Silver Market & You

What is up with price of silver?! In the pas 3 years silver has gone from $4/ ounce to $20/ ounce. In the past month it has declined from $18/ ounce to $11/ ounce. Silver is a volatile commodity, or at least has been for recent years.  To understand all the complexities of the silver market is beyond my knowledge base. However, having a firm grasp of the fundamentals is a good idea for anyone dealing in, and hoping to profit from, silver products.

In the simplest terms, the way this relates to you as a jewelry seller and me as a wholesale jewelry supplier, two tactics:

 

  1. Buy low sell high! Sounds basic, but predicting the future trends are not as easy as looking at the historical data. If you stock up only 1-2 times a year, look at the historical data and read what the experts are saying about the future. Bad timing could put you out of business.

 

  1. Dollar cost average. This is an investment term that hedges risk. Basically, buy your wholesale silver jewelry on a regular basis – every 1-3 months or whatever, but make the frequency regular. This way the wholesale jewelry you buy at a high price will be evened out by lower costs on the jewelry later on in the year if prices go down.  Study the market each time you are ready to buy. If the price of silver has hit a low point for the past 6-12 months, its a good idea to stock up with more than usual.

Keep in mind that all this depends on an efficient market. Unless you are purchasing $100,000 of silver jewelry at a time or taking physical delivery, chances are your suppliers are not giving you a price for the finished jewelry that is based on the yesterday’s closing price. So how you go about your business of identifying and negotiating with your wholesle jewelry suppliers depends on the type of buyer you are.

 

  • If you are buying for a retail business the most important consideration is to purchase from a supplier who is savvy enough to buy his raw materials wisely, enabling his/ her to keep her prices down. If you notice your suppliers raise their prices the day after the world market price of silver sky-rockets they may be trying to exploit the situation. 

 

  • If you are a wholesale or large volume ($5000+ at a time) retailer, you have more influence. Number one, ALWAYS be informed! Check not just on the price of silver at the time, check the price at your last order and compare your prices for the finished jewelry. There should be a correlation. Also if buying from overseas be sure to check the appropriate exchange rate. This should help you determine the ballpark unit price (usually per gram) you should be paying.

Remember, in this crazy world economy ANYTHING can happen!

Nelson Bunker and William Herbert Hunt were the heirs of oil tycoon H.L. Hunt. The family was one of the richest in America at the time. In the early 1970’s the family decided to buy silver as a hedge against inflation, and amassed it in great quantity. In the fall of 1979, the Hunt Brothers, along with some wealthy Arabs formed a silver buying pool and bought up 200 million ounces- the equivalent of half the world’s deliverable supply. The price of silver had moved from $2 per ounce in 1973 to $5 per ounce in early 1979 and then rocketed as high as $54 in early 1980.

The officials at COMEX moved to check this cornering of the silver market by raisng margin requirements. The highly leveraged Hunt Borthers were unable to meet their margin calls, and were forced to sell. The price of silver fell dramatically; on March 27th 1980 the price fell 50% in one day, from $21.62 to $10.80. The Hunt Brothers were forced to declare bankruptcy. Bache Group, which handled of the trades for the brothers, was financially ruined. Click here for source

While you may not be planning on buyig 200 million ounces of silver, everything is relative. The point is be careful with your silver investments. Don’t assume your inventory will be worth tommorrow what it is worth today. It could be more or less. So my two recommendations, for businesses large and small: 1) Always hedge your bets  2) Don’t be afraid to retain inventory but once you reach a plateau for your physical goods, maintain it. Then stick to a marketing system that works for you so your gross sales over a 30-60 day period equals the value of your inventory at any given time. This works for me and the main point here is if the shit hits the fan you will be able to liquidate your stock in 30-60 days without having a fire sale.

 

Have a great day!