Lets say the spot price of silver is $20/ozt. You have 1 ozt that you bought for $20.
-if the spot price decreases to $10, you can’t sell it because you would take a loss.
-if the spot price increases to $30, you can’t sell it because you can only replace it at $30.
-if it stays at $20, you would take a loss selling it because of fees and costs.
Therefore, if silver price goes up, it becomes a new commodity that can never be purchased at the previous price again.If it goes down, it is a straight loss, and must be held in hopes of it going up again.
Why would you need to replace it? If your desire is to hold and sell for a profit, do so. Then only purchase more when the price goes down to where you think it makes sense to buy more and hold for future sale. This is exactly why people buy and sell stocks. You don’t buy XYZ Company stock at $10, then when it goes up to $500, go “Oh no! I can’t sell it or I’ll have to buy more at $500 a share!”. No, you sell it and pocket the $490 a share, then look for something else you can make money on.
If you’re buying it because you need it for some purpose, then you are consuming it and will need to purchase more at whatever the current price is. This is something completely different.
If you’re buying it because you mistakenly believe that the entire economy will completely collapse and only people who own Gold and Silver will be able to buy food and survive, then you’re a moron first, but secondly you’re not likely to sell when the price goes up.
Hell, lets throw gold into the mix. Currently, you can’t buy it at spot in any form, but the basic rules apply: if spot price goes down, you cant sell it, if it goes up you can’t sell it.
The difference is that there are only 2-5 or so precious metals. If you dump your silver for gold, your only other choices are copper, rhodium palladium, or platinum.
I don’t understand why you think you can’t sell it in either case.
If the price goes down and you need to sell it, you can do so and eat the loss.
If the price goes up and you want to cash you, there’s nothing stopping you from doing so.
The false premise here is that you NEED the gold and would have to buy more. If you’re just holding onto it, what do you actually need it for, and why would fluctuations in price make any difference at all to you?
If you want to make a profit then here’s where you’re flawed…
Buy at 20, sell at $30. Don’t ‘replace’. Or, use the money you made to buy more during the next ‘pullback’. Or, buy more at $30 and sell when it goes to $35 if there isn’t a pullback/correction.
Unless you are hunting werewolves the “replace” necessity does not seem compelling. If you have made money on flipping a commodity item with dynamic pricing what reason on earth is there to replace it at the one time price you paid? If you can buy more at ANY price with the expectation you can sell it for that + “x” and net a profit what does the replacement cost matter?
The premise comes from real estate. If the market is up on a home that is occupied by the seller, they can’t sell it because they have to buy a new home at the higher rate, and thus lose money vs keeping the original home.
If the seller is able to predict spot prices at a rate that covers cost, they only break even. Buyers, however, would buy and sell at spot.
Also, as Chimera hinted at. If you’re reasoning weren’t flawed the entire stock market would have fallen apart before it even became anywhere near as big as it is.
I’m really confused as to what the issue is here.
So
1)What is your endgame (ie make money, collect as much metal as possible, something else…)
2)Why must you buy more as soon as you sell it?
2b)If you have to replace what you sold for the same price that you sold it why not just sit on it?
I sort of get what you are saying, but you realize this is just some mental hangup, right?
Most people don’t need gold or silver. Plenty of people sell when things go down - and take the loss. If they didn’t, well the price wouldn’t go down :).
Usually PMs move relatively close to one another. For all practical purposes, only silver, gold, and platinum are highly liquid - palladium and other are pretty liquid if you don’t mind eBay. Nevertheless - usually if gold is “expensive” - so is silver - although the ratios may be different or whatever.
So many will just sell and sit on the sidelines - perhaps for years - waiting for gold or whatever to reach a new floor.
Very few people are making money TRADING in gold. It’s not something they are going to usually buy and sell many times a year. Transaction costs are too high for the casual investor. You are going to buy at 300 (the price I last bought regular bullion ) - resell at 1200 (for example) and then maybe buy when/if gold comes down again. I should have sold - blah blah blah, but you can’t predict when the top or bottom is.
Assuming I get out while it is still above $1000 - I will sit on the sidelines until it is back around $3-500. Many gold bugs think that will never happen. They may be right - and if so I will have to just be happy with my one time score. If it does - I’ll buy more when gold is considered boring.
I expect to maybe buy (bullion) gold 3 - 4 times in my life.
worst.comparison.ever. Flipping real estate the owner is living in has nothing at all to do with selling precious metals. And if you could guess where the market would be in the near (or far) future you’d be very, very rich. Honestly, if you knew that the price today was $20 and it would be $21 tomorrow, you might as well buy as much as you could afford and sell it the next day and keep doing that until you’re bumping elbows with Warren Buffet. The fact that people can’t do that is why the market exists. When I make money in the market it’s because someone else guessed wrong and lost it.
How about you just start over and ask the question you want answered.
Because buying and selling occurs at spot. If you can find someone selling at spot minus one and buying at spot plus one, you are losing money.
See above. Prices always revolve around spot.
The stock maket is based on illusiory deals based on a fabricated deception of “ownership.” The silver and gold markets, largely, are not.if i buy gold, i get gold.
If you bought a house lower and sold as the market peaked, yes you make money. You could buy a smaller home, rent, move to a cheaper market or buy a more expensive home using the proceeds as a down payment.
I would argue as real estate prices increased, so does rentals, and thus your argument is flawed. I’d like to see an example of real estate prices increasing as rentals decreased. In my area, they have been in lockstep with each other, maybe 10-30% difference.
Why does rent have to decrease for the seller to profit? If you make a profit on your house and put 60K in the bank, and rent a house with exactly the same rent as your mortgage, where is your loss?
He’s saying that you could spend less money not that rent and mortgages went in opposite directions. So, for example. During a sellers market you could sell your $250,000 house for $300,000 and get an apartment for $600 a month thus saving probably at least $1000 a month on what was your mortgage payment. Similarly, during a low housing market you could buy a house in California, wait for the market to swing back up and sell it then move to the midwest where houses are cheaper (gross generalizations, but I think it gets the point across).
It’s like trading in your 2010 Navigator for a 2013 Elantra. Vehicle prices have gone up, but if you get a smaller car, your monthly payment will still go down.
Or, to go with a better comparison, it would be like taking the 2010 Navigator that you purchased and had a $900 payment on and trading it in for a 2013 Honda Pilot that you lease for $400 a month.
Are you going to make any attempt at all to learn anything here? Or are you just content at showing everyone how ignorant you are about commodities and real estate?
Actually, the precious metal markets are mostly based on the same sense of ownership as stocks are. If you invest in a stock, you’ll get a piece of paper that says that you own so many shares of stock. If you invest in gold, you’ll get a piece of paper that says you own so many ounces of gold. You can, in principle, get actual lumps of metal delivered to you, but that’s not the way it usually works.
) - resell at 1200 (for example) and then maybe buy when/if gold comes down again. I should have sold - blah blah blah, but you can’t predict when the top or bottom is.