Gold premiums just went up?

[solid]

I'm wondering why gold premiums just seem to have jumped.

Yesterday, I put in an online order for a couple of Swiss 20 franc coins, in BU condition. The premium was 9.99 per coin. I just checked, and the premium doubled to 19.99 per coin today.

The premium for gold sov's jumped up today too.

[StreetsOfGold]

They're falling for this one (http://sgtreport.com/2012/04/krugerrand-premiums-falling-upon-gold-specification-scandal-on-2011-proofs/)

[big country]

If you were buying at apmex they just had a sale on their Swiss Francs and French Francs/Roosters. Maybe the sale just ended? I saw an email about it a few days ago in my inbox.

[Horn]

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http://www.youtube.com/watch?v=LjPlhb4f9P8

[Sparky]

Cuz the price per ounce is down. It's gonna be like ximmy said, price falls from here are going to be accompanied by premium increases. It's a sign that holders of gold are becoming increasingly reluctant to sell at an artificially low price. This is what happened when prices plunged in 2008.

[beefsteak]

The premiums' game is a "sweet racket", Solid. It's a "what will the traffic bear" gig.

When prices of a gold goes up, the premium goes up primarily due to the customary "percent over spot" game. That's more honest that the WWTBP* game.

While the percentage may stay the same, the end result is an out of pocket increase in actual dollars expended due to the higher basis upon which the premium percentage is calculated in the first place.

Now, along comes a forum Sparky to inform (hopefully he wasn't defending this practice) that the sellers have figured out when the price of gold goes down, the premium also increases. Why? It's practiced as a form of price protection for the seller who paid too much for their product and doesn't want to take the loss.

So, rather than pull their overpaid product from the market place and man up and swallow their losses, they stick on a "price protection premium" and STILL dangle the product out there like a big fat wiggly worm on the end of the bait hook.

Nothing quite like the precious metals "I got something you want, what will the traffic bear" price giggin' fool's game, huh, Solid.

Reminds me of the "fuel surcharge game" played by shippers.

Just took delivery of something via Estes...delivery copies at the dock showed a 26.5% fuel surcharge over and above the basic costs to ship charges and the profit margin built into the rate structure in the first quoted S&H price.

The shippers know that if they honor their contracts, priced back when --knowing full well their 18 wheelers only get 4miles to the gallon fuel economy--, they will make money at the original contract price. But they can extort MORE money when they call it "fuel surcharge." When challenged, they claim they need more money to stay competitive with much cheaper rail delivery modality.

Same game the gas stations play.

Retail gas stations know what they bought their fuel for. But they charge the "what if I had to replace my entire fuel inventory today" pricing model and pass along, NOT CURRENT PRICING PAID, but some gossamer future GUESS price paid based upon when they run out of current inventory.

Accounting used to be either a LIFO or a FIFO pricing model. Not anymore it is a WWTBP* pricing model.

It's inflationary. And people continue to put up with it. It's disgusting.

I think this WWTBP* business model is an abuse in a capitalistic system. It should keep the greedy business owner awake at night. It's greed, pure and simple. Makes no dif to me if the seller's product is precious metals or local Shell Oil gas.

This transference from seller to buyer of seller's BAD BUSINESS ACCUMULATION of inventory decisions is being passed along to the current buying customer.

The responsibility for bad retailer business decisions is squarely upon the greedy retailer...yes, THE one who made the bad decision in the first place.

These stinkin' practices--all too common nowadays--they are encouraged by the seller's vendors pushing pushing pushing from above the retail seller in what is known as "inventory 'channel stuffing.' "

beefsteak

*WWTBP = What Will The Buyer Pay

[Sparky]

...

Now, along comes a forum Sparky to inform (hopefully he wasn't defending this practice) that the sellers have figured out when the price of gold goes down, the premium also increases. Why? It's practiced as a form of price protection for the seller who paid too much for their product and doesn't want to take the loss.

So, rather than pull their overpaid product from the market place and man up and swallow their losses, they stick on a "price protection premium" and STILL dangle the product out there like a big fat wiggly worm on the end of the bait hook.

Nothing quite like the precious metals "I got something you want, what will the traffic bear" price giggin' fool's game, huh, Solid.
...

I wasn't trying to defend it, but it is totally defensible. Why shouldn't they charge a higher premium whenever they can get it? Isn't that the whole idea of a free market? It would only be indefensible if it was collusion, but I don't see hundreds of dealers in a position to collude. It's a competitive market with lots of independent dealers, so it would be too easy for individual dealers to undercut price.

If the product were really overpriced because of the premiums, then they wouldn't be able to sell it at that price. That's what a market is. Why should they be slaves to some price that is set externally and derived from paper sales? Don't you believe in a free market? When silver was $9 in 2008, my dealer told me flat out that he took it off the shelf because he wasn't willing to sell at that price, and if he sold it with a $9 (100%) premium, it would simply piss of his customers (like yourself). Most of the dealers during that period claimed the were "out of stock". Bull$hit. They didn't want to piss off their customers.

You said it yourself: What Will The Buyer Pay. That's the real price.

[horseshoe3]

Similar to the price fixing that went on during the 30s. The government (paper market) can declare the official price at whatever they want. The real price (physical market) will be set between a willing buyer and a willing seller.

The only problem with this arrangement is that too many people have come to see the spot price as the real price, and get upset at the physical dealer when the physical price doesn't match what Comex tells them it should be.

[beefsteak]

We're going to have to disagree agreeably, Sparky.

This practice as you describe it is FAR from being "totally defensible."

Shifting responsibility for bad retailer "overstocking/overpaying for retail inventory" decisions is never defensible.

Greed is Never defensible.

Thou Shalt Not Covet, and Thou Shalt not Steal are still in the 10 Commandments, God's blueprint on how to treat God (4 commandments) and how to treat other humans (6 commandments.) Interesting is it not, that 1/3 of the 6 Commandments dealing with how we are to get along with others deals with EYEBALLING AND THEN PLOTTING--UP TO AND INCLUDING--THEFT OF WHAT DOES NOT BELONG TO THE PLOTTER.

Practictioners and apologists applying "spin?" Yes.

Defensible? NOPE! Greed is a black and white issue to God. And it is a black and white issue to me.

I hate this bullpuckey as much as I hate unpriced flea market goods or garage sale offerings. I walk away when I see unpriced items. And I walk away from greed in the retail marketplace. That includes greedy, indefensible premiums' gouging in the precious metals retail space.

This "what will the traffic bear" also translated as "monopoly pricing" or "price gouging"---THIS is wrong and needs to stop.

Horseshoe is correct: willing seller finds willing buyer, voila a transaction.

However, willing seller finding astute and UNWILLING buyer, the buyer can stop the gouging by boycotting, substitution or postponing gratification.

The retailer can stop the price gouging as well, by not creating situations where s/he can have their cake and eat it, too, using pricing power/tacking on unconscionable premiums


beefsteak

[Horn]

http://3.bp.blogspot.com/_JSVsvp9BxWE/TU4l-ZOpawI/AAAAAAAAAZM/nI_tFyPSyZI/s1600/HowManyOuncesofGoldDoesItTaketoBuyAHouse.gif

[Sparky]

Thou Shalt Not Covet, and Thou Shalt not Steal are still in the 10 Commandments, God's blueprint on how to treat God (4 commandments) and how to treat other humans (6 commandments.)
...

The dealer owns something that you want. So who is doing the coveting? You want to buy it at $1650 instead of $1675 so that when it goes to $3000, you will have an extra $25. Who's being greedy?

Gold is purely speculative, and it's a discretionary item, unlike food or fuel, so it's not really even a candidate for price gouging. It's price is extremely volatile, and dealers take great risk being in the business. As long as they are stating their price up front, they should be able to charge whatever premium the market will bear.

I'm agreeably disagreeing.

[beefsteak]

Gold in its currency role IS a candidate and a very legitimate one for the claim I'm making as an example of "price gouging."

It is just as much price gouging as are the currency exchange games played by moneychangers when one goes from nation of origin to a foreign nation and wishes to exchange native currency for a "visitor's currency."

If fact, if Biblical account memories tickle the back of my mind, Jesus himself threw the "currency traders/moneychangers" out of the temple, because of price gouging of the "required to visit the house of Israel and be enumerated" set of travelers.

Same EXACT principal "price gouging principal" at work.

THEE same exact price gouging.

To declare gold as "NOT a necessity" is someplace else we are going to have to disagree.


beefsteak

[big country]

beefsteak,
You cannot seriosuly be argueing that a dealer should "swallow" his losses when PMs drop due to illegal manipulation by the bankers....but he can also not sell for more when spot swings in his favor to make up for those losses he had to "swallow"...? This doesn't make any sense...

Also, why should the dealer sell his property on your terms? Its HIS PROPERTY he's free to sell it however, for however much, and whenever he wants to. Should private property rules change just because the dealer has something that you need? Private property rights are the cornerstone of Liberty...

If I have misunderstood the point you are arguing I appologize...

[Horn]

We are also Free to call price gouging what it is & not accept as part of a "good" and free market.

Isn't actually a sign of a sick market?

Edit to add:

Gold is not volatile, it's the most stable thing on the planet. The market is what's volatile to the point of revolting.

[gunDriller]

the spread often depends on the size of the market-maker (e.g. local coin shop or APMex).

some dealers are big enough that for every ounce of silver or gold that they take in, it won't stay long - because they have a lot of customers with a lot of money and often re-sell purchased inventory the same day - especially popular items like Gold Eagles.

smaller dealers, e.g. a coin shop in a small town, don't have the same turn-around on their inventory.

if they have a lot of silver inventory that they bought during last year's rise from $30 to $49, and i walk in there yesterday when silver is $30 to $30.30 and clean them out, paying $2 over spot - they will take a loss. i don't begrudge them the larger spread.


i notice that some dealers have varied responses to the end of the year price action. sometimes they close for the holidays from Christmas to New Year's - often a wise move because they can't afford to be selling at low prices during the normal end-of-the-year price smash.

some on-line dealers this last year, last week of December 2011, lowered their spreads. i wonder if this is because volume is slow and they want to "keep business moving" - accepting a smaller profit on each transaction.

personally i don't be-grudge the spreads charged by any of the "good" dealers - it's not easy being a 'market maker'. and some dealers are only good on one side of the transaction - good sell prices, crappy buy prices.


theoretically, in the case of a small town coin dealer dealing with a wealthy customer, it would be possible for the wealthy customer to put them out of business, simply by buying at extreme lows (10% below 200 DMA) and selling at higher highs (20% above 200 DMA). i am not in that situation yet, but if i was the small town coin dealer i would implement measures to protect myself - e.g. limiting purchases, so that they have some inventory to sell to people who aren't so focussed at buying on the lows.

[Horn]

Any bullion dealer has had boom and swoon in recent years, to raise premiums on a slight pitch is just as flippant than taking all your stock off the boards.

But oh well, Gold at 55:1 ratio is rather flippant itself at the get go... :)

[Sparky]

...
Edit to add:

Gold is not volatile, it's the most stable thing on the planet. The market is what's volatile to the point of revolting.

Gold may not be volatile, but it's price in terms of FRNs is very volatile. And that's what we're discussing.

[Sparky]

Everyone here generally agrees that gold is underpriced at $1600, $1700, $1800, $1900, etc. As such, aren't all buyers currently taking advantage of sellers? If you really want to do "the right thing", shouldn't you be willing to shell out $2000 right now regardless of spot price, knowing for sure that gold's true value will ultimately be reflected in it's FRN price? Your argument is from a selfish point of view.

And I'll repeat that gold is not really a candidate for price gouging. In "The Ethics of Price Gouging [2008]", the three primary criteria are listed as:


Period of Emergency: The majority of laws apply only to price shifts during a time of disaster.
Necessary items: Most laws apply exclusively to items which are essential to survival.
Price ceilings: Laws limit the maximum price that can be charged for given good

None of these criteria apply. There is no emergency driving up the price right now which would mask gouging; the price is at a relative low. Gold is NOT essential to survival; you may claim it is essential to an efficient or legitimate monetary system, but it is NOT essential to survival in the way that food, water, air, and even energy are considered essential. And there is no legal maximum price limit.

[Horn]

Everyone here generally agrees that gold is underpriced at $1600, $1700, $1800, $1900, etc.

I will only defend your gouging if you raise my silver to 100, until then my mercenaries are left off the field.