Monday, November 03, 2008

Interesting events on eBay...

Microsoft Live Search has teamed up with eBay to offer cash back - currently at 25% of purchase price - for people using Live Search to buy things on eBay.

The 25% maxes out at $200 per purchase, meaning that you get optimal payback by buying an $800 item. This discount only applies to buy-it-now items, not auction items.

Gold is currently running at around $750 / ounce, and one-ounce gold coins have long been popular on eBay. I have occasionally looked into buying gold coins there, and they usually trade at just a very small premium over melt value - not more than a few percent.

Until recently.

An economy seems to have sprung up on eBay of people selling gold coins (and other ~$800 items) to each other at a substantial premium. Right now, the cheapest 1-ounce gold coins are selling via buy-it-now for around $910, and most non-interesting one-ounce gold coins seem to be priced around $950, about $200 above melt value. This premium represents the entire cash-back that a buyer will get via the Live Search program.

So, the law of supply and demand is still functioning. By subsidizing purchases, Microsoft has just added $200 or 33% to the cost of every purchase on eBay.

And on a side note, if I were in the gold business, I'd be dumping my entire inventory on eBay right now, since I could get 25% above regular market value for it.