Bullion: What's an acceptable premium over spot price?

[dualstow]

Looking at ajpm.com, a recommended vendor at this forum, I see an ounce of gold can be had for $1447 or $1437 (American eagle and krugerrand, respectively), Thursday afternoon, 4 November 2010. The spot price (src: kitco.com) is $1381.
1447-1381=66.
66/1381=4.78%

Maybe I'm calculating something wrong; I've never bought gold bullion, but even assuming free shipping (which would require a purchase of ten 1-oz coins) and free storage, is this equivalent to a 4.78% fee for buying a fund?

Not to mention the cut that will be taken when it's time to sell some of these coins.

Well, holding physical gold must be worth it to those who are sticking with the permanent portfolio, but I'm hoping someone can tell me that I did something wrong or that I'm leaving something out. 

[craigr]

5% or so is about typical for coin purchases. On the plus side, you are not charged an expense ratio each year to hold it. Keeping some physical gold for emergency access use and combining it with lower cost gold investing vehicles for rebalancing, etc. is an option many people seem to use as well.

[KevinW]

On the plus side, you are not charged an expense ratio each year to hold it.

So bullion has a one-time expense of approximately 5%; gold ETFs have a one-time expense of a broker commission plus a recurring expense of .25-.5%.  Thus bullion is usually cheaper when held for many years, and ETFs are usually cheaper over short periods.  The breakeven point depends on your particular coin premium, ETF expense ratio, broker fee, and transaction size, but might be around 5-10 years.

A reasonable strategy is to buy physical bullion as the "bottom" or "core holding" of the gold allocation, and ETFs as the more liquid gold for rebalancing purposes.  The expectation is that the physical bullion will probably never be sold.

[Lone Wolf]

You've gotten some good advice in the previous two replies.

You may find that it's worth making a few calls to your local coin dealers and seeing what they might be able to do for you, particularly if you will be purchasing 10 ounces or more.  I bet that if you call around you'd be able to find Krugerrands for 4% above spot, if not better (I've seen as low as about 3.1% above spot.)

[Pkg Man]

I think there may be some confusion about the coin premium and bid-ask spreads. The premium over spot is what you pay for the packaging and dealer profit. You should get most of that back when you sell, less the bid-ask spread. You can sell a krugerrand or AGE for way more than the spot price of gold.

[dualstow]

Many thanks for all replies. I'm clear now.

[smurff]

I think there may be some confusion about the coin premium and bid-ask spreads. The premium over spot is what you pay for the packaging and dealer profit. You should get most of that back when you sell, less the bid-ask spread. You can sell a krugerrand or AGE for way more than the spot price of gold.

The spot price is for raw gold that has not been formed into coins.

In addition to packaging and dealer profit, the premium includes the all the costs of assaying the gold bricks, fabricating the coin blanks, then designing, stamping, trimming, and cleaning the final coins.  If you're buying American Gold Eagles, for example, the US Mint sells them to coin dealers with these costs included in the premium they pay.  I'm not a dealer so I don't know what that premium is.

And the smaller the coin, (usually) the higher the premium--it costs the same to do all this for a one-tenth ounce coin as for a one ounce coin.

[dualstow]

UPDATE: same store seems closer to 3.8% over spot now. (1904 per oz at spot price of 1834). Maybe spreads are getting better.

[dualstow]

Lone Wolf was right. I got 4%.
I don't have the scratch to order 20 coins from Tulving AND buy equal shares of cash, stock and bonds in the same quarter, so I've decided to add a coin or two locally once in a while. Although I don't live in the safest of cities, this was far less stressful than waiting for the mailman. The dealer was entertaining, but behind the jokes he knows his stuff. He's been there for decades, which is (DECADES minus one year)longer than I've been seeking coins.
Medium Tex has written about this: It's amazing how quickly you can complete a transaction. Yes, mouse clicks are faster, but those clicks only immediately result in the movement of phosphors on your screen, not cash or commodities in hand. This place is a short subway ride away -- a stroll away in warmer seasons -- and the entire transaction took just a few minutes. The best part, though, was paying less of a premium, even though I only bought a single ounce, versus ten by mail.

You've gotten some good advice in the previous two replies.

You may find that it's worth making a few calls to your local coin dealers and seeing what they might be able to do for you, particularly if you will be purchasing 10 ounces or more.  I bet that if you call around you'd be able to find Krugerrands for 4% above spot, if not better (I've seen as low as about 3.1% above spot.)

[jackely]

Walked into a store with some guys from work in St. Pete Florida (IDC Coin and Gold Bullion) and they were asking $95 over spot + another 7% if you used a credit card.

Based on the price plus the fact that the person who seemed to be in charge and knowledgeable about gold couldn't be bothered to step out of the office and talk to me I'm not doing business there.

I live very close to a major bullion seller, Gainesville Coins, and will be visiting them shortly. Their price looks to be around $60 over spot and better than anything I have seen online, depending on whether you use cash/wire transfer/credit card.

I don't yet have any physical Gold in my PP but am basically convinced of going down that road in the long run. I spent the holidays stressing about it, mostly about where to store it, but decided for now to just go with my gold ETF and start buying some coins until I figure it all out. Right now I'm thinking Perth Mint + enough gold to buy plane tickets to get there but time will tell.

[FarmerD]

FYI - Tulving and Goldmart always have the best everyday prices though Tulving runs occassional special sales that beat Goldmart.  The major difference between the two dealers is that Tulving requires a minimum purchase of 20 one ounce coins while Goldmart has no minimum purchase.  Neither charges shipping fees for purchases provided you use bank wire.  So for large purchases, buy whatever Tulving has on sale, for small purchases go with Goldmart.  I've made purchases from Tulving and numerous purchases from Goldmart and been pleased with both.  Provident and Gainesvill Coins are both a notch below pricewise.  

Both Tulving and Goldmart normally sell Krugs for $30 -35 over spot (1.8% premium), Maples for 38 over spot (2.3% premium), and eagles and buffalos for $60 over spot (3.7% premium).

[dualstow]

 The major difference between the two dealers is that Tulving requires a minimum purchase of 20 one ounce coins while Goldmart has no minimum purchase.
 ...
Both Tulving and Goldmart normally sell Krugs for $30 -35 over spot (1.8% premium)
..

1.8% premium is very tempting. Have you used them yourself, FarmerD? Any negatives?

[FarmerD]

Dualstow,

Quite pleased with both dealers. Ordering procedures were easy from both, packages from both dealers were securely wrapped, and coins tested good with the Coin Balance.  

Tulving was very fast in delivering their shipments to me (3 days). Goldmart is sometimes a late delivering the gold (they advertise delivery in 4-7 days).  I've ordered 9 times with them, 6 times delivery was right on schedule, 3 times they were a couple days late, once they were a week late.  

Checking the internet PM message boards, it seems virtually every company has been accused by someone of late delivery. I've read a lot of stories about deliveries being months late (Northwest Territorial Mint) or several weeks late (most other dealers, so Goldmart being a little late doesn't bother me.      

BTW for the first time in over a year, the cheapest places to buy Gold Eagles is at Gainsville Coins at $55 over spot.  Prior to that I have not seen any company undersell Tulving or Goldmart on any type of bullion coin.  

[dualstow]

Very good info; many thanks! Yeah, I've had the late delivery experience, and it's all documented here at the forum. But, for 1.8% over spot, hell, I'll wait.

[dualstow]

I haven't used a bank wire for some time (not for gold), but I think it was about 30 bucks. I guess if I order enough coins, though, it'll definitely be worth my while. I could pretend it's shipping.

[MachineGhost]

Use this site to compare premiums: http://goldprice.org/gold-prices/

And keep an eye out for when semi-numismatic rare gold premiums are as low as bullion or relatively historically low.  There will be enhanced upside potential over straight bullion, but only if you do not overpay.

MG

Looking at ajpm.com, a recommended vendor at this forum, I see an ounce of gold can be had for $1447 or $1437 (American eagle and krugerrand, respectively), Thursday afternoon, 4 November 2010. The spot price (src: kitco.com) is $1381.
1447-1381=66.
66/1381=4.78%

[FarmerD]

Use this site to compare premiums: http://goldprice.org/gold-prices/

And keep an eye out for when semi-numismatic rare gold premiums are as low as bullion or relatively historically low.  There will be enhanced upside potential over straight bullion, but only if you do not overpay.

MG

I use Goldprice.com and Goldshark.com occasionally but keep in mind that not all companies are listed on that site. Over the past year I've  compared premiums on these sites and found Goldmart/Tulving always sell below the lowest premium listed on thoses sites. 

At Goldmart I see they are selling St Gaudens for $90 (about 5-6% over spot) over spot which seems quite a bit lower that other sites I visit. What have the historical premiums been on this coin?  If you have any data/advice, I like to hear MG.

[MachineGhost]

It depends on sentiment.  The historical premiums for St. Gaudens (MS65) have ranged from 850% (1985) to 10% (2011); 100% before Nixon delinked the dollar.  The rare gold coin market is decoupled from gold bullion; it seems to peak years after gold bullion peaks.  Back during the Y2K scare, St. Gaudens were selling for 100% over the spot price of gold, but the premium collapsed after the world didn't end.

5%-6% is very cheap right now if that is for at least MS60 which are uncirculated conditions.  There's no advantage in buying anything less then MS60 which I call "junk gold" unless the cost is the same or at least less than the spot price of gold relatively to other options in better conditions.  VF did go to a brief premium during Y2K, but it normally sells for spot or so.

Worst case, in a crisis, there will be no value for the numismatic component, so overpaying is deadly.  It also may not perform same as gold bullion in non-SHTF scenarios.  Obviously, premiums have been declining for years even as gold bullion has went up in price.

MG

Use this site to compare premiums: http://goldprice.org/gold-prices/

And keep an eye out for when semi-numismatic rare gold premiums are as low as bullion or relatively historically low.  There will be enhanced upside potential over straight bullion, but only if you do not overpay.

MG

I use Goldprice.com and Goldshark.com occasionally but keep in mind that not all companies are listed on that site. Over the past year I've  compared premiums on these sites and found Goldmart/Tulving always sell below the lowest premium listed on thoses sites. 

At Goldmart I see they are selling St Gaudens for $90 (about 5-6% over spot) over spot which seems quite a bit lower that other sites I visit. What have the historical premiums been on this coin?  If you have any data/advice, I like to hear MG.

[MediumTex]

When talking about St. Gaudens coins and pricing, remember that the St. Gaudens $20 coin has a gold content of .9675 oz., so it's not really a "one ounce" gold coin.

This is the kind of thing that often isn't mentioned when you buy, but is when you sell.

[Cache Metals]

Hi!

I am a representative from https://www.cachemetals.com.

We have recently reduced our spot price premium on gold, silver, platinum and palladium bars and coins.  Our gold prices and silver prices are lower than listed on the comparison site mentioned.

Quick links to Precious Metals for your reference and review

Gold Prices (Coins)
https://www.cachemetals.com/store/items ... ID=5&PID=2

Silver Prices (Coins)
https://www.cachemetals.com/store/items ... D=10&PID=3

Warmest Regards!

[Greg]

Hi!

I am a representative from https://www.cachemetals.com.

We have recently reduced our spot price premium on gold, silver, platinum and palladium bars and coins.  Our gold prices and silver prices are lower than listed on the comparison site mentioned.

Quick links to Precious Metals for your reference and review

Gold Prices (Coins)
https://www.cachemetals.com/store/items ... ID=5&PID=2

Silver Prices (Coins)
https://www.cachemetals.com/store/items ... D=10&PID=3

Warmest Regards!

I looked at their website, from what I saw they didn't have prices up for anything but Canadian Maples (2012), and those premiums over spot were  around $6.00 over goldmart.com

I haven't seen anything on shipping and handling rates yet but I know for over $5000 in purchases that goldmart is free. I'm probably biased thought against goldmart since I'm waiting on gold from them.

[Pointedstick]

Hi!

I am a representative from https://www.cachemetals.com.

We have recently reduced our spot price premium on gold, silver, platinum and palladium bars and coins.  Our gold prices and silver prices are lower than listed on the comparison site mentioned.

Quick links to Precious Metals for your reference and review

Gold Prices (Coins)
https://www.cachemetals.com/store/items ... ID=5&PID=2

Silver Prices (Coins)
https://www.cachemetals.com/store/items ... D=10&PID=3

Warmest Regards!

I see 1 oz eagles going for 0% over spot ($1,603.04 right now). Seems kinda too good to be true, to be honest. How are you guys able to do that?

[Greg]

Hi!

I am a representative from https://www.cachemetals.com.

We have recently reduced our spot price premium on gold, silver, platinum and palladium bars and coins.  Our gold prices and silver prices are lower than listed on the comparison site mentioned.

Quick links to Precious Metals for your reference and review

Gold Prices (Coins)
https://www.cachemetals.com/store/items ... ID=5&PID=2

Silver Prices (Coins)
https://www.cachemetals.com/store/items ... D=10&PID=3

Warmest Regards!

I see 1 oz eagles going for 0% over spot ($1,603.04 right now). Seems kinda too good to be true, to be honest. How are you guys able to do that?

I don't think that is the actual price they offer. It says subject to availability and to call for pricing. Also their bulk rates are all the same and say from 0 to 1 coin. My guess is these aren't their actual prices and you have to call to see what the price is right now. That's why it looked like the only coin that they had prices for was the 2012 Canadian Maple at +$6.00 over goldmart price.

[Reub]

I've used Goldmart a number of times. They take about a month to ship your gold coins but it does eventually arrive.

[FarmerD]

I've used Goldmart a number of times. They take about a month to ship your gold coins but it does eventually arrive.

I always order $5k+ from goldmart so I get the 2 day turnaround they advertise.  Waiting a month would suck.  Unfortunately, based on what i've read from precious metal forums, whenever you order 1-2 coins from just about any dealer you're gonna have to wait. Just a thought - You may want to wait til you accumulate $5k then order through bank wire from Goldmart, Texas pm, or some other dealer and get a much quicker turnaround.