Week Ending February 20, 2022
Gold is Up - Here's How and Why
Gold added to the belief that this current strength in the spot market price is not just a “fluke run” but a firm “leg up”. Spending tireless months battling against the $1,800.00 level of resistance, gold took up residence in a new neighborhood well above that key psychological level. Currently knocking on the door to a new street above $1,900.00 gold seems to have its sights set much higher. The largest internet precious metals dealers are still hovering around a 10% premium above spot for the physical metal. While this is down from the physical premium peak of 2021, it is still north off the normal which buyers once enjoyed in the 3 – 5% range. While some analysts claim that gold’s place in the spotlight is a result of the Global Unrest with Russia about to invade Ukraine, the United States and all its assets are at war stateside against inflation. Inflation is the primary catalyst when it comes to the gold price. Gold is priced in dollars around the globe. Weakening dollars simply translate into a stronger gold price. It is important to note that gold does not go up or down. The dollar goes up or down resulting in gold costing more or less.
What's Going On With Silver and American Eagles
Silver languishes in the $23’s on the spot board while it is a very different story on the physical side. While bars and rounds carry the least premiums, a roll of 2022 Silver American Eagles carries a whopping 49% premium above spot at the major internet dealers. Know this about the price of Silver Eagles. The United States Mint has not increased the price to its Authorized Purchasers per ounce of Silver American Eagles. The retail level dealer that many Americans utilize either at a local storefront or on the phone for 10-day delivery is not making the profit between the Mint and the consumer. It is at the wholesale level that buys directly from the Mint. As long as they are able to add $8 - $10 to the price they pay the mint, they will continue to do so. When individual investors realize that the most they can realize on that $36 silver eagle is $26 or $27 from a reputable dealer, and $22 to $23 from a pawn shop, demand will drop and the crazy profits will contract to a more palatable level.
Numismatics Are Less Dependent on Market Manipulations
Numismatic Gold and Silver offer tremendous advantages when premiums on bullion inflate to the points that we see today. The premium on rare silver and gold is calculated differently but the same as with bullion. It is easy to see the premium between the spot price and the buy price with bullion. At the end of the day, the difference between what you can buy it for, and what you can sell it for is the actual premium for both bullion and numismatics. In more and more cases, you are much better off selecting a numismatic product that has three influences on its price. The intrinsic value of the metal, and the rarity and condition of the specimen. This type of purchase is less dependent on market manipulations and offers an alternative to unreasonably high premiums.