Markup Over Spot Fluctuations

I’m sure this has probably been addressed, but I’m hoping someone can help me understand how/why the cost of bullion markup over spot fluctuates.

I understand the cost of gold/sliver per ounce fluctuates with the market. I also understand there is a cost to minting bullion coins. Of course, a coin shop/dealer has overhead and has to make a profit. Okay, all of that is a given.

What I don’t understand is why the markup of gold/silver over spot fluctuates so radically. Two weeks ago, my two local coin shops were charging $150 over spot for a one-ounce American Eagle. Maple Leafs were $135 over. On Friday last week, American Eagles were $175 over spot and Maple Leafs were $160 over.

Sooo… within the last two weeks, what changed? All of the dealers, internet included, seem to be on the same page in the amount they are charging for markup over spot. The cost of a gold is relatively the same. Gold supply doesn’t seem to be an issue, and if it was, shouldn’t that be reflected in the spot price? Eagles and Maple Leafs seem to be readily available; in fact, I ask for American Eagles with the Roman numerals and they always seem to have them.

Could someone please explain what’s going on? Are governments increasing the price to make a profit?

 

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Eagles have had production problems because the US Mint doesn't want to pay a premium for planks:

https://www.kitco.com/news/2023-01-...s-on-American-Eagle-silver-coins-in-2023.html

 

High premiums are tied directly to demand, just like the way you pay more for gas
in summer time when people travel then it goes down in the winter time but this
goes foe any type of precious metal dealers such as APMEX in which I do allot of
business with now have a minimum order of $500 and the premiums have risen there, I mostly buy GOLD from them. but like I said it affects everything across
the board.

 

Supply and demand. If the dealer can sell the same round for an extra 30 bucks this week, he may as well.

 

I would understand this if I saw different markups from different dealers, but exactly the same markup at exactly the same time?

 

Thanks for the article. I have so many more questions to research thanks to you!

Sooo… it’s not the supply of the raw material, but the supply of blanks that is causing the markup to increase. And presumably gold and other precious metals are floating in the same boat as silver?

So, Sunshine Mining, here’s an idea; curtail the production of blanks. You’ll control the market and line your pockets at the same time.

 

Back in the 60s, the movie houses noticed that the scarier the movie, the more popcorn they sold. Now days the more international conflicts, political irrationality, global wars , crashes of cryptocurrency and stocks, disease, epidemics, etc. etc. so now our "Lives and future" are scarier, so the more precious metals they can sell for a higher price.
Precious metals are concentrated value, so the companies can make the decision to keep in the vaults or sell a few to keep buyers interested and drive the value up as in "buy now before they are all gone". No dummies there. IMO, Jim

 

And here I was expecting “… our lives and future are scarier, so the popcorn industry has blown the lid off the popper… “

(Sooner or later you folks are gonna get my sense of humor.)

 

@Lon Chaney is on the mark... It is supply and demand. There is a lot of market uncertainty these days so precious metals are a hot commodity. Five years ago my dealer would scoff at a gold coin. I distinctly remember seeing him exclaim, "Oh no, not another gold coin" one day in his shop. I was buying pre-33 gold as well as Eagles from him at spot back then.. Not now. He has even tried talking me out of some of my stuff lately.... PM's are hot right now.

 

My bet is on "later".

 

Personally I think is much more selling at what the market will bear. At the rate this is going a bullion ASE is heading toward double the spot price.

 

I'm doing my part to lower the demand side.

 

BARRON'S prints premiums for 6 gold coins every week in the MarketWeek section. For AGEs, they run about 4%. My LCS usually tacks on about $60-$70 per coin.

$150 seems excessive.

 

That and they have to figure in what a replacement is going to cost them.
From what I understand a brick and mortar store works on a low profit margin.

 

The silver thing I get because lots of people are buying silver at the lower cost of $30 or so per coin.

Gold hasn't seen the same retail interest as coins for 1 oz. start at $2K.

 

I think this is the answer. Most LCS look to a few national distributors for supply they are not naturally getting from walk-in purchases. This is why "all the dealers" prices move in a similar fashion. (this is tied to supply and demand). This works both ways - a dealer that makes a large purchase that they cannot afford to hold on to and sell retail will wholesale back to these distributors as well.

High mark-ups can also be a result of the quick price changes that we have seen. Dealers don't want to be left holding the bag if prices fall - though demand is currently not an issue.

 

As I noted elsewhere, an OGH MS-63 1915-S Saint I bought for basically spot in early-2020 I just sold for 15% above spot from my LCS.

Premiums are STRONG.

 

I think this may be partially true, but I also think our local dealers are looking for 6% premium on their gold Maple Leafs. One week they’ll tell you their premium is $150 and they will keep it there as they watch the spot price fluctuate. When spot increases, and they think the market is going to continue to increase, then they raise their premium to keep up with the 6%. It’s not immediate, so that’s why I’m seeing a $25 jump. Likewise when spot decreases, but they seem slower to respond.

Sorry for the naïveté, but what is an “AGE”? Is that an on-line dealer?

Just trying to understand; if spot were $2,000, then a 4% premium would be $80. If the local coin shop is adding $70, then wouldn’t they be in the ballpark… or is that why you are saying it’s too high?

But then, looking on-line, I think you’re right. A 6% premium over spot (~$150) for gold does seem excessive. On-line dealers appear to be around 4%.

Thanks for the Barton’s tip. Here’s a cool website I found: https://findbullionprices.com/ There are four or five reputable on-line dealers that are $80-$100 over spot for one-ounce gold Maple Leafs (single coin purchase). Maybe take prints to the local coin shop and see if they will match? If not, well then I guess they risk losing sales to on-line dealers.

 

Greed

 

AGE American Gold Eagle. .999 gold 1 Troy oz