GoldSilver2u.com’s High Premium and Wide Spread Gap

Back in November 2011, I reviewed GoldSilver2u.com’s above spot premium as well as their buyback spread. Just recently, I had an conversation with a reader of mine and we touched the topic of GoldSilver2u.com. I had a rude shock when I realized the premium and spread for GoldSilver2u.com has widen – in a big way!

Today, we are going to pay GoldSilver2u.com a revisit. Armed with my faithful calculator, we are going to revised our previous calculation on GoldSilver2u.com’s pricing. At current point of writing, the international spot price for silver is USD$34.78.

Back to November 2011: Premium Above Spot

^ Screen capture from GoldSilver2u.com on 26th Nov 2011

Refering back to the previous screen capture I made in 26th November, let us calculate the premium above spot back then.

Premium above spot in between 22% – 25% is acceptable.

Forward to March 2012 – Current Premium Above Spot

^ Screen captured from GoldSilver2u.com on 3rd March 2012

Considering Malaysia does not have import tax on silver bars, there is no reason for such high premium. Bare in mind that we are dealing with decent weight here (10oz and 1kg), not silver bars of one ouncers.

I would give it for PAMP Suisse as it is always known as the Rolls Royce of silver bars but 37.80% above spot price for TWIN TOWER silver bars? Really?
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How much is GoldSilver2u.com’s Silver?

To know the answer, we will need to examine GoldSilver2u.com silver pricing above spot. Calculating the above spot price for GoldSilver2u.com is as easy as UPSR’s mathematics. It is simple mainly because all your needed ingredients are clearly visible from GoldSilver2u.com website.

^ Information captured from GoldSilver2u.com’s website on 30th Nov 2011 4:15am

Let’s do a quick calculation on GoldSilver2u.com’s silver price. Bring out your Einstein thinking cap. We are going back to class.
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Understanding Spread for Buying and Selling Gold or Silver

It’s crucial to understand how does spread works before we start investing in precious metals. Spread in short means the margin between the buying and selling price. The formula is as followed:

Formula for spread:

(Sell Price – Buyback Price)/Buyback Price X 100 = Spread %

Example of calculation:

1 oz of Kijang Emas selling at RM5,060, buying back at RM4,864.

Apply the formula and therefore it’s: (5060 – 4864)/ 4864 x 100 = 4.03%

With that, the spread for 1 oz of Kijang Emas is 4.03%.

The higher the spread translate to the more ‘expensive’ it is to trade with the vendor while the lower the spread is the vice versa. Many of the time, we won’t feel the pinch immediately after purchasing our bullion. This is because most of the time, we don’t sell it back on that day same day that we bought.  But if you happened to do that for whatever reason, you will immediately lose out the spread. This is where the vendor makes their profits.

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