Negative Premium

[Toshunya86]

Hi everyone ;

I am in the process of understanding how premiums can evolve .

I am taking an example :

I found some old coins which are quite generic coins in the sense that they are recognized and from a serious country and on sale in many places. 

They are sold with a 0.7% or 0.8% negative premium .

My questions :

1) Am I correct to believe that this is done to stimulate the sales of these coins as there is less demand than usual and "too much " offer ?

2) what is the point of buying gold under spot ( with a negative premium) apart from trying to resell them to shops if the rate of gold goes up by 5% . Is it just a way for an investor to be reducing the spread ?

3) would you recommend buying below spot in any case ?

[Gildeon]

2 minutes ago, Toshunya86 said:

3) would you recommend buying below spot in any case ?

I would definitely prefer that than buying above spot! 😁

[goldmember44]

I'm no expert, but my quick answers to your questions:

1) Yes, either stimulate the sales of the particular coin, or -- more likely -- stimulate sales interest for the seller/business outlet  Likely the wish is that a buyer of the below spot piece would see other stock available for sale, too, and perhaps buy something else too. The other reason could be that the seller is hard-up for cash and needs to generate a sale/s quickly... and the best way to do that is to offer an unbeatable deal.

2) Buying gold under spot is always a good idea... for the simple reason that, when the gold is finally sold, a higher profit could be realised. There are many people looking to buy gold for as cheap as possible in order to profit from it -- either in the short term or in the long term.

3) For sure I would  Just make sure the item's gold content is legitimately what is advertised... you need to make doubly sure because gold below spot is not something you see every day... it is unusual.

 

[Toshunya86]

58 minutes ago, Gildeon said:

I would definitely prefer that than buying above spot! 😁

the main thing is , what is the point if that particular coin is "rebought" at 90% or 95% of its gold content for example ?. Or if the coin becomes rare and then will not be taken back by dealers. Because you buy a coin at 99% of its intrinsic value but you will sell it at 95% of its intrinsic value , so you still lose. I understand that main dealers will not arbitrage each other but im wondering what is the logic ? Does that mean the coin in question is destined to become a numismatic item only and not investment gold ?

[Stuntman]

^^^ In which case, you would stop thinking of it as a coin, and just sell it as scrap gold to a bullion dealer for at least 98% of spot.

[Mcgrimes]

Which coins have you seen being sold at a discount?

If you want them to get swamped, just post a link on this forum and everything will get snapped up.

[Toshunya86]

8 hours ago, Mcgrimes said:

Which coins have you seen being sold at a discount?

If you want them to get swamped, just post a link on this forum and everything will get snapped up.

It was a -0.8% premium for the 10 gulden (Netherlands).

After further research , the website in question corrected the premium to a strange +4%  , and anyway had fixed awful postage fee & a "6% tax" on every internet buy. (they are a physical shop with presence in many cities) 

So no regrets !

[universalcurrency]

Sounds like a listing error, if you trawl some of the gold deal posts on the forum its not unknown for dealers to make mistakes.  Buying the item for the listed deep discount can be a problem.