    It is a cute way to see it but spot silver is in fact the price of silver. That's what say Tiffany Co. pays when they buy several metric tons of the stuff for their production of trinkets. You and I? We are not buying a metric ton of weird looking bars; we are buying a pretty retail product where demand affects both supply and price.

    Heck HeroBullion is selling .999 silver shot by the 10 ounce (not pretty but a retail quantity) for $2 over spot. But I take it you don't just want silver, but pretty silver. That will cost you extra because demand is high and everybody else also prefers the more expensive pretty silver.

    Heck sterling silver! Take your time and you can buy a bunch of that stuff for melt. But then again; it is not pretty, and you are probably afraid that somebody else will not find it pretty either and thus have a hard time selling it. Do you see there how the 'pretty' factor is what changes the 'value' factor of silver? .925 of that item is 100% silver but it just happens to be in a shape you don't care for, so you are willing to pay to have it prettified.

  2. #22

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    When Tiffany buys silver for manufacturing their goods they buy sterling silver that's been made by refiners. It's not melted down spoons and this and that where the other 92.5% is silver and the other 7.5% is ????. Tiffany and other jewelers need to know exactly what is in the other 7.5%. They may even request or want their own preferred blend. Same with dentists. There's more than a dozen different 18k or 10k alloys that dental supply houses can use. Just a bit of useless trivia, but Tiffany likely pays $30/oz. or so for the exact blend of sterling they need.

  3. #23

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    DB, you make a good point.

    Investment demand is up so much that these premiums are being accepted. If demand for investment grade silver is outstripping supply, one would expect to see a comparable spot increase.
    Or, maybe there is no bullion shortage? Following your reasoning, these companies selling bullion should have no difficulty getting tons of raw product at spot? I suppose it could be similar to how big oil operates. Simply reduce drilling, or in this case reduce bullion production and you can charge more in premiums?
    That, or it's just inflation. The cost of production being passed on to consumers. That doesn't really explain $18 dollar premiums on Silver Eagles though.
    I'm sure there is a lot more that goes into it. These companies probably have to factor in how much is safe to buy at current spot.
    Last edited by jjmcwill; 11-28-2022 at 03:35 PM.

  4. #24

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    Insidedealer, I'm guessing has some sort of license permitting him to buy eagles direct? I would love to know what dealers are paying for Eagles.

  5. #25

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    Found the answer. This is what a dealer has to pay if buying direct.

    "American Eagle Silver Bullion
    United States Mint Authorized Purchasers are charged the LBMA Silver Price plus a $2.35 per coin premium.
    Minimum ordering requirement: 25,000 ounces."


    https://www.usmint.gov/news/consumer...chaser-program

    At 25,000 ounces there is a hell of a lot of risk involved if the spot price suddenly tanks. With a 25,000 ounce minimum order, my idea of getting a license for cheap Eagles is canceled.
    Last edited by jjmcwill; 11-28-2022 at 03:31 PM.

  6. #26

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    Quote Originally Posted by jjmcwill View Post
    Insidedealer, I'm guessing has some sort of license permitting him to buy eagles direct? I would love to know what dealers are paying for Eagles.
    I don't have that license. The mint only sells directly to a handful of authorized dealers, there's only a dozen or so. I don't even think Kitco is an authorized dealer. The authorized dealers get to buy at that $2.35 price and they also must take part in maintaining an orderly and fair 2-way buy/sell market, amongst lower level dealers. I'm not sure what's happened with the orderly market requirement, which was no problem for 33 years but became a problem since 2020 with the mint not having whatever supply was ordered.

    It's not a risk for the authorized dealers. Strictly a win-win. They can pre-sell what they order with next level dealers to lock in the price. Hypothetically, it could be a problem if silver expectations were that it was going to go down in the near future. That could cause an over-supply in the secondary market leaving the authorized dealers to maintain that bid of +2.35. This did cause some problem for the authorized dealers back in 1987-2005 at times. They needed to maintain that bid of +$1 or +1.25 back when silver was mainly going nowhere fast, trading between 4-6 most of the time. When it got to $5.50-6.00 there was more sells than buy orders, or so I heard. T the time I was managing a large secondary dealer which was "invited" to order directly from authorized dealers. We did have 2-3 savvy stackers who bought large quantities below $4.50, and sold above $6.00. That dealer had the means to just hold eagles bought at $6+ spot, if you turned to the authorized dealer then to buy at $7 or above you were "un-invited" to deal with them at a later date. I recall the most we had at any point was near 200,000 eagles, some ultimately sold at a relatively minor loss.
    Last edited by insidedealer; 11-28-2022 at 07:42 PM.

  7. #27

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    Thanks for the insight inside.

  8. #28

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    Quote Originally Posted by jjmcwill View Post
    Demand should be going down. It isn't. They wouldnt be charging if people weren't buying at these prices. They clearly are. I am going with numismatic, platinum or just holding cash and waiting to see what happens. Premium prices are in a bubble.
    I get it that demand would have an affect on silver prices. My question is why wouldn't the spot price being going up instead of the premiums. (or in addition to the premiums) Not trying to be a wise guy; just wondering.

  9. #29

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    Quote Originally Posted by spaceman View Post
    I get it that demand would have an affect on silver prices. My question is why wouldn't the spot price being going up instead of the premiums. (or in addition to the premiums) Not trying to be a wise guy; just wondering.
    For the same reason the retirees don't get a bump in benefit to the same bump inflation has spiked.
    Now there's no more oak oppression
    They passed a noble law
    Now the trees are all kept equal
    By hatchet, axe and saw.

    I will not comply.

    The Tea Party... quietly plotting to take over the world,
    and leave you the hell alone!

  10. #30

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    Spot price - "paper" price
    Premium - fabrication and demand surcharge.

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