Premiums

[Moi]

Hi. Am wondering if there is much experience of how premiums relate to spot. First hand is they hold up pretty well with lean spot, how about when spot rises any info how they keep pace. Id like to know.

[STONE]

To be honest its all about how sales are going. When the price rises people come out of the woodwork to purchase so sales are up and they raise the premiums. When sales are down they lower the premium to entice folks to buy. Most online dealers have silver contracts in which they go long and short so it doesn't matter where the spot price goes they are covered...

[Moi]

Yep agreed.  I'm thinking about  numis semi numis too. If say a swan gets you 45 when spot circa 12 where's the thinking on premium width if spot hits say 25.

[HawkHybrid]

it's a difficult calculation. if 100% of the rise from 12 to 25 is

due to inflation then the price should rise the same percentage.

if some of the rise is silver increasing it's purchasing power,

then some owners of the coin might reduce their prices to

undercut others. different coins perform differently. buy

bullion if you want to track spot. imo numismatic coins are

affected more by their specific market then by spot.

 

HH

[Pete]

I don't think margins are always a simple multiplier over spot.
If a dealer decides to make 40% over spot when spot is say £13 that means the coin will be priced at £18.20
That gives a profit of £5.20

If spot was £18 then the dealer might be happy with the original £5.20 so would sell at £23.20
However if their formula was spot + 40% then the price would be higher at £25.20 making a bigger profit of £7.20

There are fairly significant variations in prices between dealers and the best prices for a specific coin one day may not always be the best another day so it advisable to compare prior to purchasing.

[Moi]

Yes, currently inching towards generics on account of brexit ( don't think it, don't say it?) though for the life of me I can't fathom why precious metals arnt climbing strongly now. Making me somewhat more reticent and look to diversify into premium boosted coins. One more variable to keep an eye on though!.

[lmwstamps]

I've often wondered the same thing which is why I've begun keeping records on premiums vs spot.  The source I use is goldprice.com which has records back to 2015.  Prior to that I only have anecdotal evidence.  What follows concerns the US market since I don't know what else was happening around the world at the time.  In 2008/2009 spot silver dropped from about $20 per oz to $9 per oz. During that period, the premiums stayed fairly high and even rose.  Purchasing coins at 22 when spot was 20 became purchasing coins at 15 when spot was 9.  This must have been because many felt silver was undervalued at the time and didn't want to sell at a loss.  Fast forward a couple of years to 2011 when silver was $40 to $50 and ounce.  Premiums at that time were about $1 over spot and premiums on semi-numis ran about the same.  The value of the silver content dictated the price rather than the rarity or desirability of the coin.  Fast forward a few years to now and the slow steady decline of silver.  Average premiums have stabilized to between $1 and $3 per oz and semi-numi's have higher premiums once again.  With all that said, there doesn't seem to be a hard and fast correlation concerning premiums.  I would extrapolate what I've seen to the following:  A sharp increase in silver spot creates lower premiums on all bullion generic and semi-numi with little difference between the two.  A sharp decrease in spot creates higher premiums on generics with standard premiums on semi-numis.  Gradual increase or decrease in price creates stable premiums with differences between generics and semi-numi's.  THese statements are merely observations and past performance is no guarantee of future performance.  As stackers, we need to understand the current environment and be as prepared as possible for changes in the environment in order to maximize our resources and stacks.