Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Dow 30k before End of 2020? - 13th Jul 20
Credit Market Investments Turned Into End-User Risk Again - 13th Jul 20
Investors Are Going All-In on This Coronavirus Proof Industry - 13th Jul 20
5 Vital Insights That You Can Gain From Instagram Trackers - 13th Jul 20
Stop Believing The 'Economy' Is The Same As The Stock Market - 12th Jul 20
Spotify Recealed as The “Next Netflix” - 12th Jul 20
Getting Ahead of the Game: What Determines the Prices of Oil? - 12th Jul 20
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Physical Gold and Silver vs. Paper Gold and Silver: How Much Markup Are You Willing to Pay?

Commodities / Gold and Silver 2014 Dec 10, 2014 - 11:11 AM GMT

By: Mike_Shedlock


I am a gold bull, but I am also concerned about seriously misleading hype regarding alleged shortages.

For example, a friend recently emailed an article that contained this claim: Gold Selling for at least 50% over Spot in Asia-Rob Kirby.

According to Rob Kirby "In the Asian market, if you could find physical bullion as cheap as spot plus 50%, you'd be doing really, really, really well and you'd be hard pressed to find serious tonnage at that price in Asia."

Kirby, who specializes in acquiring large amounts of physical gold for clients, sees physical gold bullion selling for at least "50%" over spot, which would put the price of gold in Asia at least $1,800 per ounce. Kirby also says, "Prices being paid right now in Asia make a mockery of the prices being shown in COMEX and the LBMA (London Bullion Market Association). These paper markets have divorced themselves from the laws of economics.

Misleading Gold Hype

Kirby's statement is purposeful hype. The phrase that Kirby relies on to make his statement semi-factual is "serious tonnage of bullion". However, people don't generally buy serious tonnage of bullion. Instead, they buy bars.

Even with that phrase, I would expect arbitrage to whittle away at the alleged 50% markup.

Markups normally decline the more one buys. Anyone can ascertain that by checking refinery, mint and bullion dealer prices for direct sales online.

Of course, if someone demands "tonnage" of bullion or coins and "tonnage" is not available, then one cannot readily get it at any price.

Regardless, the average person can buy physical gold and silver in small or large quantities with very tiny markups. I will mention numerous ways in just a moment but first let's consider silver.

Silver Bars and Coins

Reader Mark emailed me a few weeks ago when silver was trading at $15.72. Mark complained that his dealer wanted $24.50 for an American Silver Eagle (ASE).

That's a markup of $8.78, nearly 56% over spot! On silver bars, the dealer markup was spot plus $3.50. That's a markup of about 22%.

That small coins and bars are so expensive does not mean there is a shortage of silver. Nor does it mean there is a difference between physical silver and paper silver. All it means is there is a shortage of silver eagles and small bars.

I believe it's crazy to pay such prices. And although I am pretty sure one can find better dealers with lower markups, coins and small bars are simply not the best way to go in my opinion.

Three Options

Mark asked me for some options. I noted three of the most popular vault options for gold and silver, but there are others. Here is my standard reply to such inquiries:

In general, I do not recommend purchasing gold and silver coins and small bars because the markup is generally very high. There are additional concerns and risks should you want to sell your holdings. Finally, should you decide to take delivery yourself, there are ongoing storage concerns, including insurance.

All things considered, there is a great deal of merit in audited, safe storage. I prefer holding metal outside the country for obvious reasons. Others disagree. If you want immediate physical possession yourself, much of the following discussion does not apply.

Three popular choices for holding gold in vaults are GoldMoney, BullionVault, and Perth Mint.

GoldMoney and BullionVault offer allocated programs. In allocated programs you have title to what you purchase.

Perth Mint offers allocated and unallocated programs. It's important to distinguish between the two. Unallocated gold is a financial asset; you own a liability of the Perth Mint. You do not own metal.

The Perth Mint does offer allocated storage, but is very expensive. Perth charges 1.00% per annum for storing gold, whereas GoldMoney charges 0.12% at most locations, 0.18% at others per its fee schedule.

Perth maintains that its unallocated program is 100% metal-backed, but also admits theoretical exposure should the Mint becomes insolvent. However, Perth Mint operates under a Government Guarantee that many will find sufficient.

GoldMoney holdings are in audited vaults in Singapore, Hong Kong, Canada, London and Switzerland. The bars are individually numbered and assigned. You may own a percentage of a bar.

GoldMoney is based in Jersey, an English speaking country off the coast of France. Jersey has some of the strongest property rights laws in the world. GoldMoney sells at the market ask plus a mark-up. BullionVault is commission based on top of a bid-ask spread. BullionVault's combined commission + spread may at times be lower than the mark-up at GoldMoney. However GoldMoney guarantees a trade, they are a broker dealer. And GoldMoney allows one to sell at the market bid with no mark-up (i.e., no commission when selling).

I prefer allocated storage over unallocated storage. Because Perth Mint allocated storage cost is so high, I prefer GoldMoney and BullionVault to Perth Mint.

GoldMoney is unique in that it allows for direct metal-to-metal exchanges between any of the following metals: gold, silver, platinum, palladium. Other dealers may provide a two-step gold-silver process (i.e. sell one and use the proceeds to buy the other).

Bear in mind I do have a relationship with GoldMoney. It will not affect the price you buy or sell at, but I feel the need to point out the relationship.

If you decide to go with GoldMoney, please select this GoldMoney link containing my referral code. It costs you nothing more, but as an incentive to use this link, new accounts will receive six months free storage.

The following applies to US citizens:

I am not a tax accountant but please remember that offshore accounts are taxable and must be disclosed to the IRS. Only the gains are taxed when you sell, not the holdings.

Reporting of Foreign Bank and Financial Accounts may apply to accounts that total in excess of $10,000. Please see Report of Foreign Bank and Financial Accounts for more information.

Please do your own due diligence. There are numerous alternatives and you may find an alternative you like better.

The important point is that unless you insist on taking immediate possession of small quantities of silver and gold, there are numerous ways you can buy physical gold, silver, and platinum at tiny markups.

And as long as you can buy precious metals at small markups, these stories of physical metal prices vs. paper metal prices are purposeful hype.

By Mike "Mish" Shedlock

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at .

© 2014 Mike Shedlock, All Rights Reserved.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Shedlock Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules