Bullion Premium, Delivery Near Normal|
June 18, 2013
Right after the prices of gold and silver nosedived in mid April, demand for bullion-priced physical coins and bars soared. Through the end of May, my company’s sales of ounces of physical gold and silver exceeded our units sold in the first five months of 2011, the year of this company’s highest dollar value of sales.
In April and May, gold demand in China and India exceeded worldwide supplies from mining output and recycled scrap. Some central banks also purchased gold during those months. Investors around the globe often stood in long lines to place orders for gold and silver bullion products that required longer and long delays in product delivery. It seems pretty obvious that, since mid April, other central banks were selling or leasing physical gold and silver on the markets to help suppress prices.
In some instances, such as with U.S. silver American Eagles and Canadian silver Maple Leaves, the delays not only became long, but delivery times because uncertain. In these instances, wholesalers stopped taking orders on such products, which resulted in retailers following suit.
Worldwide demand is still strong, though not at the frenzied pace of late April and early May. However, there is a series of photographs of a gold selling store in China last week that had approximately 10,000 people waiting in line to buy gold. So, just because demand isn’t so frenzied in the United States now does not mean that all is normal again.
It is now possible to purchase almost any of the popular bullion-priced gold coins and bars, though intermittent delivery delays for such coins as South African Krugerrands, Chinese Pandas, British sovereigns, Austrian 100 coronas as well as the U.S. American Arts gold medallions occur.
For such coins as the American Eagle and Buffalo one-ounce coins, the premiums are almost all the way back down to where they were in early April. At premiums of about $40-$85 per ounce above spot price, you should be able to have your choice of a wide selection of the large popular gold coins.
In smaller gold coins, demand is still making it difficult to find reasonable premiums. For a time, the U.S. Mint suspended sales of the tenth-ounce gold American Eagles. Though the Mint is selling them again, supply still has not caught up with demand. This supply problem has also resulted in higher than normal premiums for the quarter-ounce gold American Eagle, British sovereign, and French and Swiss 20 francs.
However, if you are still looking to acquire physical gold, you can now usually get delivery within two weeks after payment and pay close to the premiums at which physical gold sold when the spot prices were a few hundred dollars higher.
As for bullion-priced silver products, most products are available for delivery within two weeks of payment. The slowest deliveries right now are for the 100-ounce ingots and the Canadian silver Maple Leaves. But, even there, you should be able to get delivery within three to four weeks.
Because demand relative to supply is still so lopsided, for instance, you still see dealers offering to purchase U.S. 90 percent silver coins sometimes at 10 percent above spot price. Expect to easily pay $2-$4 above spot price per ounce for the most popular forms of physical silver coins and bars. As one interesting divergence, however, it is now possible to purchase one-ounce silver rounds at a lower cost per ounce than you would pay for the 100-ounce ingots. Look for deals where you can acquire them for less than $2 per ounce above spot. Most of the time in the past I have advocated acquiring U.S. 90 percent silver coins because of its low premium and great divisibility (each dime contains about 1/14th of an ounce of silver). However, with large quantities of U.S. 90 percent silver coin costing at least $3 per ounce over spot, I would now recommend the one-ounce silver rounds as the better value.
Common-date circulated Morgan and Peace silver dollars have finally dropped a few dollars to their lowest levels in many months. Until the past week or so, their prices had moved down only slightly in response to lower spot prices. They are still trading at too high premiums for me to recommend their purchase. If you have interest in them, I suggest waiting another month. Even if the silver price rises before then, I anticipate that these coins have more downside than upside for the time being.
The magic questions that everyone keeps asking are if gold and silver prices have peaked and, if not, when are they going to go back up. In my judgment, the global financial problems that led to rising precious metals prices are now even worse than in years past. Therefore, I expect significant price increases before year end (especially when you consider record demand levels in China). Gold may start to move first, with silver perhaps stagnating until September or so.
Is it possible that prices could drop slightly from current levels before they head back up? Yes it could happen. However, compared to how high I expect to see prices rise in the next couple of years, I think anyone buying today will be satisfied that they got in near the bottom.
As I have written before, it is also important that you do not speculate with borrowed money, or with money you cannot afford to lose, and that you take personal control of what you buy.
Patrick A. Heller is the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He owns Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Other commentaries are available at Coin Week (www.coinweek.com and www.coininfo.com). He also writes a bi-monthly column on collectibles for “The Greater Lansing Business Monthly.” His radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing.
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