Many posts back, I mentioned that I usually only buy pm’s (precious metals) when I can get them at discount…usually at spot. So, here’s the interesting thing…I swing by my local PM guy the other day and silver is $107/oz. I ask him what he’s selling it at, in terms of premiums. Well, he’s selling silver, at that time, for $100/oz.
Waitasec…spot is $107 and youre selling it for $100? How…how do you do that?
Turns out the answer is…economics. My guy doesn’t want to get caught holding a bunch of metals in a market that is, to say the least, a bit volatile. He sells it to his wholesalers almost as soon as he gets it. Well, his wholesalers are buying it at $17 under spot. So his $107 ounce of sliver gets him…$90. So, he can either sell the silver for $90 an ounce to the wholesaler or he can sell it to someone like me who walks through the door for $100. Of course, he isn’t buying it at spot…he has to buy it below what his wholesalers will pay him. So he’s paying, for example, $18 under. Or, put another way, he can either sell his $82 ounce of silver for $83 to the wholesaler, or $100 to me. Well, would’n you sell it to the buyer who is paying more? So, he is selling silver at below spot and still making money.
In a perverse way, its kind of a good time to buy silver if you focus just on the ability to buy at or below spot.
He doesn’t think the run up in silver is done yet. Doesn’t matter to me , though… one of my goals at the moment is to start replenishing my silver hoard that I liquidated to finance the Beta Site.


