When the Price is Right
July 22, 2008
For gold bullion coin buyers, the object should be to purchase the most gold for the least cost.
Often, buyers of the coins do not look at bullion coins as some sort of budgetary item that they used to get more cheaply years ago. They wax poetic over designs, or are indignant over the source of the precious metal. These elements not directly related to the intrinsic worth of the metal play a huge role in public perception.
However, price is never entirely ignored. When the 2008 gold Buffalo one-ounce coins and the new fractionals go on sale today, collectors and investors will begin making calculations based on prices.
Is $1,199.95 too much for a one-ounce proof coin when gold is $968? That's a mark-up of almost 30 percent. But it is a proof coin.
Would the answer be different if it weren't the Mint offering the coins for sale?
I had an e-mail inquiry from an individual who wanted to know if he had received a fair offer for two 14-karat gold rings. I calculated the gold value yesterday at roughly $162. The dealer apparently offered the e-mail writer $126. I said that seemed in line with the present market. The gold value was approximately 30 percent more than the offered price.
A follow-up e-mail from the writer suggested that the difference was too great. The dealer should be satisfied with five percent.
With almost identical profit margins, it is fair to say there will be a lot of happy buyers of the new Buffalo gold coins from the Mint and unhappy sellers of what is called scrap gold wondering why dealers don't work on a narrower margin?
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