The Underground Gold and Silver Market

The real cost of precious metals can be found on ebay.

That's what some traders have admitted.Ever since the summer, the "official" price of gold and silver, on the futures market, has decreased. But demand has been high which has lead to scarcity.

Here's an example:

Using last night's closing price, had I bought an ounce of silver on the futures market I would have paid $11.05.

Had I bought a one ounce American Silver Eagle coin (ASE) to hide in my flour bin at home, I would have paid $15.54.

Plus Shipping.

And I would have had to wait for it to come in.

And I would have had to FIND one first.

Real bullion -- bars and coins -- have always had a premium of less than 10%. These prices above have a 41% premium.

The average bid for that same coin on ebay this morning runs around $17.50 with free shipping.

Now here's the deal. If I wanted 500 ASE coins, I might be able to find them for as low as $14.68 apiece.

Let's see . . . I could then sell them on ebay for a profit of $2.82 apiece, times 500, equals $1,410 profit, less my shipping costs . . . maybe I could squeeze out a $1000 profit. But to sell 500 coins in lots of singles, doubles, tens and twenties, and ship them all would be a full time job. I'd really be earning my money.

Here's something scary. It used to be that a producer that only sold in bulk (a 5000 ounce minimum) had very good prices for coins. Good enough that someone with the money to invest could actually make the scheme above work. But when I checked today while researching this blog entry, A-Mark, one of these high-end dealers, had a price for ASE higher than any other place I looked (except ebay).

So back to my day job.