Precious Metal Trading 2

Week 25. Precious Metal Trading 2

Aiyah, this week I give early articles cause next week I won’t know when I‘ll be free. In Precious Metal there are 2 costs. Buying Cost and Replacement Cost.

Buying Cost is the cost of goods when you brought the good for initial sale.

Replacement Cost is the cost to replace the same goods you have sold. Assume you will be able to replace your goods almost immediately after you have sold it.

Let describe all the possible scenarios and your course of action

Selling Price	Action	Scenario
Below buying cost and below replacement Cost.	Don’t Sell Note (b)	Sharp downfall in prices. May 2011, price fall from USD49/oz to USD32/oz within 1 week.
Below Buying Cost and Above Replacement Cost	Sell	You can still make $$ during market down trend
Above Buying Cost and Below Replacement Cost	Sell	Normal market stagnant, market goes side-ways
Above Buying Cost and Above Replacement Cost	Sell if (a) Else don’t Sell	Market price moves up too quickly that you unable to replace your product immediately after you have sold it.

(a)    If you have a loan such as credit card cash advance, personal loan to repay, then just sell. Paper profit is ensured but you end up with less silver.

(b)   Please also ensure that you have some cut-losses measure in place.

However in most scenarios, immediate goods replacement is not possible. Customers’ purchases are normally spread out over a period of time. During the time in between you sell and replace, you may loses some money due to price fluctuation. In order to do 500 oz purchases, at least a sale of 400+ oz is required. There must be some way to minimize your losses. Thus, there will be sometimes where you need to buy some stock in advance to sell in future. The question is when will you buy?

Nevertheless, if you already established yourself in the market, when lot of people trusted you then you can earn commission. Just do only pre-order. Every 100 oz order, you take a commission of RM100-RM1000/= depending on how greed you are and how desperate is your customer and most importantly how likely you going to get the deal.

If you are an investor, look at weekly chart. If you are a dealer like me, then look at daily chart

http://stockcharts.com/h-sc/ui?s=SLV    for silver

http://stockcharts.com/h-sc/ui?s=IAU    for gold

You can change it for daily chart and weekly chart.

RSI-14 weekly chart	Action
30 – 40	Take out all your cash and buy
41 – 50	Take out lot of cash and buy. Keep some spare depending on your needs
51 – 60	Buy if your stock is low, if you expect customer to buy when RSI=70.
61 – 70	Buy if customer is buying.
>70	Sell, clear your stock.

This is not a proven method but nevertheless you can give it a try-lah. Stick to your trading rule ok. Please bear in mind that these trading are only applicable to your spare metal only, you should have some metal as safe keeping with you all the time which you will never sell at any price at least until 

a)      You die

b)      2012-2015.

c)      When Precious Metal peaked

d)     When government is more responsible in their finances.

Just don’t know when all these will happen, if I knew I will have been rich. Have a good week!