What do dealers pay for Silver Eagles from the Mint?

Discussion in 'Bullion Investing' started by cphine, Oct 31, 2009.

  1. cphine

    cphine Junior Member

    Hi.
    I'm really trying to figure out the math used by people who sell silver eagles on eBay and actually turn
    a profit.
    I'm guessing that there must be a sort of "wholesale cost" that dealers get from the mint when these
    things are originally purchased.
    For example, having scoured the web for hours upon hours, the best deal I can find right now for a box
    of 500 2009 Silver Eagles is $9070.
    The seller charges a 1% premium, bringing the total to $9160.70.
    Shipping, insurance, etc is $30 bringing the final, in hand total to $9190.7.
    Divide that by 25, the number of rolls, and the per roll price is $367.63.
    Looking on eBay, the average sale price for a roll is $410. At first, that sounds awesome. But..
    The eBay fees on a $410 sale are:
    Insertion fee: $.15
    Final value fee: $15.67
    Paypal charge: $12.19
    Total charges: $28.01
    Most of the ones that do actually go for $410 or above also offer free shipping, which would be $5 via
    USPS priority flat rate box.
    That brings the total charges to $33.01.
    Subtract this from the $410 we are paid, and we arrive at $376.99 from the sale.
    Since it cost $367.63 to have it in hand, we are looking at a profit of $9.36 per roll, or $234 per box.
    That's a meager 2 and change percent return on investment with an awful lot of risk involved.
    What sort of prices must the original dealers be getting in order to turn a real profit?
    Is this the typical margin dealt with by them?
    If so, ouch!
    Guess I'll just keep buying long term and play some price fluctuations for some profit, but avoid the
    short term buy and sell. I just don't see how they make enough money to warrent the risk!
    Thoughts?
    ~Christian
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  3. andrew289

    andrew289 Senior Analyst

    You are leaving out the most important part of the equation ..the TPG.

    Dealers don't buy ASE boxes to sell them off as rolls. They buy ASE boxes ...ship them off to be graded. It's called MS70 roulette. They only get MS69 and MS70 encapsulated. All of the other 68/67 grade eagles are returned raw. They go into mint tubes and are offered at $410 a roll.

    Dealers make money selling slabbed 69 and 70's NOT rolls of raw ASE's ...those are the rejects.
  4. Chiefbullsit

    Chiefbullsit CRAZY HORSE

    Dealers get cheaper rates from the Mint and the TPGs....when buying and submitting in bulk. Andrew is right about the 70s being where the money is.
  5. cphine

    cphine Junior Member

    Ah!
    Those definately do go for quite a bit of premium, but again, they'd better hope a box has a significant number of 69's and 70's. Even those don't look like they bring in THAT much. The first stikes are about $300, but the normal MS70's go between $70 and %80.
    I mean, PCGS is bulk charging a minimum of $5 per coin that is submitted assuming 60% of what is sent doesn't make the required grade you want...and those that do are $10 apiece. At $5 per coin and 500 coins, we're still talking a minumum of $2500 just to get the box looked at! Am I reading their grading fee scale correctly?
    At roughly a $50 premium for the MS70, you'd need 50 of them to grade that way just to make back the grading fee.
    Phew! *wipes brow* Too much thinking on a Saturday!
    I guess I'll just leave that to the professionals.

    I really would still be interested in knowing what their original mint discount is, if anyone happens to know.
    Thanks!
  6. andrew289

    andrew289 Senior Analyst

    I got one green monster box in January of 2006 and 2007 and played this game for those 2 years. Each year, I made about $8,000-$9,000 profit off each box.

    In the end it was to much work for one man so I gave it up but for stores with a couple employees who order 8-10 boxes each year. It could pay the mortgage.

    I seem to recall that I averaged about 80-90 FSMS70's and about 180-200 FSMS69's per box each year. Selling the FS70's pretty much paid for the box/grading and the rest was gravy.
  7. elaine 1970

    elaine 1970 material girl

    dealers buy from the mint:

    silver 1 oz. - $1.50 over spot

    gold 1 oz - add 3% over spot
    gold 1/2 oz - add 5%
    gold 1/4 oz - add 7%
    gold 1/10 oz - add 9%
  8. midas1

    midas1 Junior Member

    Does this include AGB, AGE & UHR? If so, the dealers do pretty good.
    I ordered a 2009 AGB MS70 early release for $1,305.00 & 15.00 s/h. After grading the dealer made about $250.00 or so. not bad for not much work.
  9. Otter

    Otter Likes shiny objects

    What are the requirements to be a dealer and get dealer pricing from the US Mint?
  10. Danr

    Danr Numismatist

    Great info, thanks
  11. Danr

    Danr Numismatist

    there are rigorous requirements. You have to be an official "big boy" (no small frys allowed)
  12. Grbose

    Grbose CoinSpace.com CEO

  13. Blueindian65

    Blueindian65 Member

    accidental post
  14. Otter

    Otter Likes shiny objects

  15. GDJMSP

    GDJMSP Numismatist Moderator

    I believe there are 14 presently qualified and approved by the mint. Not very long ago it was only 7.

    Regarding the comment about dealers making their money by playing the grading game with bullion coins. It is true that there are plenty of dealers who do this. But the vast, vast majority of all bullion coins are not submitted for grading. Only the tiniest percentage of them are ever submitted, probably 1% or less. The rest of them, 99% are sold without ever even being looked at by the dealer or the buyer because they are sold purely as hunks of bullion - which is all they are.

    The way the dealers manage to make a profit doing this is simple.

    1 - they raise the price to their desired profit level and just sell them. People will buy them because they cannot get them otherwise.

    2 - they simply wait for a movement in the spot price to make their sales profitable.

    Neither one is hard to do given the volatility of the metals markets over the past 6 to 8 years.
  16. cphine

    cphine Junior Member

    Great information, thanks a bunch.
    Ya, guess I won't be an official dealer anytime soon. LOL!

    Elaine, thanks for the numbers. Now the below really makes sense.

    Given their discount, indeed, even selling at spot plus $2 is a $.50 profit per coin...not taking into account any rise in spot value.

    Andrew289, great info. I'm surprised that many would grade so high, but the numbers make sense now knowing from your experience that they do. Perhaps it is worth a try afterall. Hey, worst that can happen is I cost myself one trip to Vegas in exchange for an alternative gamble. Well, maybe three trips to Vegas... :)
  17. JDS

    JDS Junior Member

    I was running through similar calculations this morning and came to the same conclusion. I think the best opportunity to make money would be to buy now and hold for a while until the market price increases. I've read some people's opinion here that silver may go to $20 per ounce.
  18. Danr

    Danr Numismatist

    :bigeyes:Well it may go down.:bigeyes:

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