What is wrong with Silver prices?

[dangelo]

Ok so I have these stats for gold prices paid vs current spot price:

Ave % Over Spot

24.29%

Total % Over Spot

3.17%

And these stats for silver - likewise prices paid vs current spot price today:

Ave % Over Spot

76.92%

Total % Over Spot

63.48%

I know new UK silver has 20% VAT, but most of my items are not bought new.  Even so, if I take out the 20% the average % paid over spot would still be 56.92% for silver.  Another factor is premium stuff.  I do have some proof coins but the majority are bullion.

Questions for discussion:

1. Why is silver so expensive?  Does it cost lots more to mine, refine and mint than gold?
2. Why is silver so expensive? Is this all premiums and profits for the mints and retailers/sellers?
3. If I'm not alone and most people are paying ~50% above spot price for silver, is the silver spot price just nonsense?
4. Is the spot price for silver exclusive to trade in huge volumes?  Why different to gold?
5. Do silver retailers simply rape silver stackers because they see them as "collectors" rather than "investors" - or they simply charge so much just because they can get away with it?  (supply and demand)
6. Are silver holdings all at a huge risk because selling silver to get out will only ever be priced against the crappy unreal spot price and not the market prices? 

The reason I ask (3) above is because spot price for silver has such a tiny impact on what is being paid for silver, compared to gold spot price changes where I see a significant impact on the value of my stack right away.  Silver seems to be on a different planet to it's spot price...

D'Angelo

 

...

 

[James32]

Here's my views on it...

UK pays vat so 20% tacked on straight away then dealer has a shop to run and wages to pay so they tack on their own premium on top (some dealers RIP the absolute arris out of it though but people still buy)

Silver on the second hand market at the time of writing can be had for approximately £23-24 per ounce,  which equates to roughly 30%

Silver cannot be had much cheaper unless seller is desperate or really generous. 

The miners are getting the bare minimum for their products so we can take them out of the equation. 

Silver for as long as I've been collecting has traded on the secondary market for £4-£5 over spot which ain't too bad considering that's from the mine to your hand.

The only plausible way to get silver relatively close to spot, is to either marry a miners daughter or live in a vat free country like Estonia. 

As for the spot price....some would argue it's a controlled/rigged market by the big bullion banks and all of us know its undervalued in comparison to gold.

Most stackers are of the belief that silvers day will come and we will have true price discovery as the spot price is a load of sheet, if or when this happens then today's prices will seem cheap. 

Its anyone's guess when this will happen though.

 

Edited November 9, 2021 by James32

[KevinFlynn]

My impression is that over the last couple of years, silver got hyped up and dealers are taking advantage of that. If by plan or opportunity I will not try to guess.

I can say that silver prices were more relaxed around 2010 as far as premiums are concerned.

[daca]

one word : greed 

[ArgentSmith]

Cost... VAT + manufacture + transport etc. These should be reflected somewhat/mostwhat in the secondary market but for some reason newbies look at the spot price.

[dangelo]

2 hours ago, ArgentSmith said:

Cost... VAT + manufacture + transport etc. These should be reflected somewhat/mostwhat in the secondary market but for some reason newbies look at the spot price.

Yup but that can't explain why the same isn't true for gold?  You can find gold coins at like a handfull or two of a % above spot, but silver no chance.

[TeaTime]

Part of the reason for the discrepancy between silver 'spot price' and actual retail price is the public perception of the value of coins. Historically silver coins have had a numismatic value over and above the intrinsic value. For a lot of the public they are collectables rather than stacking material. People are paying for the coin not the volume of silver (a good example would any cupronickel '£5' coin at the RM - 25p worth of material versus a retail price of £13.00)

 

(You could also make the argument that the disparity between gold and silver coins is down to the class system - historically rich people buy/use gold and those less well-off buy/use silver. As we all know the game is rigged when it comes to us plebs 🤨)

[CollectForFun]

I'm afraid this is the real question which you should ask yourself: "Why do I buy so expensively?".

Even with VAT, it should still be possible to get silver at 20% over spot max. (edit: at least in the EU, not sure about the UK). So just stick to this and don't buy any fancy high premium stuff and you will not have to wonder about your high acquisition costs anymore...

Edited November 9, 2021 by CollectForFun

[Tortoise]

1 hour ago, dangelo said:

Yup but that can't explain why the same isn't true for gold?  You can find gold coins at like a handfull or two of a % above spot, but silver no chance.

Surely the cost of producing a coin is the same though.  I don't know the true cost, but suppose it was , say, £5 to produce a coin then that is a massive percentage of a 1oz silver coin and a very much small percentage of a gold 1 oz coin.

If you are doing it for investment, then gold is the way to go.

[swanky]

Old (circulated) British coinage is the best way to stack silver in UK imo. Buy used = no VAT, and cost of minting covered by BoE many decades ago. That just leaves postage, and sometimes s a premium but you get that back when selling. Plus you get to handle it without worrying about smudges or milk spots.

Edited November 9, 2021 by swanky

[ArgentSmith]

2 hours ago, dangelo said:

Yup but that can't explain why the same isn't true for gold?  You can find gold coins at like a handfull or two of a % above spot, but silver no chance.

It completely explains it.

1. There is NO VAT on investment Gold, but there is on Silver.

2. The cost of striking a bullion coin is the same gold or silver so that cost is effectively 75x higher for silver in terms of % of spot.

3. Again with the number and weight of Silver coins vs 1 gold coin, transport handling quality control shipping all 7500% higher for Silver.

4. The costs of point 2 and point 3 are both then subject to an additional 20% VAT

There was another point I was going to make but I can't remember it LOL

 

[Pete]

Several years ago some of the best prices on bullion silver coins were from the USA seller Apmex.
They often promoted coins like American Silver Eagles for $1 over spot.
You could also purchase Royal Mint produced coins, shipped to the USA from the UK, dealer margin added CHEAPER than anywhere in the UK ignoring the VAT.
I called the Mint to ask why a USA seller could undercut ( substantially on a 10oz coin ) a UK seller and they said they didn't control the price so that's down to margin.
When there was a big demand for silver and many dealers were running low on stock, prices started to rocket and since then big suppliers like Apmex kept their high margins and it was interesting to see how much more expensive they became - e.g. American Eagles - compared to buying pre-Brexit from GS.be and other EU sources.
As long as people are happy to pay inflated prices a seller will aim to maximise profits.
The cost of a one ounce mass produced bullion coin should only be say 50 pence above the raw material price to cover production etc so the rest is middle men and dealer margins to cover staff costs, premises, overheads etc. With a near doubling of energy costs plus transport & supply chain costs rising the cost of production will have and will continue to rise however so the price of a bullion coin compared to spot might be closer to 5%. Some of this is guesswork so if anyone in the business knows it would be interesting to hear.
 

[SilverJacks]

1 hour ago, ArgentSmith said:

There was another point I was going to make but I can't remember it LOL

Was it 5. Supply and demand?

Premiums were sky high earlier this year because of restricted supply and a surge in demand. When supply increased, premiums reduced, but not by much as demand is still strong enough to justify it. If the market slows down, dealers will react accordingly. 

As for spot price being so low, it seems as though people have different views on that...

[Minimalist]

Bankers have the price suppressed and not at the true value/price (by design).

Companies selling Silver and Gold are expecting rise in price (marked in).

With margin (profit), overheads and taxes (vat) accounted for this is the price.

The end. 

[ArgentSmith]

9 hours ago, Pete said:

Several years ago some of the best prices on bullion silver coins were from the USA seller Apmex.
They often promoted coins like American Silver Eagles for $1 over spot.

The cost of a one ounce mass produced bullion coin should only be say 50 pence above the raw material price to cover production etc so the rest is middle men and dealer margins to cover staff costs, premises, overheads etc. With a near doubling of energy costs plus transport & supply chain costs rising the cost of production will have and will continue to rise however so the price of a bullion coin compared to spot might be closer to 5%. Some of this is guesswork so if anyone in the business knows it would be interesting to hear.
 

$1 over spot sounds like a loss leader, I assume there were limits to purchasing at this price?

 

I don't know what the cost is per strike, but I imagine it is a considerable amount more than 50p to produce the blanks, I suppose looking at the bottom line of various mints would give the answer.

[ArgentSmith]

https://www.gainesvillecoins.com/blog/why-you-cant-buy-silver-at-spot-price

[dangelo]

Some really good points and well explained, thanks to everyone

One part that we can control (myself included) is to buy lower premium silver to pull down the overall %'s in the stack and also to avoid buying new silver which has 20% on it.  If I can find several kilos of 2nd hand bars at < 8% over spot that will help bring down the overall averages for sure!  I also like the idea of adding more vintage silver coins with lower premiums but worry they will be difficult to liquidate back to cash sometime after they are inherited after I die next year.

[SilverJacks]

2 hours ago, dangelo said:

Some really good points and well explained, thanks to everyone

One part that we can control (myself included) is to buy lower premium silver to pull down the overall %'s in the stack and also to avoid buying new silver which has 20% on it.  If I can find several kilos of 2nd hand bars at < 8% over spot that will help bring down the overall averages for sure!  I also like the idea of adding more vintage silver coins with lower premiums but worry they will be difficult to liquidate back to cash sometime after they are inherited after I die next year.

As long as you sell privately you should get somewhere close to market value for whatever item(s) you sell, and so although buying Kilo bars might bring your cost per oz down, it may not make a great deal of difference to your end result when selling. That's just my take on things though. Maybe others will have different views to consider, like selling large quantities and timing.

I couldn't help but notice the end of your comment. Not sure what to say other than I do hope for the best for you mate.

[James32]

2 hours ago, dangelo said:

Some really good points and well explained, thanks to everyone

One part that we can control (myself included) is to buy lower premium silver to pull down the overall %'s in the stack and also to avoid buying new silver which has 20% on it.  If I can find several kilos of 2nd hand bars at < 8% over spot that will help bring down the overall averages for sure!  I also like the idea of adding more vintage silver coins with lower premiums but worry they will be difficult to liquidate back to cash sometime after they are inherited after I die next year.

The end of your comments has really struck me hard. 

I wouldn't worry about silver too much and concentrate or yourself and loved ones🙏🙏

[KevinFlynn]

8 hours ago, SilverJacks said:

...

I couldn't help but notice the end of your comment. Not sure what to say other than I do hope for the best for you mate.

 

8 hours ago, James32 said:

The end of your comments has really struck me hard. 

I wouldn't worry about silver too much and concentrate or yourself and loved ones🙏🙏

 

Mee too 😔

All the best 😶