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Author Topic: Gauging interest. Group buy of 500 oz of bullion silver.  (Read 2012 times)
TangibleCryptography
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August 31, 2012, 06:06:23 PM
Last edit: August 31, 2012, 08:37:38 PM by TangibleCryptography
 #1

Background
We are looking to acquire 50 to 100 oz of silver to offer is as a payout option for our FastCash4Bitcoins service.  
The best prices can be obtained by buying a sealed mint transport box (500 oz of silver).   Due to their universal appeal and low premium we most likely will go 1oz Canadian Maple Leaf's.  200 oz is roughly $17,000.  We would prefer not to lock up that much capital so we are considering a group buy so that we can secure the lowest possible price while reducing our capital outlays.


The coins
1 oz 2012 Canadian Maple Leaf
Diameter:   38 mm
Thickness:   3.29 mm



We will be looking to buy a sealed "monster box".


The box comes with 20 mint tubes containing 25 coins (25 oz) each.  
Customers purcashing 25 coins (or multiples of 25 coins) will receive a complete unopened mint tube.


Estimated cost
Prices are in USD but all payments will be by BTC.  

Single Coin:
Spot price at time of bulk purchase + $7 per coin
Silver spot price is currently ~$31 to this would be ~$38 per coin

25 coin tube:
Spot price at time of bulk purchase + $5 per coin
Silver spot price is currently ~$31 to this would be ~$36 per coin or ~$900 per tube.

4 or more coins tubes (25 coins ea):
Spot price at time of bulk purchase + $4 per coin
Silver spot price is currently ~$31 to this would be ~$35 per coin or ~$875 per tube.


Shipping - US Only
For 1-18 coins:
Coins will be secured in a flat cardboard coin mailer and then put inside a padded envelope.
First class mail (no tracking): $1.00  (max of 8 coins).
Priority mail (with tracking): $6.00
Express mail (with tracking): $20.00

For 25 coin tubes:
Priority Mail (estimate): ~$10.00 for first tube plus $1.00 for each additional tube
Express Mail (estimate): ~$30.00 for first tube plus $5.00 for each additional tube


The Plan

Step 1 <- You are here
Gauge interest.  Gather ~400 to 450 oz of reservations.  At this point reservations are non-binding.  We just need to know that you are interested and how many coins.  You can reply in thread or send us a PM.

Step 2
Once we have interest for at least 400 oz we will create a deposit site.  We will collect a $25 deposit per coin (current MtGox prices at the time of deposit) and a $400 deposit per tube.  Once you place a deposit it is binding.  However you can transfer your deposit to another users.

Step 3
Once we have deposits for 400 oz we will purchase the 500 oz of bullion.  This process may take up to two weeks (although it hopefully will be much faster).  Remember we need to receive the deposits, liquidate the bitcoins, place the order for the silver, wait for it to be shipped, and receive the silver coins.  Once we place the order it will lock the spot price and we can provide final prices to buyers.

Step 4
Buyers can then login to the deposit site, pay the balance of their order and have their coins shipped.

Interested?  Questions?  Comments?
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matthewh3
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August 31, 2012, 06:52:56 PM
 #2

So is this offer only open to US bitcoiner's  Huh

TangibleCryptography
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August 31, 2012, 06:53:52 PM
 #3

So is this offer only open to US bitcoiner's  Huh

No I just don't have estimates on shipping from US to (everywhere in the world).  Plus I am not sure about customs and declarations.
It is most economical for US buyers because of faster and cheaper shipping but I am open to international buyers. 
matthewh3
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August 31, 2012, 06:56:28 PM
 #4

Within the EU you have to pay 20% VAT on silver but not on gold.  I think one coin would be below the UK's customs VAT limit to be charged. 

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August 31, 2012, 08:00:32 PM
 #5

I'm a bit confuse over the price you quoted, isn't spot +$7 incredibly high for that kind of bulk, or am I misreading something? http://www.apmex.com/Category/2/Canadian_Silver_Maple_Leafs_2012__Prior.aspx is charging Spot + $2.50 for 499+ 1 oz coin orders.

TangibleCryptography
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August 31, 2012, 08:03:58 PM
Last edit: August 31, 2012, 08:29:26 PM by TangibleCryptography
 #6

I'm a bit confuse over the price you quoted, isn't spot +$7 incredibly high for that kind of bulk, or am I misreading something? http://www.apmex.com/Category/2/Canadian_Silver_Maple_Leafs_2012__Prior.aspx is charging Spot + $2.50 for 499+ 1 oz coin orders.

Well spot + $7 isn't for 499 coins it is for 1 coin.
Also APMEX doesn't accept Bitcoins ... yet.

If you use single coin, Credit card price it is more like spot + $5.30.   So someone wanting to save some money could sell BTC on MtGox pay  commission, withdraw to Dwolla, pay a commission & wait a week, withdraw to their bank account & wait a week, and buy it on APMEX using their check card.  They would be saving ~$1.23 before you consider APMEX high shipping costs on small orders ($12.95 minimum).
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August 31, 2012, 08:06:54 PM
 #7

Can someone tell me why people buy silver coins as investment instead of just silver?  Wouldn't it be cheaper/better to buy "bulk" silver if you want to follow the silver market?  Or do the coins tend to hold their over-spot value?
TangibleCryptography
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August 31, 2012, 08:12:57 PM
Last edit: August 31, 2012, 08:39:40 PM by TangibleCryptography
 #8

Can someone tell me why people buy silver coins as investment instead of just silver?  Wouldn't it be cheaper/better to buy "bulk" silver if you want to follow the silver market?  Or do the coins tend to hold their over-spot value?

Generally 1oz silver coins are more liquid.  It is far easier to unload a recognized coin, obviously you pay for that in the minting costs.

Not sure what you mean by "just silver".  As in a 3kg chunk of low purity ore?  Not much market in that.   Even say silver shot or larger bullion bars is going to sell for more than spot.  Selling means finding a buyer and the less common the form the less buyers you will find. Nothing really has more universal appeal than the 1oz high purity coin by a major mint.
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August 31, 2012, 08:38:21 PM
 #9

Can someone tell me why people buy silver coins as investment instead of just silver?  Wouldn't it be cheaper/better to buy "bulk" silver if you want to follow the silver market?  Or do the coins tend to hold their over-spot value?

Generally 1oz silver coins are more liquid.  It is far easier to unload a recognized coin, obviously you pay for that in the minting costs.

Not sure what you mean by "just silver".  As in a 3kg chunk of low purity ore?  Even say silver shot (which is much harder to sell/trade) is going to sell for more than spot.  If you mean larger bullion bars that is another option but you won't find those for spot either and sometimes they aren't any better of a deal (in terms of premium over spot).  In trying to get a group buy 10oz bars for example are going to be a lot less popular.   Nothing really has more universal appeal than the 1oz high purity coin.
Ok, easier to unload makes sense.  They are minted, so people recognize them as being legitimately silver and legitimately 1 oz.

Is there no way to buy silver @ spot price then?  At least in consumer-level quantities?
TangibleCryptography
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August 31, 2012, 08:43:11 PM
 #10

Ok, easier to unload makes sense.  They are minted, so people recognize them as being legitimately silver and legitimately 1 oz.

Is there no way to buy silver @ spot price then?  At least in consumer-level quantities?

No.  The seller would be selling you something at material cost.  How would they stay in business?

Even in very large quantities (say 1 kg bars) they are going to be sold above spot.  Spot = the material cost (pure silver) but someone has to refine it, alloy it, make the form (bar, coin, etc), measure & weigh it, stake their rep on it, and take the price risk (holding volatile silver until a buyer comes along).  

Nobody is going to do all that and then collect a premium of $0.00 over their material cost.  Would you?

This is about as close to spot as you can get
http://www.apmex.com/Product/55392/1000_oz_Tri_State_Refining_Silver_Bar_999_Fine__398417.aspx

Only $0.39 per oz over spot. Of course no dealer is going to buy that off you for spot.  They are going to need to authenticate it.  That requires time and money.
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August 31, 2012, 08:53:28 PM
 #11

Ok, easier to unload makes sense.  They are minted, so people recognize them as being legitimately silver and legitimately 1 oz.

Is there no way to buy silver @ spot price then?  At least in consumer-level quantities?

No.  The seller would be selling you something at material cost.  How would they stay in business?

Even in massive quantities (say 10 kg bars) they are going to be sold above spot.  Spot = the silver in the form.  Someone had to refine the silver, physically make the bar, measure & weigh it, stake their rep on it, take the price risk (holding volatile silver until a buyer comes along).  

Nobody is going to do all that and then collect a premium of $0.00 over their material cost.  Would you?
But why does no one just sell "silver in the form"?  I guess that is my question...  why does it need to be refined, made into a bar, measured and weighed, and stake their rep on it?  What about old silver jewelry, or silver silverware, etc?  People still know it is silver and refined to whatever extent is stamped on the items.  It can be weighed easily enough.  Would that sort of stuff sell at spot value on the second-hand market, potentially?  If so, why buy coins when you can buy old silverware and put 100% of your funds into straight silver, instead of 86% into silver and 14% into the "minting" premium?  Do you expect the above-spot premium to appreciate as silver appreciates?  In other words, if silver hops to $62/oz from $31/oz, would the total value of the coin then be $72 (indicating a doubling of the $5 above-spot premium)?  Or would it remain $67 (indicating a stay of value of the above-spot premium)?  Or would it be $62 (indicating the above-spot premium no longer holds any value)?

I apologize for the threadjack.  I've always been interested in investing in silver/gold, but the whole "paying above spot price" thing has always bothered me, so I am taking this opportunity to learn more about it.
TangibleCryptography
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August 31, 2012, 09:04:30 PM
 #12

Jewelry and silverware is generally sold at 100% markup over the raw material.   You may be able to find junk silver here and there but there is also a lot of fakes and scams.  No company is going to sell you silver at spot.  So you could meet random people off craigs list, bring large amounts of cash, and buy their junk silver.  Could you determine the purity of silverware?  Could you catch fakes?  Could you ensure you don't get robbed? 

No dealer is going to stay in business selling anything (computers, cars, silver) at material cost.  Can you think of any product in the world which is sold at material cost?

So yes if IF you wanted to start a business buying junk silver, grading it, melting it down into bars then you could probably acquire some silver at spot (and get scammed some % of the time also).  Of course you need to factor in your time/risk/equipment/capital costs.  However no business is going to do all the work (and take all the risk) for you and then give it to you below their cost (material cost + time/labor/equipment/capital costs).  Right?

Quote
Would that sort of stuff sell at spot value on the second-hand market, potentially?
Probably not.  The same issues that applied to you above would also apply the buyer.  How does he know it is authentic, how does he determine how much silver content it contains, etc.  Why would he want to take that risk.

Even if you sold all your junk silver to an assayer or refiner they are going to deduct something from spot for their time/labor/risk/equipment/capital.  
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August 31, 2012, 09:14:18 PM
Last edit: August 31, 2012, 10:02:04 PM by TangibleCryptography
 #13

Do you expect the above-spot premium to appreciate as silver appreciates?  In other words, if silver hops to $62/oz from $31/oz, would the total value of the coin then be $72 (indicating a doubling of the $5 above-spot premium)?  Or would it remain $67 (indicating a stay of value of the above-spot premium)?  Or would it be $62 (indicating the above-spot premium no longer holds any value)?

Generally the premium is % on the spot value.  So if the price of silver doubles you would expect the coinage fees to be higher maybe not exactly double but higher.  For example the 1oz Gold Maple Leafs (in quantity) tend to run $50 to $60 over spot.

Of course just because a dealer can sell you a coin @ spot + $x doesn't mean you will be able to.  Like anything else it really depends on how motivated you are to sell.  Most dealers will buy silver Maple Leafs at ~$1 or so above spot and gold ones at at ~$30 to $40 above spot (better price on larger sales).  Now if you sold it yourself you might be able to get more but that is true with just about anything.  

Like anything else a silver coin is worth what someone else will buy it for.
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August 31, 2012, 09:56:21 PM
 #14

Can you think of any product in the world which is sold at material cost?
Bitcoins.  Wink

Thanks for the explanation - that makes a lot more sense to me now.  Purity is always stamped on the metal, but you're right - it would be difficult to buy second-hand and still verify the legitimacy of the silver/purity and not ever get robbed.  A premium is paid for the minted silver, then, to mitigate the risks associated with buying junk silver.
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September 01, 2012, 06:35:04 AM
 #15

Sorry but this is a horrible bulk rate price. I can get a tube of 20oz SHIPPED for cheaper than what you listed for 4+ tubes.


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TangibleCryptography
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September 01, 2012, 01:05:22 PM
 #16

Sorry but this is a horrible bulk rate price. I can get a tube of 20oz SHIPPED for cheaper than what you listed for 4+ tubes.

It is a 25 oz tube.  
Please let me know where you can get a single tube (25x 1 oz coins) for less than spot + $100.
TangibleCryptography
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September 01, 2012, 01:05:58 PM
 #17

Update:
We have received PM reservations for 75 oz.
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September 01, 2012, 01:22:22 PM
 #18

Are you making a run at this now?

Silver and Gold just shot up in price.

Wait for it to come back down, as it usually does during the holidays and at the end of the year.

Life is What you Make it!
TangibleCryptography
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September 01, 2012, 01:49:54 PM
Last edit: September 01, 2012, 02:02:18 PM by TangibleCryptography
 #19

Are you making a run at this now?

Silver and Gold just shot up in price.

Wait for it to come back down, as it usually does during the holidays and at the end of the year.

At this point it is just gauging interest and getting feedback.  At the earliest we probably are looking at a month.

Also historically the end of year prices have been mixed.
http://www.kitco.com/charts/historicalsilver.html

In the last decade looking at prices in Sept vs Nov-Dec it has been higher at the end of year 5 times, roughly the same 3 times, and lower 2 times.
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September 02, 2012, 05:45:58 PM
 #20

Sorry but this is a horrible bulk rate price. I can get a tube of 20oz SHIPPED for cheaper than what you listed for 4+ tubes.

It is a 25 oz tube.  
Please let me know where you can get a single tube (25x 1 oz coins) for less than spot + $100.

Yes I noticed & no thanks, I am keeping that one to myself. xD
Don't mean to rain on your parade, but these aren't bulk rates they are retail rates.


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