Falling Bullion Premiums Present Favorable Buying Opportunities
Bullion premiums drifted lower last week in response to slightly reduced buying demand and a few more investors selling.
Whether this continues will likely depend on stock prices which have rallied relentlessly since March. Many U.S. investors still assume the equity markets are a good indicator for where the economy is headed. They see the rally as evidence that a V-shaped economic recovery lies just ahead.
Other equity investors simply aren’t worried about nosebleed valuations or lousy fundamentals. They just know the Federal Reserve has their back.
Either way investors are less panicked than they were a month or two ago, and demand for physical gold and silver has eased a bit.
This reduction in fear coupled with higher gold and silver prices prompted a few more people to sell bullion back into the secondary market. Private mints and refiners are also gradually adding capacity. The supply outlook is better today than it has been in months.
Premiums fell on many silver rounds and bars, as well as 90% silver coins. It is now possible to buy these products between $2 to $3/oz over the spot price at Money Metals (but not necessarily elsewhere). This is better than the $4 to $5/oz premiums seen in recent weeks, though not as low as the sub-$1 premiums seen back in February.
Silver American Eagles are a bit of an exception, particularly for the 2020 date coins. Premiums for these popular coins remain high as the U.S. Mint still struggles to keep up with demand.
Bullion buying may have weakened from the frenetic levels seen in recent weeks, but it remains at least double its levels from January and February.
Meanwhile, many of Money Metals’ competitors continue to struggle mightily in sourcing items for inventory or shipping promptly – a frustrating situation that continues to drive investors to Money Metals Exchange as their new dealer.
Vault Gold, Vault Silver, and Vault Platinum remain the lowest cost options for investors who don’t mind storing with Money Metals Depository. It is also possible to make very large purchases in both of these items.
Where premiums head from here will depend heavily on what investors see in the news. If the current social unrest escalates, or economic troubles such as unemployment start weighing heavily on investor sentiment, expect Americans to buy even more gold and guns.
Anyone who is planning to buy bullion and waiting for premiums to drop might want to grab the opportunity now in case prices soon zoom higher.