Silver Values

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.

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Well, those of us who hold a little bit of precious metals as insurance against a total meltdown of the US dollar and stock market are probably a bit relieved to see the price (as stated in US dollars) of gold rebound a bit. As of this writing, it is a hair over $900, and I’m not sure we believed we would see that price again soon. Oh, I know lots of us will argue that we’d rather hold strong dollars and see gold looking cheap, but if we can’t have that, well we have something…..

But here’s the thing. A lot of silver watches argue that the white stuff has not made the same rebound as the yellow stuff, and that the price should be at least $17 an ounce now, and not just over $13. Of course, we cannot always pinpoint the price of silver by the price of gold, but they tend to move together in a loose way.

So, is this the time to load up on silver? My crystal ball got damaged in hurricane Ike. If you have an idea, feel free to comment here!

OK, this auction looks very fishy to me. Now you have all heard of the GOLD ETF where you buy shares of “paper gold”. But here is a guy on EBay who is setting up his own paper gold company. Paper Gold On EBay.

The auction says that you are bidding on a certificate of ownership for each ounce of old you purchase. They will store the actual gold until the time you sell it back to them. Right now, the auction is selling this ‘ownership’ at $940, but Kitco says an ounce of gold should be a hair over $800. And the seller says they will buy the shares back for $40 less than spot. So right away, your $940 ‘gold ownership’ investment will be worth a bit more than $760.

Now this guy has 5 figures of positive feedback, and does sell physical too. But I cannot imagine that this is a good idea. Yah know? Just sayin’…..

Well, it is hard to find a safe place to invest in the stock market right now. Of course, the silver and gold bulls are hanging in their with smug grins on their faces. See, gold is a commodity. And no, they are not the best performing commodity over the last several months. However, precious metals are also sticking in the middle of the pack.

The thing about precious metals as a commodity is that they are easy to take delivery of. You cannot take delivery of  corn, wheat or oil, but you can take delivery of gold and silver! This means you are not speculating on something you cannot hold. This is one appeal of gold and silver investments.

Speculators who do not take delivery may be coming under increased scrutiny, but you don’t need ot worry about that. Do you?

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Stocks Not Doing So Good?

Well I know that my stocks are not doing very well, and that is across the board. My precious metals stash, consisting mostly of silver US coins, has been faring much better. In fact, the increase in my PM value over the last few years is just about the only thing that keeps me from total panic these days.

A company called USA silver wants to teach you how to profit from US Silver and Gold Coins too. You can enjoy a free initial consultation, and then decide if precious metals investment is for you.

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This is an interesting exercise to perform if you are concerned about the value of your gold or silver stash. Compare the price of an ounce of silver or gold in July of 2007 to the price it is today in June of 2008. Then do the same with a few of last year’s hot paper investments!

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It is an old saw in precious metals trading. Sell in May and Go Away. That was the traditional wisdom, and I even saw it repeated during the dip a couple of weeks ago. However, if you are still holding your stash, you may want to rethink that traditional wisdom this year.

James Turk says that the logic does work about 75% to 85% percent of the time. It works most of the time, but that does not, as he admits, work all of the time. In general, the 1st and 4th quarter are stronger, while the 2nd and 3rd quarter are softer. Now we did reach a peak in March which would conform to the logic, but we are net getting a clear pattern of any sort of bullish market yet. In fact, so far this year, a sale in March and repurchase in April would have been a great strategy. But if you, like me, missed the March boat, keep your eye out for the next one.

A weaker dollar, more expensive oil, and a stream of financial problems are supporting the price of your shiny stuff. Do Your Own Due Dilligence, but if you can hold onto your silver and gold this summer, consider it strongly, despite conventional wisdom.  A gold or silver sale in May, may just be a sale you regret by July.

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Is the Dollar Better Now?  

We keep looking for signs that the value of our good old US dollar is finding support, and maybe even rising. In such a case, it might be time to put our silver and gold investment on the back burner again, and jump into more “normal” investments.

 In other words, maybe we should just keep a small percentage of our savings in PMs like silver and gold as a hedge for the future, and go about our business as usual. However, many experts tell us that despite the way the news and government downplay the facts, we are not anything like close to being back to business as usual.

How Much Should A Person Save in PMs?

Most advisors will say to only put a fraction of savings into precious metals anyway. They tell us to allocate 10 to 15 percent of our savings into gold, silver, platinum, or palladium because of the value as a hedge against inflation.

 Gold and Silver Bugs, or those that would rather put 85% of their savings into PMs, and maybe keep 15% as liquid cash think differently. They see PMs like gold and silver as the standard around which the dollar fluctuates, and not the other way around. These savers are all about hedging. Of course, in the last several months they have seen a great return on their PM investment, though historically the stock market indexes performed much better.

Most of us, who do appreciate the ability of PMs like gold and silver to retain some value no matter what happens, or maybe just like having a very shiny stack that goes “clink”, probably fall somewhere in between the true gold bug and the standard investment advice. And of course, we do watch the market and try to adjust accordingly.

Seeking Alpha is not seeing any signs that anything the fed has done will turn the tide on inflation in the near future.  In fact, the recent drop in gold and silver prices may be a time to look for some physical PM deals. If you have some extra cash, or an investment that is not doing very well right now, and you know you can afford to wait before you cash in any precious metals you buy with that investment, look around to see what you can buy.

What did I do? Well, I could not resist picking up a Gold American Eagle yesterday (GAE). I found a deal, a bit over spot but under the posted PCGS price for the MS69 GAE. I think gold may be losing its shine for some fair weather friends, and they are raising cash for other uses. I did spend money I could afford to “wait for”, and I did shop around for a purchase that I thought was a good purchase.

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The Declining Value of Your Dollar

I think that one thing illustrates the declining value of money very well. Simply look back at a point of time, and consider the amount of money took to purchase ordinary things that we still use every day. Then take a look at the amount of silver in $1 of US silver coins that actually circulated in currency. We have mentioned before that $1 of US silver coins contains .715 of an ounce of silver. So, for use as a standard, we shall call that a “standard” dollar, even though a quick look at the US silver coins calculator shows that today, that .715 ounces is worth about $12.23 of the coins or paper money you probably have in your pocket.

Now, with even The Wall Street Journal writing about potential food price increases, and that maybe we should stockpile food as an investment, we must look at some food items! Let’s take a common box of Cheerios cereal. It was .39 in 1963, but today that same box of Cheerios breakfast cereal tops out at $4.39. A loaf of Wonder Bread, the plain bread standard, was .29, and now it can sell for $2.89!

In 1963 a gallon of gasoline cost .29, and yes, I am just old enough to remember this. Where I live that same gallon of gas is about $3.30 today. Who knows what it will be tomorrow? Somehow I assume it will be closer to, or more than today’s price, and not closer to the 1963 price.

What is Silver Worth?

But look, $1 bought 3 gallons of gasoline or loaves of bread back in the early to mid sixties. That would have bene $1 in US silver currency (minted on or before 1964). Now the $12 and some change that the .715 ounces of silver in $1 of US silver currency is worth today, will buy about 4 loaves of bread or gallons of gas.

It may be time to consider hedging against inflation with some precious metals, and of course I like silver because it is, after all, the poor man’s gold! Or maybe we should just all go to the grocerty store and stock up on peanut butter and Cheerios. They store very well, and if the price inflation continues, may turn us a nice profit on the future breakfast cereal exchange or black market.

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We can find several sources of real jewelry at discounted prices online. Jewelry stores mark up items at an incredible rate. This becomes obvious if you ever try to resell old jewelry. At online markets you can find new jewelry without the high overheads you might find at a local high end retailer. So if you appreciate fine jewelry, but don’t want to pay more just for bragging rights, an online jewelry discounter is a place to start shopping.

Buy A Diamond Ring and Get A Second One Free at Diva Diamonds. This is a great idea with Mother’s Day coming up. Your wife will appreciate a gift, and so will your mom! Of give you wife the larger ring, and present your daughter with the smaller one. You can give them the value and security of real jewelry without overpaying on the street. In fact they offer real jewelry at 50 to 70 percent discounts over retail jewelry stores.

Send Online Jewelry Fast : Offers Discounted Jewelry, Gifts, and Flowers that you can send to the US, and in some cases, overseas.

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