The Other GSR's...

[curmudgeonista]

Ya' know, we talk a lot about the GSR and it's use determining trades... silver for gold, or gold for silver. If you've tried making one of these trades you find out pretty quickly that your trading GSR is not usually the same as spot GSR. That is, most dealers will want some profit, at least on one side of the deal.

Knowing what my local dealer usually wants on a trade, I've got a trading GSR formula plugged into my bullion spreadsheet using his typical recent offer. For example, as I write this I'm looking at spot GSR of 40.4/1 but a silver-for-gold trading GSR of 41.6/1 getting spot on SAE's and paying a 3% premium on Krugerrands. That's my true exchange rate between those two items with my LCS, though I'd make other adjustments to the formula if trading generic silver or other changes that would alter the terms of the deal.

That trading GSR got me thinking about using GSR's based on actual cost to help determine outright purchases too. Comparing the GSR ratio on retail prices to the spot GSR will give you a quick indication of best buying ops, sort of an over/under when comparing specific silver to gold.

Let's look at an example. Suppose you'd consider only GAE's or SAE's for your upcoming purchase, I'll use APMEX's published pricing and budget for a 1 oz GAE showing at $1497.89 versus SAE's at $40.15 (their 20-99 quantity price). The purchase GSR between these two is 37.3/1. Comparing that to the spot GSR tells me the GAE is the better buy right now, with about 3 oz of silver net loss between spot GSR and the purchasing GSR.

Mind you, this is strictly based on which is the better buy against current spot. It can't take into consideration which might or might not have the best upside potential. So, if you're high on silver and not seriously considering gold then this won't help. But if you're accumulating both, or looking at silver primarily as a potential trade for gold then it's a big help.

It can get very complicated if there are multiple items under consideration. It might be best to make your comparisons and narrow things down before looking at this ratio. I routinely look at spreads to determine current preference for generic vs SAE's vs Maples, etc... and the same in gold items I favor.

If you're looking at something other than 1 oz pieces (on either side) remember to calculate your per oz cost before dividing the silver into the gold to get your ratio number.

This is raw data. I think you still have to take the overall status of the market into consideration. With the spot GSR moving down lately I'd probably still favor silver in the example I gave if the difference in spot to purchase GSR's was down in the -1 oz range instead of -3. In other words, I don't take this to be an absolute, just a tool to help me get a better perspective on the true cost involved in purchasing decisions.

[Rusty Shackelford]

Very nice curm!! A valuable tool for all traders.

[Irons]

Thanks Curm my head just blew off.

Seriously though very good method for determining how much really is at stake when trading!

[jogslvr]

I've traded the GSR several times lately into gold. Both parties agreed to use either melt or an average of the major online dealer's buy-back prices. I suspect most GSR traders are not making deals involving coins with perceived mumi premiums. Not saying I wouldn't take numi value into account but I prefer to steer clear of those.

[curmudgeonista]

Thanks Curm my head just blew off.

Difficult to explain... simple to do.

I know you've sworn off silver for the time being and likely to want to eventually trade any you come across for gold anyway, but I bet you'd swing the other way if you saw a really good deal on silver. And that brings up another point. If your purchase GSR with one dealer is higher than your trading GSR with another then you know you can come out on top by buying the silver and trading it for gold. It might even be worth tracking individual purchase GSR's so you know when you reach a worthwhile trading GSR on that item later on. It doesn't do you any good if the spot GSR looks favorable for a trade but you end up getting less gold than you could have bought in the first place.

[curmudgeonista]

I've traded the GSR several times lately into gold. Both parties agreed to use either melt or an average of the major online dealer's buy-back prices. I suspect most GSR traders are not making deals involving coins with perceived mumi premiums. Not saying I wouldn't take numi value into account but I prefer to steer clear of those.

Interesting you should mention that. I also track buy-back GSR on my spreadsheet. I use APMEX's from their Top-40 list since it's so easy to access. It's been running about 1 point under spot GSR lately. Very favorable for silver-to-gold trades if you can get the other party to agree to it.

[jogslvr]

Yeah, I use Apmex's top 40 sheet and also Provident's
http://www.providentmetals.com/sell-to-us.html

[Irons]

Trading gold for silver may be a problem this time around. With silver hanging around $35 an oz for so long dealers are replacing invantory at these high prices.

Silver takes a $15 an oz bath and those folks holding it will be pissed. My coin guy is not holding hardy any silver in his store, he is shipping it out as soon as he gets a price locked in.

[Rusty Shackelford]

Curm

how do you account the GSR at different dealers??

I just set up a trial spreadsheet based on your description (probably screwed it up though).

I was able to come up with a buy ratio form apmex of 37 but provident was slightly north of 40. However apmex prices were higher ($2 an oz for Ag buffs which is what I used and buy).
and effectively brought down the GSR at their site.

[Rusty Shackelford]

Yeah, I use Apmex's top 40 sheet and also Provident's
http://www.providentmetals.com/sell-to-us.html

Thanks!! I have never seen that page on their site. Very insightfull!!

[curmudgeonista]

...how do you account the GSR at different dealers?

I'd just find the best price on the items you're interested in comparing, even if they come from different dealers (as long as they're both vendors you'd be willing to buy from). You might have to take it a step further if there are differences in shipping costs involved.