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Premiums return to normal

In the wake of the financial crisis of late 2008, premiums on all forms of physical gold and silver investment products skyrocketed as investors rushed to buy gold and silver at frenetic paces. At times the buying was so hectic that some standard products, such as 1-oz American Gold Eagle coins and junk silver coins, were not available. Deliveries of 100-oz silver bars and Silver Eagles, also standard products, were delayed weeks.

Heavy buying carried into 2009 and did not abate until April. Today, gold and silver investing is at a much more subdued level, and premiums on all standard products are back to pre-crisis levels. It is likely premiums will remain at normal levels through the summer, which is usually a slow time for the gold and silver markets.

Of course, another world crisis would send premiums skyrocketing again as the markets are now more geared for additional buyers to enter the market. Throughout the crisis, many investors looked into buying gold and silver but did not. Those potential buyers now know the products that they are most likely to buy and they know procedures. Another crisis would cause many of them to join the growing throng of precious metals investors. Still, short of a major negative development, it is likely the market can handle buying over the summer without significant increases in premiums.

Possible impetuses for future gold and silver buying include a further decline in stock prices, a continued weak housing market, and a growing awareness that the Obama administration’s stimulus programs and bailouts will result in price inflation and possibly a collapse of the dollar in the FOREX markets. And, concerns about the stability of our banking system still reside with many Americans.

There remain many good reasons for owning gold and silver, even buying more.

Casualties of the record buying were the fractional-ounce Gold Eagles, which the U.S. Mint ceased producing in 2008 as it dedicated all its presses to stamping 1-oz Gold Eagles and Silver Eagles. And, the Mint has yet to release any fractional-ounce Gold Eagles for 2009. Further, it has not sold any Platinum Eagles in 2009. However, the Royal Canadian Mint recently released 1-oz Platinum Maple Leafs.

Because the Mint is not selling either fractional-ounce Gold Eagles or Platinum Eagles, investors assume that none are being minted, but that may not be the case. By policy, the US Mint does not disclose what it is producing, nor does it reveal future production plans. When the Mint has coins for sale and immediate shipment, it then lets its distributors know. So, with the slowdown in sales of 1-oz Gold Eagles and Silver Eagles, the Mint may have some fractional-ounce Gold Eagles and Platinum Eagles for sale in the near future.

With the surge in buying, and with the Mint having dedicated all presses to turning out 1-oz Gold Eagles and Silver Eagles, the Mint enjoyed robust sales of both coins in 2008, selling 794,000 1-oz Gold Eagles and 19,583,500 Silver Eagles. Sales of 1-oz Gold Eagles in 2008 were the fifth best since the coins were introduced in 1986.

The financial crisis of 2008 was the major influence on 1-oz Gold Eagles and Silver Eagle sales. In 2007, the Mint sold only 147,500 Gold Eagle, but in 2008 sold 794,000 and so far in 2009 the Mint has sold 554,500.

For Silver Eagles, the best prior year was 2006, with 10,021,000 Silver Eagles flying out the door. Year 2008’s sales almost doubled that number. So far in 2009, the Mint has sold 11,579,500 Silver Eagles.