Newbie question on "spot plus premium" pricing

[Hollywood]

Hi All -
I honestly looked in the "Learning" threads for an hour hoping to find an answer to my newbie question, but it's not jumping out at me - so sorry if this question has been asked and answered before.

What is the *average* premium percentage a buyer of physical gold can expect. They seem to be all over the place. 5%? 10%? etc. Sometimes I see it expressed in $$ dollar amounts, and sometimes in %% percentages. I'm confused and am just looking for some number as a "average ballpark" to work with.

Also, same question for silver.

Here's why I'm asking. I decided to make my first purchase on physical gold and silver a couple of months ago. Of course, I bought pretty much at the peak before it dove. >:| I'm trying to figure out if I paid ridiculously high premiums (by buying in eBay, hence paying fees in addition to premium?) so I can learn from my beginning mistakes and make better decisions moving forward.

The details:
GOLD: Bought 5 1 oz ASE for $9820.00 out the door -- So I divide $9820 by 5 and I come up with $1964 per coin. The price of gold that day was right about $1842.30. So does that mean I paid $121.70 markup/premium per coin? If so, how bad is that.

SILVER: Bought 100 1 oz ASE for $4560.00 out the door -- So I divide $45.60 by 100 and I come up with $45.60 per coin. Price for silver that day was right about $40.64. So that means I paid $4.96 markup/premium per coin? (this would include any of the sellers eBay fees also I guess). If so, how bad is that.

SILVER: (This bar I bought from a local coin dealer shop...or LCS as I believe you say!) 100 oz .999 silver Englehard bar, scuffed up but nothing unusual based on what I see in pics on eBay. Weighed in just fine before purchase. I bought it for $4551.00 out the door. Price for spot silver at the time of purchase was right AT $43.76. So $45.51 minum $43.76 = $1.75. So for the bar I paid $1.75 over spot. (receipt says "Tax Exempt") How bad is that?

THANKS in advance for any answers. Be brutally honest so I know what not to do next time.

BTW I'm holding for the long haul and do not plan to sell.

[Silverstate2011]

Are these buys before or after taxes , that needs to be taken into account . Check different lcs and also pawnshops, local stores . Make it a habit every time you go to the store ask for those pesky half dollars . Really it"s everywhere and close or below spot in the right places. Hope this helps...

Hi All -
I honestly looked in the "Learning" threads for an hour hoping to find an answer to my newbie question, but it's not jumping out at me - so sorry if this question has been asked and answered before.

What is the *average* premium percentage a buyer of physical gold can expect. They seem to be all over the place. 5%? 10%? etc. Sometimes I see it expressed in $$ dollar amounts, and sometimes in %% percentages. I'm confused and am just looking for some number as a "average ballpark" to work with.

Also, same question for silver.

Here's why I'm asking. I decided to make my first purchase on physical gold and silver a couple of months ago. Of course, I bought pretty much at the peak before it dove. >:| I'm trying to figure out if I paid ridiculously high premiums (by buying in eBay, hence paying fees in addition to premium?) so I can learn from my beginning mistakes and make better decisions moving forward.

The details:
GOLD: Bought 5 1 oz ASE for $9820.00 out the door -- So I divide $9820 by 5 and I come up with $1964 per coin. The price of gold that day was right about $1842.30. So does that mean I paid $121.70 markup/premium per coin? If so, how bad is that.

SILVER: Bought 100 1 oz ASE for $4560.00 out the door -- So I divide $45.60 by 100 and I come up with $45.60 per coin. Price for silver that day was right about $40.64. So that means I paid $4.96 markup/premium per coin? (this would include any of the sellers eBay fees also I guess). If so, how bad is that.

SILVER: (This bar I bought from a local coin dealer shop...or LCS as I believe you say!) 100 oz .999 silver Englehard bar, scuffed up but nothing unusual based on what I see in pics on eBay. Weighed in just fine before purchase. I bought it for $4551.00 out the door. Price for spot silver at the time of purchase was right AT $43.76. So $45.51 minum $43.76 = $1.75. So for the bar I paid $1.75 over spot. (receipt says "Tax Exempt") How bad is that?

THANKS in advance for any answers. Be brutally honest so I know what not to do next time.

BTW I'm holding for the long haul and do not plan to sell.

[Silver Gator]

For silver ASE's, I usually see premiums over spot about $4 per oz, +/- based on recent silver trends. When prices are dropping, I see higher premiums. I guess my LCS is trying to recoup some of his losses on the price dip. On the flipside, when silver spot is doing well over the course of a week or two, I usually can get silver at a little less premium. i also can usually buy generic 1oz rounds for about $2 over spot, premium generics like Prospectors, etc for $2.50 over spot, and then governmental rounds (maples, eagles, libertads, etc) for $4 over on average. All of this is without paying any additional tax.

As for the bar you bought, that sounds about right to me. I did buy some generic 10oz rounds last year for $1 over spot per oz, but I generally pay $1.50+ over spot on the 10oz bars. Never bought a 100oz bar but I assume its in the ballpark for what you paid over spot. So I think you did fine there from what is available to me.

I have never bought gold, so I can't comment there.

I personally would suggest getting to know a local pawn broker, LCS, jeweler that has the "we buy gold and silver" sign out front, etc. I find that ebay can have good deals, but you have to really work hard for them. For me, since i buy small amounts every other week or so, I just try to develop a good relationship with one place and expect that over time they will do good by me. Last month my LCS sold me some Canadian wolves for something like $4 over spot... he had just bought them and immediately resold them to me for a small profit. Those coins have some extra premium value attached (maybe and extra $10 premium) so he took great care of me in that transaction, and that's where the relationship built over years can pay off.

[thesilvercartel]

Last month my LCS sold me some Canadian wolves for something like $4 over spot... he had just bought them and immediately resold them to me for a small profit. Those coins have some extra premium value attached (maybe and extra $10 premium) so he took great care of me in that transaction, and that's where the relationship built over years can pay off.

This is probably one of the most important things. More than premiums over spot and a dealer's buy prices. People quickly forget that an LCS has to pay the bills and need to make money.

Which brings up the important point of, if you're buying locally, know the market. A storefront that charges a higher premium might only be pricing to be competitive for their local market. Where $4 over spot per ozt might be the norm in one place, $6 over spot will be the going rate in another. When you factor in the costs of fees, shipping and taxes (if applicable) when buying online, it may come out to about the same cost per ounce.

I've gotten to know my LCS very well. I don't fret over the pricing -- I pay what he asks and don't question. He gives me great deals without my ever asking and I recognize it. It doesn't hurt to butter him up with some Cinnabons and a coffee, though.

[dan8802]

My LCS (Local coin shop) prices are as follows. I believe they are on the lower end. Very fair prices IMO.

1 ounce AGE (American Gold Eagle) spot + 4% (~ $60 over spot)
1 ounce maple/Philharmonic =spot + 3%
1/2 ounce AGE =spot + $50 ($100/ounce over spot)
1/4 ounce AGE =spot + $25 ($100/ounce over spot)
1/10oz AGE =Spot + $20 ($200/ounce over spo)

foreigns such as British sovereigns, french francs, or pre 1933 US gold liberties ($2.5 liberty, $5 Liberty, $10 Liberty, $20 Liberty)
= Spot + 3%

1 ounce ASE (American Silver Eagle) = $3 over spot by the tube (20 coins), or $4 over spot for less than 20 coins.
1 ounce generic rounds/bars = spot + $1

90% silver ("junk silver") = ~ $1 under spot

Common prices for 1 ounce gold eagles are $60-$100 over spot.
I recommend finding pre 1933 US gold coins at the LCS. the fractional $2 1/2 liberty has .121 ounce of gold and can be had for ~3% over spot
The $5 liberty has .242 ounce. They are not marked with there weight and purity like the bullion AGE, but they will be recognized by any dealer, and most people who buy gold.

IMO you definitely did overpay a little on the gold eagles. You weren't too far off on the silver eagles, (especially for ebay- they are usually very expensive) but could have done better.

Also keep in mind, when spot was rising to $40 when you bought, the hype on ebay takes over, and premiums generally rise. Considering this, you did OK on the silver eagles.

I don't know a lot about 100oz bars, but i think you did OK when you factor in the fact that its an englehard (englehard is a famous name and their bars usually sell for more than others. I know other LCS's that would charge $1 over spot ($100 over total for the 100oz bar). It really depends on the store.

BTW- When you BUY on ebay, you pay no fees at all (except shipping). Sellers have to pay ~10% in Fees.

Ebay is notorious for having VERY high prices. I highly recommend you try your best to find 1 or 2 LCS (local coin shop) or try visiting yours more often. you could also try some pawn shops, if there are any in your area.
For larger orders like the ones you made, you would have done better buying from one of the larger popular online dealers. (apmex)
ebay Is OK for smaller orders (a few silver eagles), where online dealers shipping charges kill the deal.

Hope this helps. It sounds like your off to a good start. I know this is a lot of information, but it takes time to learn everything. Keep in mind that LCS prices do vary by location.

[Chrisko]

[QUOTE=Hollywood;1555833]Hi All -
I honestly looked in the "Learning" threads for an hour hoping to find an answer to my newbie question, but it's not jumping out at me - so sorry if this question has been asked and answered before.

What is the *average* premium percentage a buyer of physical gold can expect. They seem to be all over the place. 5%? 10%? etc. Sometimes I see it expressed in $$ dollar amounts, and sometimes in %% percentages. I'm confused and am just looking for some number as a "average ballpark" to work with.

Also, same question for silver.

Everytime I look into buying gold or silver (physical), I end up not buying it. I look into it as an investment (or investment protection) over the long term or for sudden financial instability in the world. When I see Gold/Silver prices down (I am always on stock market sites), I will sometimes re-ignite my review. In the end, when one is talking about investing, expenses, ROI, I only consider percentages, not dollars. I have that argument with my wife too often, she suggests a stock is expensive because of it's per stock price (aka: Amazon at $1,500 for example).

What I seem to find everytime I look at the idea of buying silver is that the fees are outrageous to buy and sell from an investing stand point based on the physical metal. I would never buy a stock if I was told it was going to cost me roughly 30% in commissions between buying and selling! For such an investment to work, said stock would need to increase in value by 40% (vs. spot price for silver) for me to gain a 3.5% ROI (after fees). Yet, this is exactly the situation with silver (today 12/18/2018). Having just checked one of the big on-line "dealers" that purportedly offered lower premiums, they are buying silver at roughly 15% below spot and selling for roughly 15% over spot (roughly means within about a quarter % point).

So if silver spot is $15, it means I would pay $17.25 after premiums.

If silver's spot increases by 40% to a spot price of $21 and I sell it at the current (12/18/2018) discount from spot buying price of said site, I would be selling it to them at $17.85 per ounce ($21 spot - 15% = $17.85).

So I bought silver at $17.25 per ounce

Silver goes up 40% at the spot price.

I sell my silver after it goes up 40% in spot price value and I receive $17.85 per ounce.

My ROI is 3.478% after the value of my investment (at spot price) increased by 40%! This does not factor in any shipping costs (either way), and of course capital gains taxes (15% or more).

Now I don't know about you, but normally when my investment's price goes up by 40%, i am pretty ecstatic with those results. But after going up 40% in value and then incurring ridiculous fees that would downgrade my ROI to 3.478% . . . I don't think there exists a stock broker, hedge fund, mutual fund, etc. . . that would ever dare charge such an outrageous level of fees and remain in business!

So, my opinion . . . buy gold or silver from other people by offering to buy at the spot price (a good deal for them) and when you sell, offer to sell at spot price for interested buyers (also a good deal for them). But alas, there is risk in doing this too! Counterfeits, getting mugged, underweights, etc. . . And then just finding people to buy from you at what you perceive to be the high, and finding others to sell to you at what you perceive is the low.

In the end, I have got to imagine the LCS s over pricing (both buying and selling much, much closer to spot). I think a reasonable pricing structure is 2.5-4% over/under spot for selling and buying by a LCS. Anything greater than these amounts you are paying way too much in fees in relationship to other investments.

[maxwellsilverhammer]

and therein lies your fallacy/problematic thinking/reasoning for acquiring gold or silver. you think it is an investment vehicle. it is not. at least most of the folks on this forum and folks on the street i know that stack physical do not consider it as an investment. so if you are looking for p m's as an investment strategy, stick to paper metals or metal mining stocks. stacking physical precious metals, of course can be a way to get lucky and increase your frn's if the spot price shoots upward which it very well could do and has done several times in the past hundred years. it can also be a good way to earn a weekly wage if you want to deal in metals like a coin shop, etc. no matter the daily spot price, lcs's and online dealers that deal in bulk buys/sells make their money by hedging and buying lower than spot and selling higher than what they bought it for by constantly turning over inventory. as long as they are consistent and are able to locate clients, and turning inventory regularly, they can earn a living just like any good business operator. but as a true stacker, i consider it a "store of wealth", a "wealth preservation strategy", "forced savings account" that historically holds its purchasing power across generations and is difficult for the greedy, money makers of the world to manipulate and steal from you. i think you may be better served to find a stock market forum rather than try to find investment strategy answers here. jmho.