Roll of 2015 silver eagles for $399.95 on Ebay sold by Moderncoinmart

Can you post the link to this bar? I cannot seem to find it for $8 over spot...

 

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Don't have the link but it's there.

 

Sorry Gal, closer to $10 over spot my bad

 

http://www.ebay.com/itm/1-oz-Pamp-S...pt=US_Bullion_Bars_Rounds&hash=item19f8b3f417
Price is $1304.99 Buy It now. (630 sold so far and 8hr left). And, it looks like they're limiting quantity to 5 pieces per Ebay User.
The MCM roll of 2015 ASE was limited to 3 rolls per Ebay User. I bought 1 and afterwards could only buy 2 more. If I tried to buy 3, I got an error message.

 

Any major dealer with common sense is going to have their inventory hedged and won't lose anything on a price decrease or gain anything on a price increase. Any bullion dealer that didn't hedge their inventory would of almost certainly went bankrupt over the last 3-4 years as silver fell from a high of $49 to a low of $14.

 

Actually, any dealer who doesn't want to speculate on the price of the metals wouldn't hedge -- they would just keep minimal inventory to take care of current or near-immediate demand.

You don't need months or years worth of inventory, just a few days or weeks. Then you replenish.

You want to be like a bookie: not betting on either team (the price rising or falling)....you just want to collect the commission (the spread).

 

The big dealers need significant inventory, there are hundreds of different coins/bars ect. Customers would complain if the items weren't in stock and took a long time to deliver. Thus they need to hedge their inventory.

For example Apmex probably has a million ounces in inventory, if they didn't hedge that and the price of silver dropped a very large amount they'd be in serious trouble.

 

But what is enough inventory ? I think a few weeks is fine....once it drops, you order more at the new price.

I'm sure APMEX knows what happens to orders as the price of silver falls or rises 5%...10%....20%. So if they know that a drop in price of 20% leads to a huge inventory loss but will not lead to a demand response (inelastic demand), then some hedging might be necessary. But as they have steady orders and generally see more buying as the price goes lower, I would think it's not mandatory to hedge.

Plus, that doesn't take into account what happens when the price RISES and they reap a windfall...unless of course, demand is not inelastic and falls off as the price rises.

My point is that unless they are holding huge amounts of inventory relative to daily/weekly demand, and unless demand is elastic when price rises but inelastic when it falls, they should see windfall gains and inventory losses cancel out over time. As expected...and then your spread becomes your only/major source of income.

I realize that's simplistic and there could be adjustments, but these guys are supposed to be dealers and wholesalers/retailers, not speculating on the price of the metals. Only a very sharp drop in the price on a large inventory build that happens very very quickly and that is not accompanied by increased orders should be a financial problem.

 

Sure, their inventory would increase in value if silver rises. That's a windfall for them. If it falls, the hedge protects against losses.

Silver is down 86 cents today. If they have 1M ounces inventory, they would be down $860,000 today. If it drops $1 tomorrow, that's another $1M unless they can raise premiums. Why wouldn't they hedge against such a loss?

Hedging would be done to avoid speculating on the price of silver. You take a small expense to open the hedge and then you don't care if the price of silver drops. Not hedging is speculating on the price.

And the price of silver does exhibit sharp drops, quite often over the past few years in fact.

 

I got the two rolls I ordered today. Faster shipping than I expected with so many bought. I was going to order 5 more using mine and my wife's eBay accounts but alas, they had stopped selling them for 399.99 by then. Oh, well, I like the two rolls I got.

 

I took advantage of the sale too but with silver dropping today I wonder if MCM was the real winner if they locked their price in around $15 around November. Anyway it was a nice deal and I enjoy my new ASEs so no problem. Nice rolls too. Only a couple had scratches on them, rest were spotless.

 

Are they hedging against an EXTRAORDINARY move in the price, or the everyday fluctuations ? It seems more the latter.

That costs money, and I'm not sure it's the best use of their working capital.

If they do a few hundred thousand coins a week (?) then the existing inventory losses aren't a problem since they can replenish at a lower price. Unless the price CONTINUALLY goes down, they shouldn't be affected by price movements. It should cancel out in the income statement rather than sit on the balance sheet as a series of big losses.

They could be hedging....depends on what kind of instruments they are using. But with narrow margins, I maintain hedging NORMAL commodity volatility is very prohibitive.

Yes, but big rises too, right ? And when it falls, they replenish inventory they may have sold at a loss and then reap gains when it bounces back, no ?