I have noticed this among several big online dealers. I'm not naming names but it seems that every time there is a price drop, especially with silver and platinum that they all of the sudden seem to be out. Are they really out or just waiting for the price to rise.
it's common practice. would you accept less for something you knew had the potential to sell for the same amount you paid for it or even more at some point in the future? no. you'd wait if you had the ability to sell later when the price recovers.
Could be. You have to realize that they buy these coins at a certain price based on market value at that time. so lets say you are a dealer and you buy 1000 ASE at 15.00 (dealer price). lets say you can sell them for 25.00 since bullion is based on market value at that point in time if there is a big drop or a decent drop in price then you will start to lose money.
Generally a well ran bullion dealer has short future contracts or options to protect their inventory from loss in case of price drops, but this is an expense like insurance and many dealers ( large and small) run naked. Withholding sells as the price drops doesn't mean the price is going back up against tomorrow or next week or....... As long as the trend is upward, it appears smart, but when the long term down market occurs, it is deadly. IMO. Jim
If the price of gold and silver drop, then online and B&M bullion dealers (with no hedge) will either 1.) Withhold the PM's until the spot price recovers or 2.) They will sell the PMs but with higher premiums since bullion dealers will not sell gold and silver coins and bars below the price that they paid for them even if the spot prices continue to drop. For example, Lets's pretend that spot is currently $18.00 and XYZ Bullion dealer bought 10 1-oz silver bullion coins from a person for $16.00 ($2 under spot) and puts them on sale for $19.00 ($1.00 over spot). That is a $3 over spot profit for XYZ Bullion dealer ($19.00 - $16.00 = $3.00) if he sells. A week later spot silver drops to $15.00 and the dealer stills has inventory that he bought at $16.00/coin and lets say that XYZ dealer drops his price from $19 to $17.00 to generate more sales. If XYZ Bullion dealer sells at $17.00, then that means that XYZ Bullion dealer is still making a profit but it is $1 spot profit ($17.00 - $16.00 = $1) instead of the $3 over spot profit and the premium increased from $1 over spot to $2 over spot ($17 price - $15 spot price). Another week later silver goes down to $12.00 and the dealer still has some remaining inventory that he bought at $16.00/coin. In order for XYZ Bullion dealer to not sell for a loss, that means that he would have to sell his 1-oz silver bullion coins at $16.00. If XYZ bullion dealer sells for $16/coin, then that means that he is breaking even but the premium jumped to $4 over spot silver ($16.00 price minus $12.00 spot price).
When I went to my local dealer when spot silver was in the $9 range in 2008, my bullion dealer would have 1-oz silver art bars available but at the time the lowest price that he could sell them to me was $15.00. He was breaking even at selling 1-oz silver art bars to me for $15.00 when spot silver was in the $9 range. I bought some 1-oz silver art bars that I wanted to add to my collection for $15.00 from this dealer during that time in 2008 when spot silver was $9/oz but I did not buy much during that period in 2008 because the premiums were way too high for me and I wanted to pay a much lower premium than the $6 over spot that my local dealer was charging me at that time.
As long as a bullion dealer can replace his inventory for less than he sells to you, there is no reason to withhold inventory. In fact, the dealer loses money by doing so even if the price eventually recovers. But there are a lot of dealers who don't understand business as well as they should and believe they are increasing profits by withholding inventory.
