Perspectives

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  • Scott Schamber

Gold, Silver Premiums and Availability Finding Pre-Covid Levels Again

I remember the 2nd week of March 2020, like it was yesterday: on March 9th, the Dow proceeded to drop almost 8%. Later that week, another 10% setback, and finally, on March 16th, it lost 13%. Gold followed suit, dropping from roughly $1700/oz to $1480 in just over a week’s time. What followed was a year-and-a-half of higher premiums and often spotty availability for gold, silver, and other metals, but we are finally starting to see a light at the end of the tunnel.


A look back at what happened…


Looking back at those weeks in March, while it was incredible to see what happened so quickly to the financial markets, gold and silver quickly followed suit. Initially, we had a few clients contacting us to sell metals, and gold, in particular. It was certainly surprising, as normally gold is seen as a safe haven. Why on earth would you sell your gold now that the price fell over $200/oz.?


Whether it was to cover losses they were experiencing in other parts of their investments, or over concerns of physical demand as Covid started sweeping across the West, in any case, investors made a “dash for cash” rushing away from gold for a brief moment in time.


For us, that literally lasted 2-3 days. Suddenly, the sales requests stopped, and the phone rang off the hook, with our existing and new clients alike looking for ways to get in as fast as possible. “Safe haven” took on a new meaning again as if there was an immediate realization that the trouble would only continue.


Meanwhile, refineries and mints were shutting down to try and stop the pandemic, and it didn’t take long for demand to shoot up, supply to slow down, and the premiums on gold and silver above spot price to take off.


By August 2020, gold spot price was well over $2000/oz and silver was over $29/oz. As 2020 became 2021, two- week delivery times became four, one-month delivery times became three, as the supply chain issues continued to mount. Eventually, we heard our American friends were paying premiums as high as 15% over spot price on 1oz gold American Eagles and over $7/oz over spot on silver coins.


…and how we are turning back the clock


The good news is that in the past few months, we’ve started to see some signs of normalization of the premiums and availability of most formats of gold and silver, as well as some improvements on the platinum and palladium front as well.


It was a “quiet” summer for metals purchases, as demand slowed down. That meant our metals providers, refineries and mints were trying harder to sell metals, helping push prices down. Also, if you look at metal spot prices during the months of June – August, with the exception of a dip in early August, prices have been relatively stable.


All of this has translated to a number of the 1oz gold coin formats we work with being right back at pre-Covid prices, and delivery times are two weeks…if not even less! Gold bars have also been cheaper again than they had been for the first half of 2021, and 1oz and 100gr gold bars have been particularly popular for clients this summer.


And 1kg silver bars, at one point taking up to 3 months to delivery, are pricing out well now, and are also being delivered in 2 weeks. The premiums above spot on 1oz silver coins have pulled back nicely too, making that monster box of 500 Canadian Maple Leaf’s quite attractive again.


The question now is how long this may last. Traditionally, September sees metals pick up again after the “summer doldrums”, and it is yet to be seen if or how the Delta, Alpha, Beta, Kappa, Mu, or other variants will affect economic activity and the market as the US and Europe rolls into fall and winter.


So, while we had a “perfect storm” roll in over 2020 and 2021 that caught many investors unprepared, this time around there are clear signs of “danger ahead”, making this a great time to buy again.


If you consider the amount of money our governments are pouring into the system and the growing lack of trust many have in their ability to get us over this current crisis we are in, I think we’ll have a busy fall with those trying to take advantage of the pricing and availability of metals.

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