Survey misses gold buyers

March 2, 2017
Pat Heller

Three weeks ago, I wrote how imports of physical gold and silver in China and India were much stronger in 2016 than indicated in reports from GFMS and the government of India (click here to read). There is even some possibility that total imports last year exceeded demand in 2015, despite the published reports trying to mislead people into thinking they had declined significantly.
There continues to be strong demand for both metals in both nations, particularly out of concerns that the government-created currencies may decline in value.
The vote in the United Kingdom last June to leave the European Union and the fears that upcoming elections or other circumstances could result in either France, Greece, Italy, or the Netherlands abandoning the euro as their currency have many citizens of that continent concerned over the value of their circulating money. The recent increased media coverage on growing civil unrest in Sweden has also increased fears of holding government-created currencies among European residents.
Britain’s Royal Mint reports that it is operating around the clock to try to meet demand for its gold and silver bullion products, with recent quarterly production up in the neighborhood of 50 percent over prior quarters. Demand for physical precious metals appears to be on an uptick almost across Europe.
When it comes to the United States, however, physical demand for bullion-priced gold and silver coins and ingots has softened since about mid-December. Through Feb. 24, the U.S. Mint had sold just under 5.9 million silver American Eagles so far in 2017. While this week’s sales have not yet been added, the total for the first two months of 2017 will almost certainly be lower than the U.S. Mint’s sales in the first two months of 2016 of more than 10.7 million coins.
As for gold American Eagles, through last week’s report, the U.S. Mint had sold 141,500 ounces thus far in 2017, compared to January and February totals of 207,500 ounces in 2016.
The recent fall in demand for physical gold and silver in the United States has resulted in falling premiums that are beyond what is attributable to rising spot prices (e.g., a silver product that would sell at $2 above spot costs 11.8 percent premium at a spot price of $17 versus 11.1 percent at $18) spot.
There are multiple current issue bullion products that are available today at closer to their bullion value than they were in years past. However, the greater decline in premiums occurred with bullion-priced items that are out of production. In gold, you can acquire the Austria 100 coronas, Mexico 50 pesos, and U.S. American Arts Gold Medallions at their lowest premium levels in recent memory.
In silver, premiums have fallen by a much greater percentage for U.S. 90% percent silver coins. Out of curiosity, I checked for current selling prices on $1,000 face value bags posted online by more than 40 of the nation’s largest dealers or those listed on the first three pages in a Google search for “US 90% Silver Coin Prices.” The results were eye-opening in how wide a range of premiums there is:
Three dealers were selling $1,000 bags of 90 percent silver coins for less than 75 cents per ounce over the ask silver spot price.
Four dealers quoted a premium ranging from 79 to 99 cents per ounce over the spot price.
Five dealers quoted premiums ranging from $1.70 to $1.99 per ounce.
Five dealers quoted premiums between $2.18 and $2.77 per ounce.
Four dealers quoted premiums of $3 to $5 per ounce.
Two dealers only offered 90 percent silver coins in small quantities at much higher premiums.
Ten dealers indicated that customers need to call to obtain price quotes.
Ten dealers did not indicate that they offered U.S. 90 percent silver coins for sale, including some that focus on selling products for precious metals Individual Retirement Accounts (where U.S. 90 percent silver coins are not an approved option).
It pays to shop around. It surprised me that some of the nation’s larger bullion retailers were charging a premium of well over $2 per ounce where another national seller was quoting just 59 cents per ounce for a premium.
At a premium of 59 cents per ounce for 90 percent silver coins, I would consider that as perhaps the best form of bullion-priced silver to acquire when you consider the factors of divisibility (a 90 percent silver dime has about 1/14th of an ounce of silver in it), liquidity, legal-tender status, history of circulating in America, as well as the low premium.