Over the years, I've enjoyed occasional buying physical Gold and Silver.

Generally, during times of social and market duress, precious metal pricing goes up when stock markets go down.

But with this COVID-19 thing, something has happened that I have never seen before, at least in the past 10 years or so. Previous metals have dropped quite substantially.

For example, silver was just a couple of weeks ago in the $18 per ounce range. Now, it is in the range of about $12.50/oz. You'd think precious metals would be higher than before, given the market calamity. What's the reason for this? That's my first question.

My second question is - the actual price you pay for physical Gold and Silver has pretty much stayed the same. I can buy 99.99% pure 1 oz Silver Eagles for about $22.50 per coin. This is about the same as what they were selling for when Silver was at $18.00 per ounce! The companies selling these are stating demand is very heavy, and many have sold out of supplies. Given that demand, I guess I can understand why they are still charging high prices - they are profiting off the situation.

So - if demand is that heavy - why is the spot price per ounce so low?

I would love to buy more physical silver for close to $12.50 per ounce, plus a reasonable markup - but the current markups of about $10/oz are crazy, so I have put off buying more.

What's going on? I have never seen such a wide gap between spot price and actual cost of physical silver before.

I have the same question on Silver.
I have a bunch of it and also some Silver ETF (SLV) and thought this "crisis" would have increased its value?

In simplest terms, the precious metals are a hedge against inflation, not against the value of the dollar (many other factors are include; supply and demand being a major factor).

When the value of the dollar decreases, demand is curtailed... when people want dollars in pocket and sell their metals, supply increases... What we see here is a double whammy:

The value of the dollar is decreasing and people want dollars in pocket.

Now the trick is finding someone with stock to sell. My theory on this is, since prices have tanked and dealers bought at $17/oz, they don't want to sell what they have and take the heavy loss.

What they will do is take orders today to sell at $12.90 then try to procure over the next three or four days at $12/oz thereby realizing some ROI on their in stock quantities.

I also am looking for answers.

I am wanting to buy gold when it reaches my desired threshold, but find it is already hard or impossible to find in stock at my usual vendors.

The price of precious metals continues to tank, availability is going down, and sales prices remain the same.

What is happening?

H&K-Guy

Here are my thoughts. I think why silver is not available for sale is not a supply issue. Stores are sitting on stockpiles but don't want to sell it at a loss now that the spot price has dropped. So they are just not selling anything. Many stores are trying to recoup the potential loss by jacking up their premium.

On the bigger picture, as you noted the current situation of PM prices falling in the middle of a world-wide financial and health crisis is the exact opposite of what all the pro-PM people say should be happening. PMs should be going "to the moon" as the financial markets collapse and we lose faith in government. But the silver fans will never give up their notion that it is a hedge against the worthless paper money. They keep touting lines like "back the truck up because PMs are on sale." Of course ignoring all the lost value of their current horde as the price drops. The other line you always hear is that the price drop is because paper PM traders are some cabal manipulating the price and the price of physical coin is the true price. Which is irrelevant since all dealers of physical PMs use the spot price to determine what to sell for.

quote:

Originally posted by Fundman:
Here are my thoughts. I think why silver is not available for sale is not a supply issue.
Stores are sitting on stockpiles but don't want to sell it at a loss now that the spot price has dropped.
So they are just not selling anything.

I agree, I think they are just taking there stash off the market until everything settles down and goes back UP.

This is a deflationary event. Precious metals go up when there is inflation.

This panic has a different cause than the one the soothsayers are always talking about. It's not caused by banks, Wall Street, etc., it's people worried about their very existence (valid or not). That's why toilet paper, canned goods and ammunition are the currency of the day.
The closest thing I can think of in my lifetime was in the early 60's when we were doing practice for nuclear destruction, another perceived existential threat. Duck and cover and eventual fallout problems. That never went beyond theoretical.
You can't eat or wipe your behind with precious metals.
One thing this should show people is that all those supposed experts preaching (and charging for their expert advice) didn't actually know more than anyone else when it really matters.
We're all learning as we go right now. The Standard investment advice is pure speculation and very dependent on a lot of unknown variables.
Invest accordingly.

quote:

But with this COVID-19 thing, something has happened that I have never seen before, at least in the past 10 years or so. Previous metals have dropped quite substantially.

Not within the past 10 years, but gold did drop along with everything else, initially, in the 2008 craziness:

link
I'm not saying this is 2008. What I'm saying is that folks forget that metals are not cash, and sometimes, cash is what some people are looking to hold (or need to have, to cover margin calls) in preference to anything else.

In early Fall 2008, when market madness was in full swing, folks dumped their gold to raise cash and October 2008 gold prices swung from low 900s to the mid 600s. Took a while for the traditional view to re-establish and then in the end of the year, the gold price got back up near 900.

TL: DR - Gold may be a store of value, but, being priced by the market, it is subject to emotional overselling as well as the need for large owners of gold to sell at times of market stress to raise cash.

quote:

Originally posted by BBMW:
This is a deflationary event. Precious metals go up when there is inflation.

In general, this is true.

And we are in a deflationary tailspin. Businesses stopped, whole industries dragged under the bus. Zero demand for products and services such as airlines, hotels, restaurant meals, etc. Other than toilet paper and food, people are not spending money. And once the virus panic stops, prices will drop to bring back consumers.

Generally speaking,

When you're looking at buying physical gold and silver, you're paying a retail price for an item. That price is typically going to be higher than what that same precious metal trades at as a commodity, in vastly different quantities. The retail price is always going to be higher than the commodity price, and the vendor selling it to you, retail, is more or less making its living off the spread.

...buying silver and gold in this manner is typically not a good way to invest.

Global manufacturing has fallen drastically. Therefore, industrial demand for silver has also tanked, ergo the drop in price.

In the case of Silver, which is viewed in the market less as a precious metal and more as an industrial commodity, the prospect of a recession means less demand for silver, hence the selling.

With the extreme volatility and rapid downside velocity in the market, there have been huge margin calls throughout the industry. When that happens, institutions sell whatever they can to raise cash to cover the calls. Gold and silver are getting caught up in that.

Market fundamentals always win out in the end, and with the printing presses about to go into overdrive, I wouldn't be surprised to see gold hit new highs in the next year or two. But the markets need to stabilize first.

Talking to the bullion coin traders in Redmond WA, and here in Melbourne Australia, the thoughts are the same.

People want the cash.

Bullion was at a decent high on the pandemic announcements, and now with the US-AUD exchange rate, bullion is coming in for cash.

When discussing stocks and ETF's, yes, values are dropping and being dislocated.

It is important to try and remain invested in these volatile times.

Stocks go up and down.

I'm watching and investing when, and as often as I can. This hasn't reached bottom quite yet, trying to figure out the timing is up to you.

Stay calm is my opinion.

I read somewhere that I need to diversify and buy some precious metals, so I bought a 2011 in 10mm.

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Originally posted by .38supersig:
I read somewhere that I need to diversify and buy some precious metals, so I bought a 2011 in 10mm.

The 9MM ammo I bought at $0.16 per round last year is my best performing asset right now.

Silver is used in industrial applications, although not as much as used to be.


Plus, with President Trump handling the US side of this manufactured Corona Virus Crisis, look how well the USD is doing. .93 vs the Euro for one.

A lot of confidence in the USD or even better, in President Trump, right now.

Have been watching these prices fall also. In 2011 I sold approx. $3500 worth silver at that time. Glad I did. It was the highest on record. Bought four guns and ammo with it! I still am sitting on more just in case.