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.

Gold and silver, in case you didnt notice, took a bit of a dip. Is it “The Dip”? Who knows? I just know that I picked these up:

Interestingly, my local ‘guy’ was selling generic silver at $.50 over spot, which is pretty much an all time low for him. These Eagles were a little more than that ($2 over), but I always wanted to flesh out my silver holdings with some minted stuff rather than just generics. However….buy the generics first. Get the most silver for your money.

Why the slump in metals? Profit taking, I am told. The story I hear, from someone who is well positioned to know, is that a large holder decided it was time to cash in their chips. As a result..prices drop. They might have another little dip here, but theyre definitely on their way up.

Regardless, I had a few bucks sitting around and its never a bad idea to convert a little cash into metals every so often. Got plenty of guns, plenty of ammo, plenty of food….but there’s always room for precious metals.

When the war finally kicks off…with Russia, China, or both….I expect things will get rather unstable quickly and some hard currency is never a bad thing to have in a time of wild uncertainty.

Gold hit $4000/oz, and silver hit $50/oz.

Read into that what you will.

I have a stash of gold and silver set aside specifically for land purchase and this climb in metals prices means good things for my ability to afford something.

Sad thing is, though. When it’s gone, its gone.

What I’ll probably do is start diverting a percentage of my dividends each week into metals. Get a little dollar-cost-averaging going.

But, in the meantime…wow.

I’ve mentioned in the past that I sometimes can get gold at spot price, no premium. How does that work? Can it work for you? Depends. Its all about self-interest. Today, while I was jawboning with a local dealer, a fella came in and wanted to sell some 1/4 oz. gold coins. My buddy explained that he would buy it for melt at 95%. He’ll then send it to be melted down and they’ll pay him 97% of spot. That 2% difference is his profit. Now, I enter the picture and tell the dealer, I’ll pay you 100% of spot. So he goes from 2% profit to a 5% profit* (2.5x what he would otherwise have gotten) and I get gold at spot price. Pretty straightforward.

The most obvious question is why wouldn’t he just buy the gold at 95%, throw it in the display case, and sell it at spot (a 5% profit) plus the premium (which can get fairly high depending on the form the gold is in…the smaller the piece, the higher the premium.)

Well, the answer is: risk. If he buys the gold and throws it in the display case with 25 other gold coins, every day it doesn’t sell is a day where the market could go..anywhere. Sure, maybe in a month he makes a $100 profit from the change in metal prices. But he might also lose $100 if the price goes down. Why take the risk when you can get the sure thing, and get 5% all day long, all week long, from someone like me?

Will that work with everyone selling metals? Probably not. But if you say “Hey, any gold you were gonna send off for melt and take less-than-spot for, I’ll give you spot. Cash.” Again, won’t work with everyone but if you have a relationship with a seller, maybe someone you’ve done business with a bunch of times over the year, they might take you up on it.

Having said that, I almost never buy gold at anything other than spot. Gold is already expensive..paying spot and then an additional $50 for a Krugerrand or Gold Eagle just doesn’t make financial sense for me. And it doesnt make sense for the dealer to leave money on the table by selling to a melter at below-spot when someone is there, cash in hand, willing to pay spot.

So, go ask. Might work, might not. If he says no, there’s no hard feelings and if he says yes you’ve gotten a deal.

As an aside, I was there in the shop talking to my ‘gold guy’ when one of you savages called and asked if they could get some metals at spot like that Zero guy on the blog did. Nice try. As I said, it really helps if you throw this idea at a dealer you’ve done business with in the past who knows that a) you’re a good guy and b) you pay in cash immediately. Dont ever for a moment think that “can you hold onto it for a week until my SSDI/VA/SS check comes in?” is going to do you any favors. Always have the cash in hand when you make an offer like this. What the dealer wants is to make a ‘turnaround sale’. He buys it for 95% and six minutes later turns around sells it for 100%. Deals like that are fast money in the pocket for him, his risk exposure is barely measurable, and he did better than he originally planned when he was going to send it to be melted down. And now he doesn’t have to deal with the hassle of packaging, shipping, wire transfers, etc. Everybody wins…and when youre trying to make a deal, thats the kind that will fly. Also, this is very much a face-to-face kind of transaction… the deal looks better for the dealer when he can just hand you the gold and you hand him the cash. Playing phone tag, doing payment over the phone or online, packaging, insuring, shipping, tracking, etc. are all ‘friction’ that makes the deal less and less attractive.

Good luck.

* Mathematically, its not 2%. For simplicity, lets say gold is $3000/oz. He buys it for 95% of spot ($2850). He sells it for 97% of spot ($2910). Thats actually, not a 2% profit, its a 2.1% profit on $2850. Selling it to me at spot isn’t a 5% profit, its a 5.26% profit. Why? because the profit is based on what he paid (return on investment, if you please), and he didnt pay spot, he paid less than spot…$2850. Math.

Amazingly, I managed to score 1/10ths at spot. The smaller you get on gold, the higher the premiums, so this was a very nice score. I’ve bought 1 oz and larger gold at spot before, so its not unheard of…but getting fractionals at spot…thats a rarity and worthy of posting about.

I don’t even want to think about the market bloodbath that is going on these last few days. If there’s any bright spot, it would be that now is the opportunity to buy since everything is ‘on sale’.

However…….

I’m hedging my bets. I normally throw my weekly dividends back into more equities. No longer. I’ll be pulling a large chunk of those dividends out each week and dumping them into physical silver and gold. Why? Well, mostly because silver and gold dont throw 5-10% losses every day for several successive days…at least not lately.

Oh, I’ll still keep buying the equities, but at least half of that money is going into silver and gold.

My buddy at the coin shop made a massive buy today and offered me Krugerrands at spot…but I was in no position to take him up on it since I kinda shot my wad with those Swiss francs last week. But, he did have something of interest. I walked in and he reached under the counter and handsed me what certainly looked like a pipe bomb. But, no, it was something else entirely:

It was a PVC pipe made to fit 100 1-oz silver rounds. Tell me youre a survivalist without telling me youre a survivalist. The backstory is that with gold and silver being pretty up these days, this guy decided to come in and sell some of departed dad’s stuff. When a guy packs his silver away like this you can sorta get the impression that he’s on the same page you are.

I had to take a pass…..need to recover from the gold purchase. But it was still pretty cool to see. And seeing tubes full of krugerrands is always a nice reminder of Life Goals.

For those who havent been keeping up, gold has passed the $3000 mark. Infer from that what you will.