Historic Precious Metals Anomaly
Something extreme is happening in precious metals.
It’s not the slow build of a potential bull market though.
Although, every investor should be paying close attention to that.
Instead, the extreme is in the market for physical gold and silver.
Specifically, U.S. Silver Eagle coins.
Silver Eagles are the official silver bullion coins minted by the U.S. Mint.
They’re one of the most widely recognized standards in silver bullion.
The U.S Mint cranks out tens of millions of these every year.
They’re normally quite easy to buy and sell online or at your local coin dealer.
But something has changed recently that could be a big sign of things to come for precious metals.
It’s all about the cost of these coins.
You see, when you buy silver bullion, you pay a premium above the market price.
The mint has physically mint coins which come with a cost. Coin dealers have to make some money too to keep the lights on.
So in a normal market there’s a natural premium over the spot price of silver.
The amount of premium over the spot price a buyer would pay depends on the dealer, shipping, size of purchase, and other basic factors like those.
For years the premium on Silver Eagles was pretty standard. It ranged between $3 and $4 each in legitimate coin and bullion dealers.
That means that a Silver Eagle today would cost about $28 with the current spot price of silver at $24 per ounce.
That’s in a normal market.
The current market is not a normal one.
We checked out two of the largest and most reputable precious metals dealers in the world and noticed the premium on the U.S. Silver Eagle coins have soared.
Kitco, for example, is offering a U.S. Silver Eagle coin for $40.
That’s $16 over the spot price – a premium of 60%.
This is an unheard of premium.
But it’s not just Kitco.
Every major bullion dealer has similar mark-ups and the cost of the U.S. Silver Eagle with $24 worth of silver is between $39 and $41.
This is unprecedented.
But it’s also probably a signal too.
After all, ask yourself, why are premiums so high?
The answer must be demand.
The price is set by what buyers are willing to pay. And they’re willing to pay $40 for $24 worth of silver.
Clearly, there is some huge demand for silver in the current environment.
There’s plenty of reasons for investors to turn to silver. Soaring government deficits, recession, and inflation, to name just a few.
But here’s why it’s important.
Precious metals have been in a decade of dullness.
Gold prices hit a record high in 2012 around $2100 per ounce. Today, gold is $1900 an ounce.
Silver is a similar pattern. It traded around $50 in 2012. Today silver’s still 50% below those highs.
Gold and silver have been out of favor for a long time. Changing sentiment could get them rocking again.
These high premiums are a signal that sentiment has changed and precious metals could be a hot spot in 2023.
