It’s very important to find a dealer you can trust. I’m often asked for advice on where to buy silver and how to find a silver dealer. Here’s the best advice I have:
Most silver dealers offer a standard rate above the spot price. While the majority go by a percentage (for example spot price +5%), There are some who charge a fixed dollar amount over spot price per ounce (such as 45 cents over spot, per ounce). When looking for a local dealer to buy from, it’s recommended that you ask what their pricing model is for bullion. Most reputable dealers will answer with a natural response like “5% premiums” or “spot plus 50 cents an ounce.”
Of course, not all reputable dealers will have such a simple cut-and-dry rule like the ones mentioned above. Many have a volume scale where the prices vary based on the quantity purchased. For example, they might offer something like…
- 1-9 ounces = spot + $1.50
- 10-19 ounces = spot + $1.25
- 20-49 ounces = spot + $1.00
- 50-100 ounces = spot + $0.75
- 100+ ounces = spot + $0.65
This is very common, and also a sign of a reputable seller.
So far I’ve been talking mostly about bullion sales. For the rare silver coins or those with higher numismatic (or collectors) value, dealers will typically sell at a more flat rate, since several other factors tie into the pricing, such as mintage, condition, scarcity and demand. For the popular 1 ounce coins (Silver Eagles, Maple Leafs, Libertads, etc.) you will likely never find these selling close to spot. These are acquired directly from mints with premiums of several dollars above the silver price. Dealers will naturally pass these premiums onto their customers as well. You’ll see individual coins or sets going for super high premiums. There is always a legitimate reason.
However, you can expect the more common forms of bullion (generic rounds, silver bars or circulated junk silver) to be close to the spot price of silver. For these, a pricing standard should be fairly consistent.
The most important thing is that a dealer has a pricing system in place for their buyers to easily understand and rely on each time they come in to buy. The best dealers usually have this posted somewhere, and my favorite one actually has live prices displayed on a flat screen TV behind the counter, calculated from the current silver spot price. Dealers like these are more consistent (and arguably more honest) and you can rely on them for predictable bullion sales.
If you ask a dealer what their bullion pricing model is and they don’t reveal specific pricing model, then you might be working with a “haggler” or a “negotiator.” Dealing with these sellers can be like talking to a car salesman. There are some good, honest shop owners out there that sell this way (believing that whatever someone is willing to pay is a fair price, which is somewhat true), but the majority of the ones I’ve come across would certainly charge more to the gullible or the non-savvy collectors. A stupidity tax, if you will.
Why Silver Dealers are Important
A dealer who negotiates has the upper hand when they know more than the buyer. These are typically less helpful for beginners or the occasional buyer who needs knowledge as well as a decent price for silver. These dealers tend to be less helpful in educating the buyer objectively, and unfortunately, many of them prey on gullibility of the buyer. Some are even downright liars. This is why I generally advise people to steer clear of “hagglers” until they get comfortable and familiar with the silver market and buying bullion. I’ve heard too many stories of ridiculous price gouging, where the buyers had way too much faith in the guy behind the counter. Not-so-savvy buyers will often pay higher premiums than those who can negotiate well and know their numbers.
For beginner or intermediate bullion collectors, finding a consistent dealer who holds to a fixed pricing standard is highly recommended. When a dealer has nothing to hide, or no reason to talk you into something, they are more likely to be open and honest about your questions, and even teach you helpful things along the way. Not to mention, you’ll likely get much better deals from these guys than most of the small time pawn and hobby shop pirates.
If the dealer is nice, honest and generally helpful, then I would recommend trying to develop a good working relationship with them. Introduce yourself. Ask their name. Get their business card. Talk to them. Ask them questions. Ask for their advice. Tell them exactly what you’re looking for and what your plan is. Let them know your limits. One day, don’t be surprised when they call you to give you first dibs on a new stockpile, or hold onto things for you, or even proactively go out and get what you need from a local coin show. If you buy locally, a good dealer can be worth their weight in gold. Even if you buy silver online, you might need to have a good local dealer to one day sell to.
One word of caution: Running a coin shop is a tough business, and these people work hard. Respect them, and understand that they are trying to operate a business and put food on the table. It is 100% reasonable for them to charge a premium over the spot price of silver, and earn several dollars on a transaction. I’ve known people who they themselves try to haggle the poor shop owners out of their livelihoods and try to nickel and dime every dealer. I see this from time to time, and I think it’s counterproductive to good seller/buyer relationships.