A framework for evaluation bullion prices: Stop overpaying!

[StackingSmart]

Intro  As a long term stacker, I've always found the relationship between premiums and spot prices to be both frustrating and interesting.   Other than a few websites that help compare silver and gold offerings across multiple dealers, I've not been able to find any analysis that was very robust.   To help me and perhaps a few others with decision making, I built a tool that scrapes the offering price for popular bullion products at 5 different dealers.    For the sake of transparency, the dealers are:  APMEX, BGSC, Bullion Exchange, JM Bullion, and Monument.  For coins, I use the 25+ price and for 10 oz and Kilo bars, I use the 1 bar prices.  Despite not living in the U.S., this analysis is done on a USD basis. 

Now to the analysis:  What I've done here is create an average offering price for each of the products listed in the table below (Exhibit A.) I then break each of those average prices down into two components:  The spot and the premium.   Next, I compare the premiums across products now vs. where they have historically been.  This is done by plotting each product according to its history using z-scores on a graph.   On Exhibit B below, you can see the yellow star shows where 1 oz American Silver Eagles were today.  Readers can mentally plot the other products.

Why is this useful to me personally?  As a long term stacker, I want to focus my marginal accumulation on products that are relatively cheap.  Not only do I want to know which product is cheap relative to others at any given time, I want to know if the offered premium is actually is cheap relative to its own history.    Dealers mark up and down their premiums by product to effectively manage their inventories.  In a world of uncertain supply chain issues and rumored blank shortages, its not difficult to imagine a scenario where inventories may become more difficult to manage in the future.  In my view, that may well force dealers to become more active in adjusting premiums.  Setting spot prices to the side for a moment, I think this tool can help me evaluate exactly how good a 'deal' actually is.  If I can verify it truly is an exceptional deal, I'll typically try to up my purchase amount to take advantage of the pricing. 

In closing:  The precious metals industry (like many others) is famous for employing questionable sales tactics that prey on peoples emotions and biases.  I want (and need) a tool to help me cut through well crafted marketing so that I can make more informed decisions.   A note of caution:  The analysis below only looks back 7 days, but as I accumulate more data, I'll be expanding it to a range that is likely to be more useful. 

Would love to hear if readers find this useful or not.  If so, I can try to post updates on here from time to time.  I intend to post more frequent updates to my Twitter account:  @StackingSmart

Exhibit A. Silver Offers by Dealer

 

 

 

 

 

 

 

 

 

 

Edited November 8, 2022 by StackingSmart

[LawrenceChard]

7 hours ago, StackingSmart said:

Intro  As a long term stacker, I've always found the relationship between premiums and spot prices to be both frustrating and interesting.   Other than a few websites that help compare silver and gold offerings across multiple dealers, I've not been able to find any analysis that was very robust.   To help me and perhaps a few others with decision making, I built a tool that scrapes the offering price for popular bullion products at 5 different dealers.    For the sake of transparency, the dealers are:  APMEX, BGSC, Bullion Exchange, JM Bullion, and Monument.  For coins, I use the 25+ price and for 10 oz and Kilo bars, I use the 1 bar prices.  Despite not living in the U.S., this analysis is done on a USD basis. 

Now to the analysis:  What I've done here is create an average offering price for each of the products listed in the table below (Exhibit A.) I then break each of those average prices down into two components:  The spot and the premium.   Next, I compare the premiums across products now vs. where they have historically been.  This is done by plotting each product according to its history using z-scores on a graph.   On Exhibit B below, you can see the yellow star shows where 1 oz American Silver Eagles were today.  Readers can mentally plot the other products.

Why is this useful to me personally?  As a long term stacker, I want to focus my marginal accumulation on products that are relatively cheap.  Not only do I want to know which product is cheap relative to others at any given time, I want to know if the offered premium is actually is cheap relative to its own history.    Dealers mark up and down their premiums by product to effectively manage their inventories.  In a world of uncertain supply chain issues and rumored blank shortages, its not difficult to imagine a scenario where inventories may become more difficult to manage in the future.  In my view, that may well force dealers to become more active in adjusting premiums.  Setting spot prices to the side for a moment, I think this tool can help me evaluate exactly how good a 'deal' actually is.  If I can verify it truly is an exceptional deal, I'll typically try to up my purchase amount to take advantage of the pricing. 

In closing:  The precious metals industry (like many others) is famous for employing questionable sales tactics that prey on peoples emotions and biases.  I want (and need) a tool to help me cut through well crafted marketing so that I can make more informed decisions.   A note of caution:  The analysis below only looks back 7 days, but as I accumulate more data, I'll be expanding it to a range that is likely to be more useful. 

Would love to hear if readers find this useful or not.  If so, I can try to post updates on here from time to time.  I intend to post more frequent updates to my Twitter account:  @StackingSmart

Exhibit A.

 

 

Good work.

May I suggest you add "Silver" to your exhibit A heading to ensure perfect clarity?

😎

[StackingSmart]

Attributing the average offering price of the 5 dealers across each product according to spot and premium. 

[StackemHigh]

I assume these are silver figures?

I stopped buying stacking silver a long time ago.

The position for that stopped in the UK a while back.