Typical Buy/Sell Spread for Physical Gold/Silver?

[DEGuy]

I was thinking about moving some savings into some physical PM's, and I think I'll be OK finding somewhere to buy gold and/or silver at a respectable market rate. However, I don't have a good feel for the spread on turning that gold back into USD. So, at a typical dealer, if you turn around and sell the same gold bar/coin/etc back to them, what is the difference? 1/5/10% loss? Does it vary significantly by quantity? What is the best I might expect to find?

Disclaimer: I searched the forum, but couldn't find anything on this topic.

Thanks!

 

[RDM]

Average is 5%

 

[DEGuy]

Cool, thanks. I'm naturally risk adverse, so I don't want to lose a lot right off the bat if I need to liquidate gold back into USD because of an emergency. The long term risk of inflation though, is definitely greater than that risk, and a potential 5% loss on the spread. Or the fluctuation in value of gold, for that matter.

 

[pmbug]

Ask you local coin shop what their buy price is on everything that you are considering buying. They will tell you up front what their policy is if they want to keep you as a customer. Apmex.com also posts their buy prices for most of the products they sell. tulving.com also publishes their spread all on one easy to read page.

I would caution you that spreads fluctuate as the market supply and demand dictates. Back in April-May 2011, for example, the spread on Silver Eagles compressed when there was a shortage.

 

[Zippyjuan]

Cool, thanks. I'm naturally risk adverse, so I don't want to lose a lot right off the bat if I need to liquidate gold back into USD because of an emergency. The long term risk of inflation though, is definitely greater than that risk, and a potential 5% loss on the spread. Or the fluctuation in value of gold, for that matter.

A five percent spread means that when you buy some silver five percent will be added to the price- you pay say $105 for $100 in silver. When you sell the silver back to them they pay you five percent less than the list price so if you bought $100 worth and imediately resold it, you lost $10 or ten percent which means you need at least a ten percent increase in the price to just break even. The spread could vary depending on where you buy and you may or may not have sales tax on the transaction. Higher spreads or taxes means you need the price of your metal to go higher just to break even.

Sales over a certain amount ($600) may be reported to the IRS. Metals get treated as collectables by the IRS and are subject to a 28% tax rate instead of the capital gains tax rate which may be lower for most people so keep that in mind as well. If the sale was not reported (you will be asked to fill out a form with the dealer if he is reporting it) then you can probably avoid that tax. This reduces your return as well.

Just some things to keep in mind. Gold (and other metals) should be a longer term investment- not a short term one. Have an emergency fund established in low risk places and then you can invest in whatever you like for the long run.

 

[DEGuy]

A five percent spread means that when you buy some silver five percent will be added to the price- you pay say $105 for $100 in silver. When you sell the silver back to them they pay you five percent less than the list price so if you bought $100 worth and imediately resold it, you lost $10 or ten percent which means you need at least a ten percent increase in the price to just break even. The spread could vary depending on where you buy and you may or may not have sales tax on the transaction. Higher spreads or taxes means you need the price of your metal to go higher just to break even.

Ahh, now I'm confused. I thought a buy/sell spread would be the total cost I would incur if I bought then immediately sold, so according to your example that would be 10%. Looking at Apmex.com, seems like the buy/sell spread is anywhere between 2.3% and 10%, depending on the product. Looks like the spot over gold is usually 5% also.

Just some things to keep in mind. Gold (and other metals) should be a longer term investment- not a short term one. Have an emergency fund established in low risk places and then you can invest in whatever you like for the long run.

Yeah, my goal is not necessarily to invest in gold (although any gains wouldn't be a bad thing). I really just want to diversify as a way to hedge against possible inflation. Savings/CD's are getting basically 0%, so seems like a good time. But since this would be savings money, I might need to liquidate it anytime. More than likely it won't be soon, but a potential 10% loss on my trade is a little steep, also taking into account a potential short-term depression in gold/silver prices. I'm willing to take the risk on market price fluctuations, but probably not much more than 5% cost in the business of selling back the gold.

 

[Tim Calhoun]

I have quite a few silver coins, mostly maple leafs and Mexican libertad ounces. If I sell them, would I usually get at least spot price? I read somewhere that if they are coins, especially bullion coins, they command a higher premium than rounds or "junk" silver. Is this true.?

 

[Bossobass]

First, any hard asset is worth what someone is willing to pay for it so, obviously, profit (or loss) depends on; a) how much and who you bought it from, b) how much and who you sell it to and c) what environments you bought and sold it in.

Second, "metals" are NOT "considered collectibles" unless you hold them for more than 1 year.

Finally, there is always the unpredictable variable of the street price decoupling from the spot price, which has happened to a great extent since the "credit crunch" "meltdown".

Some people I know paid $11 spot + $5 premium and sold for $25 on Ebay weeks or months later. That's a 56% profit without the collectibles tax premium, and just one example.

Bottom line: As a small investor there are no absolutes and an infinite number of variables, most of which cannot be prognosticated, especially by someone who has never owned silver bullion. Spot silver is up 18% in the last 30 days. You could easily stretch that to 25% if you bought right (monsters on sale) and sell right (small quantities to individuals).

Bosso