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New to silver stacking and this site...
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Thread: New to silver stacking and this site...

  1. #1
    Join Date
    Feb 2014
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    Default New to silver stacking and this site...

    so I have a couple of basic questions. Sorry for any redundancy. First, I am buying silver as a long term investment. Just started as the price seems to have fell from its highs to a level that feels right to jump in with a lot of potential up side. With that being said, why should I buy premium bars or coins VS the lowest cost silver per oz?? Assuming that I am buying REAL silver of course.

    Secondly why do dealers like Engelhard or Johnson Matthey demand such a higher price over spot? 10 years from now can I expect to get that cost over spot back plus current OZ price? I just don't understand the value in the cost?? For example, if the cost over spot is $10 at purchase with a $20 spot cost=$30 per oz. In ten years let's say silver is at $40 an oz. Doubling the spot cost. Does the premium paid double as well. Therefore, would someone tens years from now want to buy this bar for $60 an oz Vs $40 an oz for a standard bar from someone like Silver Town???

    Thanks in advance!

  2. #2
    Join Date
    May 2007
    Location
    Atlanta
    Posts
    10,577

    Default

    Quote Originally Posted by Rick Davis View Post
    so I have a couple of basic questions. Sorry for any redundancy. First, I am buying silver as a long term investment. Just started as the price seems to have fell from its highs to a level that feels right to jump in with a lot of potential up side. With that being said, why should I buy premium bars or coins VS the lowest cost silver per oz?? Assuming that I am buying REAL silver of course.

    Secondly why do dealers like Engelhard or Johnson Matthey demand such a higher price over spot? 10 years from now can I expect to get that cost over spot back plus current OZ price? I just don't understand the value in the cost?? For example, if the cost over spot is $10 at purchase with a $20 spot cost=$30 per oz. In ten years let's say silver is at $40 an oz. Doubling the spot cost. Does the premium paid double as well. Therefore, would someone tens years from now want to buy this bar for $60 an oz Vs $40 an oz for a standard bar from someone like Silver Town???

    Thanks in advance!


    Buying Silver is based on the amount of Silver you are buying at any one time and who you are buying it from. The lower the quantity, the more in premiums you will have to pay per ounce. Then you have to factor in the shipping costs into your total overall costs. With larger quantities comes lower shipping costs per ounce and in some cases free shipping. That's not to say some dealers do not advertise free shipping, but then they have included the shipping expenses into their premiums charges already. There are a few exceptions like SilverTowne that runs a continuous sale on a few one ounce bars and one ounce rounds. Which includes free shipping and the upcharge for credit card purchased in their premium. However when you look at their premium, it doesn't take a second look to realize how over priced they are. But for someone buying very small quantities of up to five and maybe even as high as ten ounces, depending on what the other dealers are offering, they can be a low cost alternative. But if your not one of those using a credit card and prefer to write a check to get the most bang for your dollar, then their deal isn't as great for quantities above five ounces. For all their other products, well that's a different story as they are not very competitive with their premiums and shipping charges.

    There are a few low cost dealers that have low premiums and they stick it to you on their shipping charges. You really need to take a look at all dealers shipping charges before you consider buying from them. Some are far more favorable to low quantity buyers than others. In almost all cases the dealer will post his shipping charges somewhere on his web site. Either in the FAQ section or policies, but it is in there. If they are hiding it or tell you it will be calculated on your way out the door, that might be a great deal or a screwing. Most have shipping charges based on the dollar amount being purchased and for small quantities, that can add several dollars per ounce if your not careful.

    As far as Engelhard and JM bars, they are not premium bars, just preferred bars. Some dealers will sell them for huge premiums over spot, while others will sell them for as low as 49 cents an ounce over spot, when buying in quantity.

    Engelhard has been selling with higher premiums than the JM bars in recent years only because JM has continued to manufacture them and Engelhard stopped producing them many years ago. Again it all depends on who you are buying them from.

    As far as the premium on any purchase, it's called the spread, as in your example of the $10 premium + $20 spot = $30 purchase price

    The ideal situation is to buy as low of a spread as possible and that includes premium rounds like the ASE and Maple.

    Dealers will always buy any Silver products back at much lower prices than what they are currently selling them for, if they will buy the products you happen to be selling. There is a myth out there that when the market runs hot, dealers will buy anything you have to sell and it actually is the opposite. They are not willing to buy when the price is rising fast as it's much more of a gamble for them. The faster the price is rising the less they are willing to pay and no one can blame them.

    Typically in a stagnate market where the price of Silver is stable, the buy back price for a one ounce generic Silver product will run from -$1 to even spot price. And the buy back price for a premium round will run between even spot to $1 over. Then there are times where the premiums are running at much higher levels and you will find higher buy back prices, but that's only until the premiums fall back to their normal range. Even with the much higher premiums that the ASE and Maples have sold for in the past couple years, there are still major dealers that will not pay more than $1 or less in a buy back today. It pays to shop around when selling just like when buying.

    The difference between generic a product and a premium product is in the spread. For generic products, you can expect to lose at least $1 per ounce of your original spread, not counting the shipping charges paid. The same can't be said of premium products, where you might have paid a premium of $3 to $10 per ounce and then sell them for only $1 over spot in a normal period of time. While the premium rounds are much easier to sell, that doesn't mean you be able to re-coup your premium investment.

    For those that are buying in larger quantities of say in the hundreds of ounces at a time or even in the thousands, that spread can make a huge difference in your total net value down the road. People only tend to look at the value of what they are paying for today and what it might be worth down the road. They tend to over look the potential value of buying much more generic Silver for the same dollar amount. When the price is basically the same, your only looking at the difference between what you can sell both items for. When the spot price rises, then there is a multiplying factor to take into account for that extra generic Silver you bought vs the premium Silver rounds that didn't have the extra rounds.

    Using an example of a spot price of $20 today and $60 tomorrow. If you were to buy 500 ASE's today at the best premium price of $2.99 over spot at $20, that would buy 552 generic rounds from the same dealer at $.79 over spot per round.

    The difference between the two products at a spot price of $60 would be, the premium rounds would have a spot value of $30,000 and those generic rounds would have a spot value of $33,120. If you have a run away train and the spot price went to some great price like $180, then those ASE would be worth $90,000 and the generic would be worth $99,360. Of course the premium rounds will add an extra Dollar or maybe even $2 each when selling and the generics may only bring in the spot value. When selling in quantity, you don't have to settle for a beating to spot at your local coin shop, you can sell them online and usually get close to spot or a little over. The issue is, your not going to be able to make up the difference in less Silver with better premium rounds as the spot price increases. In reality, most people would take a larger beating if they sold their premium rounds today versus those that bought generic. And that's not accounting for any changes in the spot price.

    The same statistics work no matter how much Silver your buying, it just becomes much more evident when you are looking at larger numbers. The investors taking the worse beating are those that are buying premium rounds and paying $7 - $10 each. It's fleecing that people do to each other when a product becomes hot in the market place. The only problem is, they are not worth that extra $7 - $10 when it comes time to sell.

    Probably the hardest thing to do as a small buyer, is to find the best buy for your money. I think too many people look at two different products and think, it's only a few extra dollars for this other one, but it all adds up in the end.

    For those that can invest the amount needed to purchase in the 500 ounce quantities, it becomes much easier to decide what and who to buy from. The large online dealer almost always have the best discounts and come with free shipping in that quantity range.

    For those that can only buy an ounce or two at a time, it becomes a real problem finding the best deal. Do you have a local coin dealer, he may charge more per ounce, but it cuts out that all expensive shipping charge. Assuming you don't have to waste a lot of gas driving back and forth and you don't mind spending the time. Ebay can be a find for those willing to spend the time and effort. Which for some is like a game to them, kind of like sorting coins for others. Both are like work to me. The only problem with Ebay are those willing to sell fake Silver to those not knowing what they are talking about in their wording. It looks like Silver, it sounds like Silver, but all the words don't exactly add up to pure Silver.

    If you look in the Forum Silver Bullion and Coins, you'll be able to find more threads on this topic, but you'll have to change the Thread Display Options at the bottom left hand side of the page. Change it from "last month" to "beginning". It all depends on rather your logged in as a member and what you'll see. Unfortunately with a major attack on this forum, they have not been able to restore the archived files for regular viewing, but they are still out there to be found.
    Last edited by valerb; 15th February 2014 at 16:00.

  3. #3
    Join Date
    May 2007
    Location
    Atlanta
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    10,577

    Default

    I should have added the following to the above:

    First off, the premiums have been fairly stable over the past 15 plus years that I've been in the market regardless of the increase in the spot price from a low of under $4 an ounce to $49. Yes there has been shortages at dealers on a few occasions and they jacked up their premiums on a temporary basis, but not all of them followed suit. Back in the 1990's you could buy 1,000 ounces of Silver in one once rounds for 45 cents per round in premium. Those same 1,000 ounces from the same dealer have a premium of 90 cents today, with occasional sales at 65 cents per ounce. While other dealers are selling one ounce rounds in volume for 79 cents on a regular basis. Back in the 1990's you could purchase 100 ounce Engelhard and JM bars in volume for around 25 cents per ounce and today they are selling for as little as 49 cents per ounce. The difference is in the demand today versus back in the 1990's when there was far more available inventory and very little demand. They basically couldn't give it away, even at under $4 an ounce.
    I'm a proud member of Eggshellman's Liar, Shill, and bully club and a new member of the Super Jew Defense League!!!

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