A New Place for Investors to Find Silver

I received a phone call from Tarek Saab, a former finalist on Donald Trump’s television show, The Apprentice. At first I was a bit suspicious because, believe it or not, there are a few flakes floating around the gold and silver arena, and having someone claim to be associated with The Donald did send up warning flags. I must state, however, that perhaps to an outsider, all gold and silver bugs probably seem nuts!

Tarek’s call was followed by an e-mail and this gentleman sounded as bullish on the precious metals as anyone I have met. In fact he began something that many of my friends and associates have talked about for years. He began a peer-to-peer network where buyers and sellers can find true price discovery and deal in physical silver and gold.

His company, GoldandSilverNow.com, is helping solve a “shortage” problem in the precious metals market by linking buyers and seller directly. In a previous article, I mentioned that one of my colleagues in Belgium has put together a method of tracking eBay (EBAY) prices; see Precious Metals Price Discovery.

The current situation is a huge spread between the paper derivative price on COMEX and the actual price paid for silver and gold by retail investors. This was discussed in my article “Silver Arbitrage.” People can take advantage of a price differential between two or more markets, striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices.

There is without a doubt a price differential between retail silver product, such as 100-troy-ounce silver bars, and the spot price for silver on the Futures Exchange. In fact, this presents a very good arbitrage opportunity for those willing to take the risk. This is accomplished by selling lots of 1000 troy ounces in 100-ounce-bar increments and locking in the 1000-oz. COMEX bars for delivery. This process is achievable and, as with all arbitrage situations, will find some market participants willing to take advantage of this opportunity.

But GoldandSilvernow.com is not an auction house. The company, described by Saab as a “virtual bullion dealer,” has a simple transaction process: A seller registers and sends a picture of his inventory. The buyer, who must purchase a minimum of 500 ounces silver and 10 ounces gold, wires funds directly to the company, which acts as escrow. When the funds clear, the seller ships his bullion via registered mail, according to strict packing instructions.

Now it must be impressed that this seems to be a rather simple idea, and in fact it is, but to my knowledge it is just beginning to be implemented. Saab’s is not the only one, however; we are seeing more and more Web sites pop up that are selling precious metals.

There is another Web site that has begun business recently that is known as seekbullion.com and has some of the expertise from goldseek.com and silverseek.com. The founder of goldseek.com came to one of my first appearances at the Wealth Protection Conference in Phoenix, Arizona, and we have been friends ever since.

According to their Web site, “SeekBullion.com™ is an online precious metals/bullion auction Web site that deals with trusted pre-screened authorized dealers (sellers). SeekBullion.com™ is a division of GoldSeek.com and SilverSeek.com, Gold Seek LLC, founded in 1995. SeekBullion.com™ aims to create a new marketplace for bullion products at competitive rates, whereas other auction Web sites will charge several percent on auctioned products which increases the cost to both parties. SeekBullion.com™ aims to greatly reduce the cost of bullion auctions with the trust and integrity of Gold Seek LLC, the premier global leader in precious metals information and financial truth.”

A third Internet site that deals in silver is FlettExchange.com. According to its Press Release:

Flett Exchange LLC is introducing a new silver market. 100 oz and 1,000 oz silver bars are now listed on Flett Exchange, LLC, to buy and sell. For hundreds of years silver has been recognized as a superior form of monetary currency and is internationally accepted. It has retained its intrinsic value by backing paper currencies and has many versatile industrial uses. Our 100 oz and 1,000 oz silver bar markets will allow participants to convert cash into silver and silver into cash.

100 oz and 1,000 oz silver bars are proficient way for investors to gain access to a growing silver market. These premium bars are easily shipped, conveniently stored, uniformly stacked and are dependable forms of financial liquidity. Our silver bar markets are live, anonymous, two-way market determined by Flett Exchange, LLC, users. Customer price-negotiation eliminates the premium buyers pay and the discount sellers incur, when transacting with major bullion houses and other auction platforms.

These are just three of the recent websites that have seen an opportunity and capitalized upon it. To be clear I have not personally dealt with any of them, so I am not necessarily endorsing any of them but do find it interesting that market participants and proving the free market still exists. In closing, this will be the last weekly article in the public domain as we are working overtime on the January issue which is by far the largest issue of the year. Those interested in viewing our work in full can click here.

Some readers outside of the U.S. have asked us where can I buy without huge premiums and one place that works with industrial size bars can be found by clicking here.

So, in closing out another year, I wish everyone Peace in the New Year!

Comments

[bluesmoke:]

Good article and information. There is a cost to storing physical bullion. For me, having a relatively small position on paper makes the most sense. I know many don't agree. But my long term goal includes the hope of long term capital gains without having to guard it 24/7.

Some day I do plan to "get physical". I have bookmarked your links.

2008 Dec 19 09:17 AM

[GMiki1:]

Great idea. By the way, storing bullion isn't that hard--everything in life has a little risk. Diversify and include physical in that diversification. Since we don't know when prices will shoot up--and we may be on the verge of a breakout (or not)--do it now. Thanks, David.

2008 Dec 19 11:36 AM

[DGCmagazine:]

Tarek was kind enough to grace the cover of our most recent magazine issue. He's very sharp guy and his business model is right on the money. Shipping included.

Mark
[e-mail]

2008 Dec 19 12:11 PM

[CoinMiner:]

Never understood the reluctance to maintain physical metals. The storage objection stands out as a red herring IMO.

One can maintain several hundred thousands of dollars of gold bulion - or millions in certified coins -in a shoebox. Amounts of silver that size are not necessary since silver coinage has always been for day-to-day mercantile transactions, not for larger dollar settlements. Hiding a shoebox is NOT an insurmountable task; rather an increasingly necessary skill in today's world.

2008 Dec 19 02:20 PM

[jimmy46:]

GoldandSilverNow.com has a very different business model than some of the other new entries in this market.

They charge 20% of the premium over spot.
Bulliondirect by contrast charges a flat 1% of the total sale amount.

With premium's unusually fat now this can work,
but when premiums go back to normal,
this firm may go out of business and people who have wired money
or sent bullion in will be involved in a bankruptcy proceeding.

Not a happy thought.

I recently sold some coins at bulliondirect, it took
20 days from the time I mailed the coins till the day I got
the check. I was beginning to wonder.

2008 Dec 19 03:38 PM

[Arcturus:]

I checked out that Anglo Far East link at the end of the article... they try to prove their "legitimacy" by having photos of themselves taken next to a pallet of silver bars... boy, that did it for me. Where do I wire my 401K?

2008 Dec 21 09:36 AM

[Warning:]

I recommend you look at the disciplinary history of Michael Flett, owner of the Flett Exchange, before doing business with him. He's been disciplined 3 times by the NYMEX and paid over $100,000 in fines and restitutions. One disciplinary action was for trading ahead of a customers order, and now he provides his own oversight! You can see his record at the National Futures Association site at www.nfa.futures.org/ba... and www.nfa.futures.org/ba... Here is the text of the most serious one:

Narrative for 0236105 - FLETT, MICHAEL DONALD
The New York Mercantile Exchange took final disciplinary action against Michael Flett("GALT"), a Member of the NYMEX Division of the Exchange. The subject of the disciplinary action concerned an allegation that in October, 2004 and November, 2004 Respondent trading ahead of customer Market on Close orders in violation of NYMEX Division Rule 6.41(B): Trading Standards for Floor Brokers; and Exchange Rule 8.55(B)(2): Engaging in Conduct Inconsistent with Just and Equitable Principles of Trade.
Respondent submitted a Joint Offer of Settlement without admitting or denying the allegations against him. The Offer, consisting of a fine of $25,000, restitution in the amount of $74,700, and an order to cease and desist from future similar rule violations, was accepted by the Exchange’s Board of Directors at its meeting held on September 19, 2007.

Mar 06 07:15 PM