Is it just me, or...

.. is everyone excited about silver prices right now. They hit the teens this morning 19.78! I know a lot of people bought a bunch in the 30+ range and might not be to happy. But for me its awesome. I can't afford to buy a full tube of rounds, at this price though I can get 4-5 oz each pay check instead of 2-3.

 

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I'm excited I can tell you that. I'm planning on buying a few Oz's today.

 

Everyone, please be careful not to repeat the mistakes of the last big drop. It is my opinion you should refuse to pay inflated premiums. I seriuosly doubt this is a once in a lifetime opp.

 

Coin shop next to my house has rounds for 1.70 ovrr spot and ase for 3.25

 

$3.25 is pretty good. Last I checked (before this mornings drop) my coin shop still had a $5.90 premium for ASE's. And he add's tax.

 

And that brings us to another point. I am not sure what a good spot premium is anymore. At $40 an oz. $3.25 over is an 8% premium at $20 that same $3.25, jumps to a whopping 16% That is a tough nut to crack.

Tread lightly, At the risk of bring on the rath of the bullion guys, I might suggest looking at some paper silver to mix in with your physical as the premium is really only the .5 % fee and you get the added bonus of no need for a safe, insurance or SDB and 0 risk of a home burglary.

 

I feel you are treading on dangerous ground Mike equating premiums with percentages. Premiums should be the cost of converting bulk metal to coins, (or premium because of collectibility). As such, they shouldn't change if silver is $30 versus $10 versus $100 an ounce. ASE's had a $2.5-3 premium in 1986. To me, that is the cost of conversion and markup effectively. I simply believe if you treat a premium as a flat conversion fee you get better investment analysis that by using percentage markups, which are too easily distorted.

So, bottom line for me, about $3 is the max ASE premium I am ever willing to pay, regardless of silver price. Anything higher than that and I will label it a poor purchase.

 

I disagree Chris, while I do not know how much it costs to strike an ASE, I do know the total cost of our clad quarters is a mere 10 cents each incuding the base metal. I can only extrapolate that to "very cheap" for an ASE. I believe the majority (not the entirety) of the premium for retail silver is the profit margin and the margins should ideally stay the same as the cost of spot decreases. At three dollars over spot that is still 15% and too rich for my blood. I would be looking for cheaper alternitives like paper silver as I suggested, or larger size bars.

Now, to take it further, what actually matters is not the cost of spot, but the total difference between the buy and the sell. Of course there is no problem with $3.00 over spot if they are buying them back at $2.50, but I don't believe that is case. Looking at it in this manner would certainly remove the cost of converting factor from the equation.

In summary, I think the buillion dealer will use this opportunity and try to keep the cost of spot dollar amount similar to what people "are used to" for as long as they can as to drive up their profit margins. Competetition will eventually win out and premium marigins will fall.

I do admit though, the cost of shipping to the bullion dealer is a monkey wrench as that of course does not decrease and is baked into the price of ASE's

Mike

Edit: Oh yeah, one more thing I really doubt you paid $7.00 for your 4 buck/oz silver correct?

 

Last things first. I did pay the premium for a roll of 1986 ASE's, the first and only ones I have bought.

Sourcing silver blanks, handling security, making dies and then shipping high value loads is all expensive. So is the union workforce in the mints. I would seriously doubt their costs are less than $1 per ASE, most likely higher. Then coupled with it having to go through an authorized distributor, then to retail channels for sale. All of those people applying overheads to them, I simply do not feel a $2-3 premium is unwarranted. The value to the owner is very recognizable, very pure silver which will be worth the maximum when it comes time to sell.

I have never against ASEs, I simply happened to buy junk silver because I love coins also, and to me an ASE is not really a coin but more US minted bullion. Give me WL halves and mercury dimes any day of the week. Plus I had a source where I bought many below melt, and now I have nearly all junk silver. BUT, looking at pricing today, and what I consider excessive premiums for junk silver and my leeriness of bars, and I am seriously considering buying a box of ASEs when I want to put more money into silver.

Of course, if I find a lot of junk world silver in the meantime near melt I doubt I will have that much self control.

 

Yeah, silver has really gone down. So has gold unless it just went back up.

 

when silver gets under 12.00, I may start to buy a little

 

Cheaper preimiums are nice but I like to hold it. How can I do a mc scruge dive with paper

 

I hear what you are saying, but perhaps a just a little compromise, It may be possible to dive into only half a pile, and then with all the savings from the other half, you can buy something special for your wife, girlfriend, boyfriend, whoever, and everybody wins. Just another way to look at it

 

Having been around for a while, I remember the silver drought very well, when it traded within a range of $3.50 and $9.00 an ounce...for 20 years (1987 through 2006)! It would not surprise me to see silver investments become dead money again, for the next decade or two. So, be careful out there.

 

plus one

 

I hear ya. One of my LCS has been increasing their premium as the price has been dropping. At $30+ their premium was $4.50. Now that we're under $20, their premium is a whopping $8. Not only does the increased dollar amount suck, but they're approaching a 50% premium.

 

Premiums are also used by dealers for at least two other purposes. The first is to cover volatility. If a dealer buys at spot from customers, or spot plus $1.50 from online sources, they might have to wait 7-30 days before they can sell the item they bought from the customer, or they have to wait for the bullion they purchased online to arrive. In the meantime, the price of PM will change. Many dealers (especially those who aren't hedged) will add in a little premium to cover that risk.

Another purpose is profit. Dealers don't buy and sell coins at cost.

It makes sense for both of these to be based on a percentage of total value rather that a flat fee per coin.

 

I am still leaning to my way of thinking, As Chris has said, it SEEMS like it might be costly per coin to strike and it is difficult to understand how it can be done so cheaply, but I also don't understand how they can make a 40" LCD for $299. We could put this discussion to bed if we knew the production cost of an ASE but I have looked and could not find it. I still hold on to the belief it is cheaper than Chris thinks. It seems the mint only loses money striking pennies and nickels at 1.26 and 7.7 cents respectivley which does include the base metal. Dime are 4 cents and quarters are a dime. Like I said, Cheap

http://coins.about.com/b/2008/05/10/current-costs-to-mint-us-coins.htm

 

I started collecting coins seriously in 2011 and the high silver/gold price was one of the reasons I choose not to collect thme. I assumed at the time that silver/gold would fall back to more normal levels once the economy picked back up. If it drops down to those levels I will start collecting some gold, if it stays where it is I will stick with old copper

 

I'll be buying before that, but $12.00 sounds like time to throw it in overdrive!