Buying Bullion at Wholesale Prices

Finding wholesale prices for gold or silver bullion coins and bars is pretty difficult. Most bullion dealerships cooperate with the larger wholesalers in the industry.

While this may usually offer them good prices to stock their products, it does not guarantee availability in tight physical markets. Very large dealerships have complained about physical bullion shortages during 2010 and 2011, and these shortages are expected to return to the physical bullion market — notably silver with its increasing supply-and-demand imbalances — before long. In light of this, it may be wise for bullion investors to load up on their short and medium term requirements as soon as possible. Not only does it appear that, in light of recent price corrections and widespread liquidation, supply is not currently an issue, but prices are very attractive right now (for the very same reason). Having consolidated throughout the latter part of 2011, prices have bottomed out just before New Year’s Eve and have shown a healthy recovery since. (Our subscribers had been alerted to this on Dec 27, 2011, just in time to position themselves for this move.) Silver spot has increased more than 28% throughout January 2012.

Although getting the absolutely cheapest price and squeezing out the last $1 to $2 on one’s phyzz buying does not even have to be one’s highest priority in light of these lucrative market movements, it is always nice to economize on price and not waste any money (see our earlier articles here on this blog). One might want to economize on both sales taxes as well as dealer markups, then.
As it is common in the U. S. to pay dealer markups of around 7% to 15% over spot, some strange “solutions” have come to the market. Joining a “buying club” or rather a multi-level marketing scheme for bullion is one of them. This organisation claims to offer “wholesale” pricing on all bullion transactions, no matter how small or large one’s order. In order to get this “benefit”, prospective buyers are required to “join the club” at an upfront $249 payment plus an additional monthly maintenance fee. Depending on order size (and frequency, as these monthly fees sure add up over time), this may or may not be a good deal for physical bullion investors in the U. S. due to sometimes high domestic dealer markups.

Why that “member privilege” should be worth so much, remains a bit of a mystery though when actual prices for physical bullion are compared on a wider scale. While “members only” prices for the whole ounce Silver Maple Leaf were $35.73 and actually compared quite favorably to PFG Bullion an similar dealerships ($36.97 and up), the same coin traded in Europe for $35.67 online. That is retail, and it even should include higher transportation cost from the Canadian Mint to the dealer in Europe.

Bullion coins are sold to wholesalers or very large dealerships by the various worldwide mints at between 3% and 5% over spot. This is the wholesale price. The “members only” price that is allegedly a “wholesale” price runs at a whopping 8.2% over spot. It turns out that this is a retail price, although a somewhat competitive one when benchmarked against local competition in the U. S.

In his book Crash Proof 2.0, Peter Schiff advises to walk away from retailers with higher than 8% markups on regular whole ounce bullion coins.

We don’t know whether or not the operators of that membership scheme do actually believe that theirs are “wholesale” prices. When easily accessible online retailers in Europe (offering to ship worldwide) are actually a few pennies lower, we have seen enough though. (We also happen to know that such a claim constitutes unfair competition in numerous countries worldwide.) Spread the additional $249 initial payment plus monthly fees equally to your actual amount purchased at such a “members only” price of $35.73 and that membership privilege may come in quite costly to you (even when an additional allowances for shipping is made). In order for these “wholesale” prices to result in a savings, you would have to either order a very large chunk of bullion or buy medium-sized amounts quite regularly.

Bottom line: forget about “members only” pricing but do the legwork (or mouse-and-finger-work of doing an internet search) and find really good prices where they are offered.