re: Buying silver online?

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I tried to sell some silver junk jewelry to the guy at the coin shop. He ended up wanting a "comission" for lack of a better word. I was dissappointed in his offer. Do you just collect or do you sell some too? Just curious.

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This is typical for when trying to sell junk silver in various forms to a reseller. A lot of times what happens (to my knowledge) is that depending on the form in which the silver being sold is in, depends on whether or not they will turn it around and sell to a scraper to be melted down, which in turn they also face a similar (yet smaller) premium rate for the silver. I highly suggest finding a dealer that you are comfortable doing business with and that is honest when doing business with you.

Keep in mind (and I'm sure this is a given) they are also trying to profit off of their transactions but the more business you do with one dealer or shop the more you will build up a relationship with the dealer and over time, your premiums will decrease as well as the prices for various junk silver coins (don't expect a huge percentage reduction, but any reduction is a good sign).

When searching for a dealer or shop that you should ask the individuals whether they can fulfill special order requests such as locate a specific date/mint of a coin (ie Morgan dollar 1878/9-S 7/8 tail feather strike in graded no lower than 40) or order specific sized bullion bars from a specific producer.

Also, you should ask the dealer if they have an account with the US Mint. Some dealers have an account with the US Mint and this is how they obtain their uncirculated American Eagles and other US special coinage. If they have account, they have to maintain a certain dollar amount in volume (i think its volume, may be on deposit. not really sure but the following remains true) which is why dealers with accounts tend charge the spot price, plus $5 dollar premiums for Silver American Eagles, before sales taxes. This scenario is true for Louisiana Gold Coin on Sherwood near Airline. They charge the higher than usual premium on those type of coins to accommodate for maintaining their account with the US Mint. But on the flip side of the coin (See what I did there? ) the additional premium decreases based on the quantity you purchase. But this is true for all silver purchases. The larger the single unit, the lower the total premium rate.

To determine the percentage rate they are charging above spot heres an example using 1 (a.1 one bar individually & a.2 10 1-ounce bar pack), 10, 100 ounce bar and 20 Silver eagles (Mint ships in 20 coin tubes) using a the current spot price (as of 12/2/2012) of $33.44/troy ounce and compare against what Scottsdale Silver is asking:

Doing the Math:
Step 1: total selling price/number of ounces being purchased= Selling price per ounce

Step 2: selling price per ounce- spot price per ounce = $ premium above spot

Step 3: $ Premium above spot/spot price= Premium % per ounce


a.1) 1 ounce bar scenario:
- Spot Price: $33.44
- Selling for: $38.18
- Sales $ per ounce: $38.18
- Premium in $ per ounce: $4.74
- Premium % per ounce:14.17%

a.2) 1 ounce bar scenario (using pack of 10 bars):
- Spot Price: $33.44
- Selling for: $360.64
- Sales $ per ounce: $36.06
- Premium in $ per ounce: $2.62
- Premium % per ounce:7.85%

b) 10 ounce bar scenario:
- Spot Price: $33.44
- Selling for: $350.94
- Sales $ per ounce: $35.09
- Premium in $ per ounce: $1.65
- Premium % per ounce: 4.95%

c) 100 ounce bar scenario:
- Spot Price: $33.44
- Selling for: $3,462.34
- Sales $ per ounce: $34.62
- Premium in $ per ounce: $1.18
- Premium % per ounce: 3.54%

d) Silver Eagles scenario:
- Spot Price: $33.44
- Selling for: $747.74
- Sales $ per ounce: $37.39
- Premium in $ per ounce: $3.95
- Premium % per ounce: 11.80%

Notice how the premium over spot per ounce decreases based on the amount and size of the purchase. Granted these are online prices using the wire transfer price and you should receive a lower premium rate through a local dealer, depending on what you are buying.

But to answer your question after my long winded tutorial, I buy silver with the intention to hold onto it for the long haul. I do not buy only to quickly turn around and sell. If a person is serious about purchasing physical metals, they need to be prepared to weather the ups and the downs of the prices because they will go up and down on large percentages and NEVER buy or sell on emotions. Leave emotions at the door because they will hurt you in the end.

Remember, buying any investment such as metals, stocks or mutual funds only to quickly turn around and sell is not investing, its trading. Investments are long term deals and not quick turn arounds. Always do your homework and do your due diligence before making any purchase or investment decision, this is your money and your choices so make sure you make the most of your money and make educated decisions. Always learn about what you are getting into with any investment before jumping in or else you may find yourself landing at the bottom of an empty pool.

Thanks, lot of good information. I have been trying to find a deal on silver. It has been virtually impossible to buy anything for under 36-37 dollars an ounce after taxes and mark up. I thought trying some junk silver may be an oppurtunity to do a little better. I hate paying the commission and tax necessary evil I know. I'll just hang on to it and see what happens.

I have been interested in silver over gold because of the affordability of silver.

cheaper per unit
has industrial uses
easier to barter/trade espcially in SHTF scenarios
more room to appreciate IMO
and I like the feeling of owning more that I would with gold

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i.e., its historical correlation to gold prices and the need to still go a ways to reach that in the near future with gold's rise the past few years).

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To expound on this a bit, my buddy was telling me that silver has historically maintained a value approximately 1/15 the value of gold. As of the current price of gold, that would require silver to reach approximately $114/oz. to hit that 1/15 mark. The cost of one ounce is roughly $35 right now. Is it reasonable to assume silver will reach upwards of $114 in the next few years assuming gold keeps rising (or even stays the same)?

Really, really appreciate your time in typing that up. That said, I'm much more hesitant now to sink that kind of "coin" into silver based upon your post. I'm new to investing in general, especially in precious metals. I was under the impression that silver was a relatively safe option at this time and had a large growth potential given the current price of gold and trends valuing silver and gold going forward. I'm not looking for a quick turnaround, but it would be nice to turn $5,000 into say $10,000 in 4-5 years.

What are your thoughts on where silver is heading? Do you think silver could come anywhere near a 20:1 ratio to gold in the next few years?

I've done some research and opinions differ greatly. Some predict astronomical gains for silver, while others are much more bearish on its growth potential.