Dealers making room for future ASE orders?

Discussion in 'Bullion Investing' started by isaiah58, Apr 7, 2014.

  1. isaiah58

    isaiah58 Member

    It looks like a couple of dealers have lowered their ASE premiums a tad. I am guessing that it has more to do with keeping their supply chain open that anything else. Can the main distributors of ASE's restrict deliveries only allowing their dealers to have a maximum amount of ASE's on hand? If they can, then any smart dealer would find creative ways to keep their inventory turning over. Once an allocation is cut you risk your supplier finding other resources, not being able to increase your supply when things pick up. That happened to us a few years ago when Prius sales on the east coast were lagging. Toyota moved allocation to the west coast. As the market opened back up, it took a while for allocations to balance. The east coast still has a lower percentage than before even though sales are better than before the re-alignment.

    Of course it might be another reason, but has to be related to sales volume.
     
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  3. Blaubart

    Blaubart Melt Value = 4.50

    I think the reason for the premium drop is simply that the price has been around $20 for over four months now and even with a smaller premium, it's still possible to earn a profit. If they don't lower their premiums, and their competition (either local or Internet based) does lower theirs, then they won't be selling very much.

    When the price was falling, it was hard to sell for a profit when it takes a few weeks to get an order in and a few days or a few weeks to sell the order. Just think about a dealer selling from Sept 2012 to Aug 2013. Place an order on Sept 1, 2012 at $34/oz, and their order might get in on Nov 1, 2012 at $31/oz. If they had to sell at $3-5/oz over spot to make a profit if there was no change in the price, then they'd need to sell at $6-8/oz over spot to earn the same profit in that situation.
     
  4. medoraman

    medoraman Supporter! Supporter

    I would say its more a factor of less risk like Blaubart says and/or reduced demand or increased competition. Think about it, do stores lower their prices when they are already selling everything they get in stock, or do they cut prices and have a sale when either competition picks up and sales slow down?
     
  5. isaiah58

    isaiah58 Member

    Good points. I'd love the premiums drop across the board to about where they were a few years ago. Back to $3 on ASE's, $1 on established private mints and 90% coinage back to 30 cents over melt per dollars worth.
     
  6. sodude

    sodude Well-Known Member

    Less demand and tight competition. The 2014s have been out for a long time now.
     
  7. medoraman

    medoraman Supporter! Supporter

    How about 20 years ago, where they were $2-2.25 for ASE, spot for rounds, and below melt for junk? This is much more in line with what smelters would pay.
     
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