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« Randgold Resources: Puts Sold | Main | Randgold Resources Limited: A Christmas PUT! »
Tuesday
Dec232008

The eBay Index for the price of Gold

Just a few weeks ago we mentioned rather tongue in cheek, using eBay as a guide to the true price of physical gold and silver as there was some suspicion that COMEX might default. Well this morning we received an article from Big Gold a publication from Casey Research on the same subject, which we hope that find interesting.

The one place that shows you how much gold is really worth
By the editors of BIG GOLD

Anyone who has watched the price of gold lately must have felt that something was off. While public demand for bullion coins went through the roof and major bullion dealers ran out of coins to sell, the spot gold price was flat, teetering between the upper 700- and lower 800-dollar range.

Managing Editor Jeff Clark of BIG GOLD wrote in the November 2008 newsletter:

Many dealers are out of 1-oz. coins, and not just here in the U.S. Londoners have been queuing up in front of coin shops; German suppliers are refusing new orders; demand exceeds mint capabilities in Canada, Australia, and South Africa; and Switzerland is working around the clock. If you’re fortunate enough to locate a source of coins, expect to pay an unusually high premium over the price of spot gold -- in the U.S. perhaps 10%, 15%, or more -- triple the normal level. Even then you may have to wait eight weeks or longer for delivery.

According to the laws of supply and demand, shouldn’t the spot price have skyrocketed?

Whatever the reason that it didn’t – hypotheses bounced around on the Internet ranged from deleveraging to governmental price manipulation – the BIG GOLD editors managed to find an unexpected indicator of the true value of gold that seems to be more reliable than the spot gold market itself…

The eBay Index.

Just like The Economist with its Big Mac Index or its modern cousin, CommSec’s iPod Index, both of which explain and compare the purchasing power of currencies, online auction house eBay makes an excellent yardstick for the true value of, well, just about everything.

In recent years, politics and economics seem to have entered an unholy alliance, thus increasingly obstructing the view on causes and effects in the markets. eBay, on the other hand, is the free market at its best and simplest. In other words, a seller’s item is worth exactly what a prospective buyer is willing to pay for it.

In April of this year, when the U.S. Mint rationed one-ounce, 2008 Silver Eagles to its thirteen authorized buyers, those same Silver Eagles sold on eBay for $25 apiece… nearly 50% over the then-spot price of $16.80.

Along the same lines, a few weeks ago, when gold was at $750/oz, one-ounce Gold Eagles got bids of $1,000 on eBay… a premium of 33% over spot price.

At the time of this writing, the availability of bullion coins has slightly improved, and major bullion dealers like Kitco.com have resumed offering some of their standard bullion products. Even though inventories are still selling like hotcakes, at least there is an inventory – and the eBay Index has reacted accordingly. Right now, with spot gold at $852, 2008 Gold Eagles are fetching bids of $876 on average… a premium of only 2.8% over spot.

This is a Christmas gift. It means any investor concerned about the government’s out-of-control printing of dollars has a window of opportunity to buy gold bullion at reduced markup. You can, at the moment, buy gold while both it and the underlying premiums are cheap. The eBay Index demonstrates that premiums can spike any time and without notice.

And since the editors of BIG GOLD recommend keeping 33% of your portfolio in gold bullion, it is well worth watching the eBay Index to gauge how high gold prices should be at any given time. For it is almost certain that the spot market will follow the Index sooner rather than later. Buy gold now before eBay signals premiums are expensive again.

***

Deflation today + government responses = inflation tomorrow. This means you would be well advised to own some physical gold, as well as crisis-proof stocks of major gold producers and quality ETFs. BIG GOLD is the monthly advisory for the prudent investor, focusing on precious metals investments that are safe havens in times of crisis. Learn more about it here.

Have a sparkling day.

If you are new to investment in the precious metals sector then you may wish to subscribe of our FREE newsletters regarding gold stocks, silver stocks and uranium stocks, just click on the links.




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Reader Comments (10)

I'm a theme collector of precious metals and eBay is THE only place I can find what I'm after...if you're willing to work at it, which entails a lot of regular searching...key word searches, watching of a lot of individual auctions, one can get good deals...but premiums do exist, and most still do exceed 10-15%...demand is way too great to get much less than 10-15% over spot, and that's even for generic 10oz silver bars, etc...in fact, 10oz silver bars commonly command premiums of 20-25%...but in the long picture, that's OK with the extended dip we've had in the "spot" price of metals...the point is to GET the metal NOW, while you can get it...and you know exactly how much you'll pay for shipping, figure that into the bid price, and GET your item usually within 1 week...many of the items I bid on are from foreign sellers, those take 2-3 weeks to receive in most cases...and it's very rare to get ripped off...only once, and that was from some schmuck here in the USA and luckily was for just a few bucks...if the seller doesn't reveal shipping cost don't bid, some few will try to make money on shipping...so...for the theme collector especially, I highly recommend eBay...note also there are some other new auction sites popping up...ie: www.seek.bullion.com...which charge lower fees to sellers compared to eBay, where you can buy VOLUME...and all this can be done in the comfort of your home, with a cup of steaming joe...sjm

December 24, 2008 | Unregistered Commenterscott michaels

Hello, I enjoy your articles very much. I wondered if you know that Rhodium has fallen from around $10,000 to about $1,000. I can not find out how to invest in Rhodium. Kitco has a high premium on it which I feel is unfair. Do you follow Rhodium?

Thanks Frank

December 24, 2008 | Unregistered CommenterFrank Greenwood

There's actually a website which does the hard work and mines all the auction information from ebay. Even better they break it up by different coins, bars, etc.

(Silver)

(Gold)

To be clear - I'm not affiliated with this site. I simply use it as a tool to gauge the real market price of silver and gold.

December 24, 2008 | Unregistered CommenterJH

see? christmas rally! happens almost every year ! and at the same time ! hah yes and lets go back to what i mentioned....it is better to buy a gold or silver stock with a HIGH MARKET CAP ! WHY? BECAUSE WITH A HIGH MARKET CAP THEY ARE MORE LIKELY TO GET LOANS FROM BANKS TO FUND THEIR PROJECTS THATS WHY! right degraaf? oh i forgot he already told you that ! yeah right! hahaha ALSO IT IS BETTER TO BUY A GOLD OR SILVER STOCK THAT TRADES ON THE USA AS WELL AS THE CANADIAN EXCHANGE ! WANT EXAMPLES? OK LOOK AT TODAYS PROOF HRG.TO DOWN TODAY IT DOES NOT TRADE ON A MAJOR USA EXCHANGE EPL.V NO CHANGE IN VALUE TODAY THIS ALSO TRADES ONLY IN CANADA MSV.TO DOWN 14% TODAY ALL THESE STOCKS TRADE ONLY IN CANADA OR ON THE USA PINKSHEETS-YUCK! PINKSHEETS USUALLY SUCK STAY AWAY FROM THEM AS WELL AS OVER THE COUNTER BULLETIN BOARD STOCKS SUCH AS SLGLF.OB WHICH WAS ALSO DOWN TODAY ..ALL THESE STOCKS WERE MENTIONED ON THESE SITES now lets look at THE stocks that are mentioned on these sites that are on the canadian as WELL AS MAJOR USA EXCHANGES AEM UP 1.66% AUY UP 2.51% FRG UP 11.23%!GOLD UP 1.83% KGC UP 5.29% EXK UP 6.59% HL UP 6.44% PAAS UP 6.82% SLW UP 8.69% SSRI UP 9.12%

December 26, 2008 | Unregistered Commenterwil

XXX

December 26, 2008 | Unregistered Commenterwil

The recent premium on eBay probably has more to do with the recent live.com 20-25% cash rebate on "Buy it now" purchases. Vendors and buyers both knew they could receive a 20-25% cash rebate from Microsoft if they used live.com to search for American Eagles or some other item, then click the link to eBay. For a while, it was possible to buy Eagles for melt value after the rebate, but the prices quickly rose to take the rebate into consideration.

December 27, 2008 | Unregistered CommenterJeff

OH SO YOU WANNNA WAIT FOR SIGNAL EH ? YOU WANNA SMART SOUNDING TALK LIKE DEGRAAF AND YOU WANNA SIGNALS FROM SILVER PRICES AND GOLD PRICES TO BUY CDE AND PAAS EH??? HAHAHAHAHA LOOK AT DA MARKET MOW UPUPUP AND YOU WANNA WAIT FOR SIGNAL HAHAHAHAHAAH GO AHEAD AND WAIT THEN HAHAHA ....HOW MANY ALIAS YOU GOT DEGRAAF? HUH ?? GO TALK SOME MORE TRYING TO SOUND INTELLIGENT GARBAGE... I TALK LIKE THIS TO MAKE POINT ....YOU SEE I DONT TRY TO SOUND SO INTELLIGENT FULL OF BS LIKE YOU BUT LOOK LOOK LOOK AT THE MARKET...IVE MADE GREAT CALLS WITH WHAT IVE READ OF BUFFETT ---WHAT YOU DO --NOTHIN -EXCEPT TRYING TO SOUND SMART... AND GOLD SILVER PRICES-YOU-WHAT KINDA SIGNAL YOU WAITING FOR ??? CAN YA NOT SEE THE MARKET MAN????? WIL

December 29, 2008 | Unregistered Commenterwil

HUH? Hey Wil you better adjust your Ritalin dose I'm thinking it's having the opposite effect on you...I'm bettin' this Degraff dude will agree wit dat assessment!

December 29, 2008 | Unregistered Commenterscott michaels

HUH SCOTT OH I MEAN DEGRAAF WHAT YOU TALKING ABOUT YOU GOT ANYTHING INTELLIGENT TO SAY ? i didnt think so goof

December 29, 2008 | Unregistered Commenterwil

LOL

December 29, 2008 | Unregistered Commenterscott michaels

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