High Silver Prices & Depressed Premiums

[BullionStar]

Hi All.

I am new to Gold-Silver.us so please be gentle with me!

I am a particularly close watcher of Silver (and Gold) premiums and how they fluctuate as I believe they are a very good indicator of physical supply/demand. It seems to me that the current high prices are having the effect of pushing down premiums somewhat.

I did an expermiment with some 1 ounce Silver bars. Selling through eBay in the UK at the end of March, we achieved 15% better premiums, with Silver at $36 (£23), than we are getting now, with silver around $49 (£29)

I wonder if this is a case of physical buyers simply being put off by higher prices, or if it is a case of psycological price points being reached.

I wondered if anyone out there has any insights?

[Serpo]

Hi and Welcome.....


Not sure most people around here dont like to sell much...hahaha,

it is interesting what you are talking about,please explain in more detail.

cheers....

[SLV^GLD]

Based on my observations in the past, when silver was not displaying its current degree of volatility, premiums flexed with strong moves in either direction. The longer spot went sideways the higher premiums went. During strong moves in either direction premiums were depressed. I attributed this behavior to supply and demand. During strong moves supply increased because there was more selling than buying. During the sideways intervals there was more buying than selling and inventories would run lower.

These observations were made in brick and mortar coin shops and specific eBay sellers.

[Sparky]

What was your average premium at $36 and $49?

[SLV^GLD]

What was your average premium at $36 and $49?
Both of these price points were highly transient and therefore fell into a period of strong movement. $36 was revisited over the course of what, 2 weeks? Did silver ever really stop moving up since February this year? $49 existed in a blink of the eye so I have no observational data to relate. At any rate, the local shops have been moving their typical $2/oz premium down to $1/oz or even $0.50/oz premiums over the past couple months. However, the buy rates have moved from the usual -$1/oz to -$3/oz so it seems the spread is relatively constant for the dealer.

[Sparky]

What was your average premium at $36 and $49?
Both of these price points were highly transient and therefore fell into a period of strong movement. $36 was revisited over the course of what, 2 weeks? Did silver ever really stop moving up since February this year? $49 existed in a blink of the eye so I have no observational data to relate. At any rate, the local shops have been moving their typical $2/oz premium down to $1/oz or even $0.50/oz premiums over the past couple months. However, the buy rates have moved from the usual -$1/oz to -$3/oz so it seems the spread is relatively constant for the dealer.


I think the spread has remained relatively constant, but for the opposite reason. My observation is that both buy and sell prices have increased relative to spot price in FRN terms, but not in % terms.

I think the observation in the OP is correct, that the % premium has actually decreased. The dealer needs to make a certain dollar gain per transaction in order to make money, which is a smaller % as prices increase. When silver was <$10, there were times when I had to pay 20% premium. That would be like paying at $10 premium for a round at these higher prices. I don't think people are paying that.

[SLV^GLD]

I am in agreement that a higher spot price (at any instance of time) results in a lower premium because the spot value and the premium percentage are denominators with the actual premium amount being the numerator. That numerator value tends to be a static $/oz number making the percentage function in an inverse proportion to spot value.

Examples; premium is $1/oz and you are buying exactly 1oz.

In the first example spot value is $25. $1 / $25 = 4% premium

In the next example spot value is $50. $1 / $50 = 2% premium


My initial assertion was that premium becomes a variable dependent on the stability in spot price. The more stable the spot price the higher the premium will be. The less stable the spot price, in either direction, the lower the premium will be.
Lately, spot has constantly been on the move so my assertion is doubly in agreement with yours that premiums are currently depressed when expressed as a percentage (since the moves have been upwards) or when expressed as a fixed value relative to spot (thanks to supply and demand).

[BullionStar]

Thanks for all the posts! I'll try and cover everything a single post.

We sold bars in 2 tranches through 2 eBay accounts. Transactions were limited to the UK only

With Silver at $36 (London Fix) we got average premiums of 41.1%

With Silver now at $45 (London Fix) we got average premiums of just 19.7%

In each case the auction was started at the Silver fix.

The bars we were/are selling are a new, previously un-marketed brand, so the "Brand Premium" would not apply here as it would with something like a Johnson Mathey or Englehard branded 1 ounce silver bar.

We were selling them with some nice professional photography, which I'm sure helps! See Below

http://bullionsupermarket.com/articles/Ingot1.jpg

My personal theory is that buyers psychological price "Anchor Points" as I think the behavioural scientists term it, are not keeping up with fast moving market.

[Sparky]

Could the price movement of the spot price during the auction period been a factor? Curious, because you may have started with a London fix of $36, and by the time the auction ended could have been a spot price of $40. Just wondering.

41% is quite a whopping premium.

[BullionStar]

Could the price movement of the spot price during the auction period been a factor? Curious, because you may have started with a London fix of $36, and by the time the auction ended could have been a spot price of $40. Just wondering.

41% is quite a whopping premium.


Sparky, Sorry I should have been clearer. The price didn't move that much during the auctions.

There were 10 short auctions when Silver was at around $36, and 10 short auctions when Silver was at around $40. About 4 weeks apart.

[ximmy]

BullionStar could just say, "At BullionSupermarket.com, we have fine bullion available for purchase. Good prices, low premiums, You buy now!!!" ::)