Why Do PMs Cost So Much More Than Spot?
I have seen this question all over the internet: Just why are the prices for precious metal bullion so much higher than the spot price? When the silver metal, palladium, cannot move over $200 an ounce, palladium bullion coins on EBay reflect twice that price. And you would be lucky to find platinum bullion for less than a 30% markup, and it is not uncommon to see a 100% markup. But even the more common staple PMs like gold and silver do not seem to reflect the spot prices in their sales or Buy it Now prices on the most popular online auction: EBay.
I think we need to look at three reasons for the inflated prices.
- A suspicion that Spot prices do not reflect the price of actual bullion, but are tied to the price of paper or digital bullion. In other words, the gold and silver funds are trading paper that do not reflect actual metal in a buyer’s hand. These prices are low and should be regarded with a jaded eye because who really knows how many times the same ounce of gold or silver (or platinum or palladium) are being traded? I have no idea if this is correct, but neither do a lot of people. Can we actually see the stores of precious metals that back up paper or digital bullion?
- EBay and Paypal Fees are so darn high that sellers have to sell for much more than spot price or they will go broke. Well, I know that there is a lot of truth to this one. I am tired of seeing potential bullion buyers accuse sellers of greed, when they really should be examining EBay’s methods. If a buyer thinks the price or shipping fees are too high, they should shop elsewhere. And no, I am not actively selling on EBay now. I have just examined the way the system works. And many complaining buyers also note that they cannot find lower prices on bullion, or any bullion at all, in their local coin shops.
- This one is more complex, but has to do with faith. Sellers have to source their bullion for somewhere, and may have purchased during a spike, just like a lot of us did. They refuse to sell at a loss, especially when they are confident the price will increase soon. Buyers must believe that the bullion is scarce, and that it will be an increasingly valuable commodity at some point in the future too. They are willing to pay a premium because they believe that holding gold, silver, palladium, or platinum is worth it.
Now you can find other ways to purchase precious metals. Your local coin shop, individuals in your community who want to sell, members of online forums, and online precious metal stores. It is up to you to find reliable sources at the best cost, and that is all part of the game. But if you are frustrated by high premiums, you need to consider the reasons for the markups and decide if you believe they are valid.
ebay, gold, silver, palladium, platinum, gold price, silver price, etf, spot price
Technorati Tags: ebay, gold, silver, palladium, platinum, gold price, silver price, etf, spot price
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