Q & A on Precious Metals During the Coronavirus Crisis

March 26th, 2020 Comments

The past few weeks have brought unprecedented volatility to the bullion market.

Q & A

In addition to wild swings in spot prices, Money Metals has experienced a massive surge in demand and extreme strain on supply, leading to a spike in premiums (on both bids and asks).

These are stressful times for everyone, to be sure. But precious metals investors can rest assured physical bullion has always and will continue to, represent real value during turbulent times.

Case in point, while virtually all other assets have crashed, gold has stayed firm near its recent highs.

Many longtime gold and silver holders – as well as potential new buyers seeking safe haven – have been reaching out to us with questions and concerns. Here we will answer a few of the most pressing ones for the benefit of a larger audience...

Will precious metals dealers be able to operate during this national emergency and remain in business throughout it?

Yes, but… sadly, not all dealers will make it through the crisis. Local coin shops could be ordered to shut down for weeks or perhaps even months in some states.

Meanwhile, national dealers that have failed to properly hedge against extreme market volatility and/or secure enough inventory to fulfill orders could be getting into trouble right now.

At least one major U.S. dealer has stopped taking orders altogether and many others have been outright refusing to accept orders under $300 in response to their operational challenges.

To be fair, this is a challenging environment in which to operate, but it is especially critical during these times that you do your homework on any dealer before placing an order. Check out their reputation on the internet and with the Better Business Bureau.

Make sure a dealer has customer service available online and by phone. Also, make sure their order delivery timeframe is reasonable (delays of up to a few weeks on many popular bullion products should not necessarily be cause for alarm until market conditions normalize).

Money Metals Exchange has built an industry-leading reputation for customer service and satisfaction. We have made necessary adjustments to our business during this coronavirus crisis, including beefing up our customer support and order fulfillment infrastructure to handle surging order volumes (more than four-fold!) Our company is well-positioned to emerge from this economic turmoil stronger than ever.

How can I buy physical bullion without having to pay an elevated premium over spot prices?

All gold and silver bullion products, except in some cases very large bars, have seen premiums spike due to rising demand and insufficient production from mints.

To reduce the premium you pay over spot, normally you would opt for bars or rounds over American Silver Eagles. However, the U.S. Mint temporarily suspended production on these popular coins, and private mints have also sold out of bars and rounds, resulting in shortages across the board.

To obtain physical metal at the absolute lowest cost currently available, consider Vault Silver and Vault Gold.

Through our new Vault Metals storage program, you can obtain ounces of .999+ pure silver or gold stored securely in your name. Premiums start at just $1/oz for silver and $5/tenth oz ($50/oz) for gold. (For now, we have an order minimum size of 200 silver ounces or two gold ounces.)

What if I need to sell my coins, bars, or rounds?

The bullion market remains liquid. Precious metals dealers are now desperate to acquire inventory and will be happier than ever to buy from customers willing to sell.

In recent days, Money Metals has repeatedly raised its buyback prices versus spot prices as a reflection of scarcity-driven premiums on coins, bars, and rounds. So please go to any product page and sell us your items if you wish – or call 1-800-800-1865.

With all assets subject to being liquidated during panic selling sprees, why should we expect precious metals to perform any better than the stock market at this point?

Let’s take a step back and review where stocks and metals stood before the coronavirus crisis got us to this point.

In February, the S&P 500 was trading at a record high in of one of the longest bull markets on record.

Valuations had gotten extremely stretched and stocks were priced for perfection. When the economy suddenly ground to a halt, stocks were bound to crash.

Gold and silver, on the other hand, haven’t traded at record highs since 2011. Silver in particular was already extremely depressed in price as the stock market began to nose-dive.

When the indiscriminate forced selling subsides, undervalued assets with strong fundamentals will begin to diverge from the broad market and outperform. We saw a bit of that on Monday, with gold and silver each up about 5% on a day when the S&P 500 dipped 3%.

Will the Federal Reserve be able to rescue the economy?

No amount of money printing can rescue an economy that remains shuttered due to an exogenous threat outside of the financial system. But that won’t stop the central bankers from trying!

Helicopter Money

The real unknown is what happens when the economy finally does restart with trillions of newly printed dollars having just been pumped into the financial system.

We have never seen a Quantitative Easing this fast and this furious attempted before.

The potential exists for a massive demand surge, with too many dollars chasing too few goods. In other words, the recent deflation scare could reverse violently and leave the economy with a massive inflation problem.

But until we “flatten the curve” of COVID-19 infections and get the world working, traveling, and consuming again, the inflation created by the Fed will stay mostly bottled up in government and now also corporate bond markets.

Precious metals can be expected to serve as a leading indicator of future inflation. Gold and silver prices can begin rising well ahead of a recovery in the real economy.