Tuesday, March 16, 2010

Why Are There Premiums on Gold and Silver Coins?

This is a quick update with some buying tips in the area of premiums, for the first-time, small investor looking to purchase small denomination tradable coins or bars. I often get asked why smaller coins have a higher premium, etc. Or why gold/silver coins are not available at spot price of the metal. There is always premium on 999 fine gold and silver bullion.

Part of the premium, of course is a result of the refining, minting, administration and distribution fees for the actual manufacture of the coin. When you go to the gas station to fill up, you are not paying the spot price for a barrel of oil at the pump. There are many costs involved in the refining and distribution of fuel. We just expect that as a fact of life. It is the same for precious metal coins.

When the spot price of silver dropped considerably last year, the high premiums we were paying at the time reflected what was considered as a natural correction of what a more realistic price of silver should be based on supply and demand. The low price seems farcical as many people wanted to buy silver at that price, but there was low supply and long waiting times. Suppliers were charging 40% premiums. So if an economic event occurs that will spike the demand for an American Silver Eagle, and the mint has only regular reserves available, the high demand and low supply will push the premium higher.


Always research what premium you should expect to pay before buying. There's a few simple ways to do that:

1) Here's a website where you can see what to expect: 24hGold.
Scroll down all the way to the bottom on the left hand side until you see "Let's Get Physical - BULLION - METAL VALUE AND PRICE" On the right hand side of the chart in green text, it lists the average percentage of premium to expect. Use this information to compare and shop around for similar products and rounds. There are other premium research tools at the top right of the site under the tab "BUY AND SELL GOLD ON EBAY"

2) Another good thing to do is a quick comparison directly on the Ebay site for a similar item. So for whatever you are looking for, type it into the Ebay search field. For example, type “100g bar silver”. It will come up with what they are being sold for that day/week.

3) If you have the time, take a saunter down to you local coin or precious metals exchange shop. Prices will change daily.

Your goal should be to accumulate the maximum oz's of gold and silver for your money as possible. Part with extra premium for a premium product that will offer added insurance. As an example you may consider paying extra margin for a smaller denomination or non-legal tender private mintage. Buy before the rush! When everybody is rushing into the bullion market at one time, premiums soar very quickly.

This will get you up and running to begin buying right away. Now for all of you seasoned gold and silver buyers reading this article, I welcome your comments and additional personal tips you can pass on to everyone.

Find out why I prefer privately minted bullion rounds and coins here.

Kirsty Hogg

Saturday, March 13, 2010

First Grocery Store to Accept Silver

The National Inflation Association recently posted a video that really struck a chord with me. Take a look at this portrayal of an actual purchase of regular convenience store items with tangible silver.

Although my favourite form of tangible silver is of the privately minted bullion round or bar variety (due to the pristine 999 fine silver and the low premium), I will now be taking a second look at junk silver.

This video conveys two powerful points:

1) We are not too far off from this type of business to be as commonplace in every city.
2) These low-budget, educational videos are a really powerful tools to portray some pretty complex issues in very uncomplicated way. So let's get out there and make some videos.

You can view the video HERE.
I think I’m going to buy my first bag of junk silver!

Sunday, March 7, 2010

The Eve of Destruction?

Well it’s been 2 years since the whole notion of the importance of acquiring inflation proof assets entered my world, and let me tell you, it couldn't have happened at a more opportune time. I sat wide-eyed as I watched the whole Fanny Mae and Freddy Mac saga unfold before my eyes. This was what the likes of Richard Martin, Peter Schiff and Marc Faber had been predicting for months, and I had just finished taking it all in when it hit the mainstream media. I was on the phone with a friend when the news feeds hit the net. We could not believe our ears. “Is this it?”, I thought, “is this the beginning of the end of life as we know it?”

Then the ensuing images of regular families who so ill-advisedly “bit off more than they could chew” ending up in homeless shelters, motels, parking lots, or “tent cities” were unbearable. And to watch the audacity of the media as they blamed the families for purchasing something they couldn't afford, all the while, begging for a bail out for Fanny and Freddie; the culprits who caused the crisis to begin with.

Well it turns out that that the sky was not falling that day, but it was definitely a warning shot. With the Federal Reserve continuing to print money into existence, and the Federal debt growing exponentially, the foundation of this 100 year experiment called “non-gold backed, fiat currency” has been eroded and the economy is definitely on its slow decent into hyper-inflation.

Many seem to argue that things are turning around, the economy is getting better. We are told to cheerfully continue buying stocks and watch the stock market “rally”. But common sense simply dictates to take a look around you. What are we actually seeing in our lives today? Increased unemployment, record inflation, increased homelessness and the existence of “modern day shanty towns” N.America.

Can we rely on the government to rebalance the economy? As Chris Martenson so succinctly described it in the “Crash Course”, he states we are now in a situation with an outcome, and it is just a matter of how we are going to handle the “outcome”. What are some things we can do to lessen the blow of the outcome?

More and more it makes sense to store your wealth in something that is inflation proof. I for one will be buying gold and silver in a variety of forms.

Kirsty Hogg