By Money Metals News Service
The silver futures price is near $15.50 per ounce but good luck buying the white metal anywhere near that price (with one notable exception discussed later).
The inventory of low-premium retail coins, rounds, and bars mostly disappeared in a matter of days when fears over COVID-19 pricked the bubble in global equity markets back in March.
Buying demand increased 5-fold and sellers all but vanished. Mints and refiners producing new products were unable to bridge the widening gap between supply and demand, and premiums exploded higher.
Today the lowest premium product available for delivery – the 10 oz silver bar – is sold at approximately $3.50/oz over the paper futures market price. The higher premiums on some coins – especially the Silver Eagle – are giving investors pause.
The question is whether or not to buy now or wait for better pricing.
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Before we examine that question, we should point out that investors who don’t need physical possession of their metal don’t have to make this difficult choice.
We have two options for people who want to buy silver today, near the current paper price; Vault Silver and 1,000 ounce silver bars.
However, anyone who wants delivery of silver now does have to make a choice. The key consideration is when supply will once again be plentiful relative to demand.
These are the challenges to bringing more supply of retail coins, rounds, and bars to market:
Now let’s take a look at demand:
The case for falling demand in precious metals hinges on some sort of return to “normalcy”. COVID-19 will need to turn out to be less deadly and economically disruptive than people thought. And it’ll also take people fairly quickly going back to work and resuming their regular activities.
A return to normalcy is, in our view, a real long shot. The 25 million people who have already lost jobs won’t all have a job to go back to.
Many businesses will not weather this storm, and fear of the virus is going to permanently change consumer habits.
When we consider both supply and demand, the odds favor premiums remaining high for months (at a minimum). The wait for lower premiums could be a long one.
If you are contemplating an investment in physical metal as a safe haven, you need to consider whether or not you have the luxury of time. The less metal you currently hold, the more urgent it is to bite the bullet and start stacking.