Anyone else had this experience?

Went into a shop this morning where I occasionally buy coins to pick up a few ASE's (their main business is jewelry). They had been happy to take my money just last Friday for a couple of them, but today had yanked all their silver bullion out of the display cases and told me they weren't selling any silver at all for the moment. Got what I wanted elsewhere, but pretty disappointed in how this one place decided to react to the drop in silver.

 

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How would you feel if someone today came to your house and expected you to sell your stuff at today's much lower prices.

Many store I think did sell out at the new price. Some sell at a larger premium then they used to and some just pull their stuff.

I can't say I blame them in any of the cases.

 

But wouldn't you be upset if you pulled into a gas station only to be told that they are not selling gas for the forseeable future since the price of oil declined overnight? The shop that the OP went to has the right to pull their product but I feel the OP is entitled to be somewhat upset.

 

When I brought this up to the fellow at the coin shop where I bought my ASE's today, his remark was that to be successful in the coin/bullion business, you have to accept the precious metal pricing as it happens to unfold. Dealers always quote spot for selling and buying, don't they? I'd also add that what if silver goes down another several dollars and stays at that level for, say, a year? Then their decision not to sell today will look pretty shortsighted.

 

The way that usually works is the gas station will continue to sell gasoline at the higher price as long as they can and then sloooowly drop their price a cent or two every few days. It might take a month or more for the price to drop 10 cents. However, if the price of oil increases or if there is a refinery fire someplace (or if anything happens anywhere in the world that might remotely affect the supply of fuel) the station will immediately raise the price of their gasoline (even though the gasoline they are selling was purchased at the lower price before the crisis occurred). I have seen prices spike over $2.00 per gallon in one fell swoop.

 

They would look shortsighted but they have no way to know what will happen anymore then you or I.
They just know what their business dealings and have to price accordingly.
As for dealers quoting spot price for buy/sell, my local dealer does not. He quotes his buy and sell price never speaking about spot at all.

 

They are in it for speculation and profit bottom line. After all they are a jewelry store not a coin store or bullion distributor. If they are in it as a business such as a coin shop they look at it as sometimes you're the windshield sometimes the bug. It's just a loss and a tax write off when they do sell silver they paid $39 for at a price of say $28. It off sets the nice profit when they sell say a 09 S vdb that they paid $400 for years and years ago to someone today for $1300. Perhaps they are just afraid you are doing the same thing buying now at low prices and if it goes up a month from now you will unload it all back on them. Also if they pulled it only once you walked in go back in a day or two and see if the eagles are in the case again and if they magically pull them when they see you then you know they have some issue with you but are selling to other buyers.

 

None of that is what's happening. There was nothing in the case when I walked in, period. They just weren't going to sell based upon the current silver price.

 

Here's another way to look at this. What if, as an individual investor, you wanted to add to your stock holdings, but were told that since prices had taken a dip, you couldn't, but the stock exchange would be happy to facilitate the sale of your current shares? How long would the equity markets last operating on that basis?

 

Lock your wife and daughters away. Carnage in precious metals ensues. These guys bought high and are reluctant to 'deal' at this point. Check back later when they'll be more obliging to sell because of needed cash flow..........

 

Perhaps they do not realized that they can profit from the drop in silver prices. Sure, they will take a loss on their current inventory but they can replace that inventory at the new, low prices and sell it for a profit. A few transactions at the new, lower prices will quickly erase the loss they will take on selling their current inventory.

 

I don't believe they are bullion traders so to speak. A trader earns off the margins, so they attempt to move as much metal as possible. Price fluctuations don't affect them as much. Mom and Pop wannabes get antsy when the perceive a loss on the horizon. However, this is foolish to pull a saleable inventory because we don't KNOW where it will settle. $16-17 is not unrealistic, simply because the cost of production is lower than $15. And if the Hunt hoard rumored to be several billion ounces of $2 silver were released, it could drop it to $5-9 I believe. I know there will be a lot of differing opinion, but no one really NEEDS silver with the exception of some minor manufacturing. That which was used in photography is largely obsolete now. In fact one of the reasons for the current trend was the dismal economic reports from China. It is felt that the Chinese who have been the world's largest buyer of Silver bullion (since the government allowed private ownership) won't be buying nearly as much. Lower demand equates to lower prices.

 

I have learned to not do my trading all at the same place. Years ago I purchased a few Krands and turned a tidy profit in a 2 week period. I sold them where I bought them and comments were made. So mix it up if you can. And it keeps them from knowing too much about your business

 

Silver is used widely in solar panel applications, and a growing number of biotech applications. Gold's industrial use can be called negligible...silver, not so much.

A dealer worth his salt doesn't sell existing inventory when prices are declining. They sell at replacement cost. That means that if you want to buy 10 or 100 ASEs in a declining market, a smart dealer will first confirm that they can re-acquire from their distributor what they're selling you, and then replace what they just sold you with the proceeds from the sale. Your dealer's profit will be only the margin they get between the distributor and resale.

It doesn't work the same way exactly for the large sellers, but a good dealer will break even/make small margins in a falling market, and make larger sums in a rising market.

 

Very common. Heck I discussed this at length here about a year ago, how dealers refuse to sell when low, and refuse to pay full value for purchase when high, thereby making physical bullion an even worst short term play.

Seriously, I would have been shocked if I HADN'T read about stories like this. Remember those dealers who do this too you, since they will be the same ones to severely discount purchases if the market gets in their eyes "too high".

Myself? I would prefer to deal with someone who is hedged and will treat you fairly regardless the market conditions. Wouldn't you?

 

Some dealers want to get rid of their PMs because the prices are falling.
Some do just the opposite.

In my opinion, a smart coin dealer wants to sell (that's what they went into business to do, unless they went into business to speculate and time the market). They can always buy more anyways.

 

I guess they can sell at their own discretion and we as a buyer can buy at our own as well. I do think it is kind of chincy since it is not a significant price difference. Probably will be more stories like this in the coming days.

 

My question to the OP is to whether you would have felt more upset if he had left out what you wanted to purchase but with his sell price not reflecting the big drop in silver? In other words, do you feel it is wrong he just pulled his silver completely or do you feel it is wrong he did not sell it at the price which would be dictated by the market?

 

...and sell fast. Flip inventory as quickly as possible to minimize the risk of having inventory sit around while the price falls below the purchase price.

One of my LCS has been in business since the 70's and doesn't seem to care what the price of PM are. They just look at the spot price and make their buy/sell offers accordingly. The owner of the new one has told me he will stop selling if silver falls below $25, so I didn't stop by there yesterday.

 

That is silly.

I remember being at a show and the dealer pricing the gold at last weeks (higher) price.

I asked why and he said, well do you expect me to take a loss?

I asked him if he'd buy my silver at last year's higher price, so I wouldn't take a loss.

He said no, and I asked him what the difference was.

It is okay for collectors to take a loss, but not the dealers?