Gold and silver are global commodities with spot prices being the same all over the world (assuming you live in an open society). The only differences are the premiums that dealers charge buyers. One of the surprising things has been the large increase in premiums on gold and silver coins. Even though the prices for both metals have dropped from their highs, the cost of buying gold or silver coins hasn’t dropped proportionately. In fact, there’s been reported shortages of these coins by the US Mint and the Australian Perth Mint, not to mention individual retailers. This seems to defy common wisdom; prices drop when demand decreases. Even though spot prices have increased, the demand seems to have increased and thus gold and silver coins aren’t as cheap as they should be.
Right now the premium on silver coins is a whopping 60%+. For gold it’s a lot lower but still higher than it’s historic 2.5-3%. I just got an email today from a newsletter service that I subscribe to that’s pretty interesting.
If You Want Cheap Gold Coins, Canada Has Them
By Tom Dyson
I don’t trust my bank. And I don’t trust the dollar.
As far as my savings are concerned, I’d rather keep them in gold. And I don’t mean gold futures or gold certificates or gold mining shares. I’m talking about physical gold bullion in a safety deposit box.
My family thinks I’m taking a big risk. But as I see it, they’re the ones taking the risk. I’m the one storing my money in the world’s safest asset… the asset that’s been used as money for 5,000 years… and the only money that’s no one else’s liability.
Besides, what have I got to lose? My bank pays less than 3% on its savings accounts.
I’d advise you to own at least a couple of ounces of gold, too… if nothing else, for insurance purposes.
Coins are the best way for individuals to buy gold. They come in small denominations, they’re portable, and you can exchange them for cash anywhere in the world at gold’s international spot price.
Here’s the thing: Right now, gold coins are hard to find. Even if you can find them, they’re more expensive than usual.
In normal markets, you can buy silver coins below the spot price and gold at a 1% or 2% premium to the spot price. I’ve spoken to at least six gold coin dealers in the last week. Three of them were out of stock. Of the dealers still in stock, the cheapest gold coins I found were selling for a 5% premium to the gold price.
In other words, with gold at $800, you’d have to spend at least $840 on a one-ounce coin. The scarcity of silver coins is even worse. One dealer told me he was paying $16 for one-ounce silver coins, purchased in bulk. Right now, the spot price of silver is $9 an ounce. So the premium’s almost 80%.
The financial crisis is the reason for this mispricing. Demand for coins, one-ounce bars, and other “retail” denominations of gold has outpaced the ability of fabricators to make them.
There is no shortage of physical gold. If you wanted to buy a kilo or a 100-ounce bar, you’d have no problem.
The shortage is just a short-term supply problem at the retail level. Gold producers will take advantage of the premium and ramp up production. So in a few months, the big mark-ups will disappear.
That said, if you want to buy small quantities of gold right now, go to Canada.
The Bank of Nova Scotia is one of the world’s largest precious-metals dealers. If you go to the Hollis Street branch in Halifax, Nova Scotia, or the King Street West branch in Toronto, they’ll sell you Canadian Maple Leaf coins at a 3.7% premium to spot and one-ounce wafers at a 2.6% premium to spot.
P.S. Gold doesn’t show up in airport security metal detectors. I’ve tested this with gold coins before. But if you’re traveling across the border with more than $10,000 worth of gold or currency, you must declare it at the border. They’ll run your name and make sure you’re not a money launderer. That’s it.
Of course, if you don’t feel like going all the way to Canada just to buy a few gold and silver coins you can always buy them cheaply here:
American & Canadian Silver Coins
American, Canadian French, & Swiss Gold Coins