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Daily / Weekly Gold commentary
We’ve all seen it: the stock market gets wobbly, the news gets scary, and suddenly, everyone starts talking about buying gold and silver. But when you go to buy some, you notice something frustrating. The actual price is much higher than the "spot price" you see on the news.
That extra cost is called the "premium," and it can spike dramatically when markets are volatile. So, how can you still get physical metal without overpaying? Let's break it down in this blog.
What Premiums Are and Why They Spike in Volatile Markets
Think of the premium like a convenience fee. It covers the cost of minting that beautiful coin, the dealer's business, and getting it to you safely. In a crisis, this fee jumps for a few simple, human reasons:
- A Stampede of Buyers: When people get nervous, they want something solid they can hold. This surge in demand lets dealers charge a bit more.
- Supply Can't Keep Up: Mints and refiners can only produce so much, so fast. High demand leads to delays and empty shelves.
- Dealers Get Nervous Too: If their supply is running low, they'll raise prices to manage their own risk and ensure they don't sell out completely.
- It Gets Pricier to Ship: High-value shipments need more security and insurance, costs that are passed on to you.
We saw this play out dramatically during the 2008 financial crisis and again in the early days of the COVID-19 pandemic.
How Precious Metals Prices Behave in Uncertain Times?
Gold has long held the reputation of a safe-haven asset. When stocks tumble or geopolitical risks dominate headlines, capital often flows into gold, driving up demand and, correspondingly, premiums.
Silver, platinum, and palladium behave differently because of their industrial uses. Their spot prices may be more volatile. In a downturn, industrial demand can collapse, pulling some pressure off, but if investors crowd in, premiums may remain elevated despite lower spot precious metals prices.
Even if the spot value falls, the premium might remain inflated, so your all-in cost stays high.
Smart Tactics for Buying Physical Metal When Premiums Are High
You don't have to sit on the sidelines. Here are some practical tactics to shop wisely:
- Compare pricing among trusted dealers: Don't just buy from the first site you see. Compare precious metals prices from several reputable dealers. Look for those with clear pricing and a stated buyback policy.
- Favor bullion over collectibles or numismatic coins: Now is not the time for rare, collectible coins. Stick to standard bullion like common bars and rounds, which have the lowest markups. Save the numismatics for calmer days.
- Use larger units if possible: If your budget allows, buy a 1-ounce coin or a 10-ounce bar instead of several smaller pieces. You'll pay less premium per ounce.
- Dollar-cost average: Instead of betting it all on one purchase, dollar-cost average. Buy a little bit each month to smooth out the highs and lows of both the spot price and the premium.
- Explore alternate metals: If gold premiums are through the roof, take a look at silver or platinum. They might offer better relative value, but do your homework on their unique market dynamics.
Mistakes to Avoid During Premium Spikes
Here are some mistakes to avoid:
- Don't Panic-Buy: Fear leads to overpaying. Take a deep breath and make a plan.
- Avoid "Rare" Coins: In a crunch, the collectible market gets weird. The high premium you pay may not hold its value.
- Check the "Sell" Price: Before you buy, see what the dealer is willing to pay for the same item. A huge gap between the buy and sell price means it will be harder for you to profit later.
- Beware of Shady Sellers: High demand brings out scammers. Only buy from established, vetted dealers who guarantee authenticity.
Role of Trusted Dealers in Volatile Markets
Working with a reputable bullion dealer matters more in turbulent times. Here’s how they help:
- Transparent pricing and clear spreads: You’ll see the markup over spot and know where your dollars go.
- Consistent buyback policies: You’ll know how and at what price they’ll repurchase your holdings.
- Storage and logistics support: Some dealers offer secure storage, allocation, or insured shipping to ease your burden.
- Education and guidance: In volatile markets, you appreciate a counterparty who can enlighten you about market forces instead of merely trying to sell you stock.
At Pacific Precious Metals, we maintain a full two-way market for all bullion products. We also have domestic and foreign storage with full insurance, and we have secure, allocated holdings so you receive your actual bars or coins.
Additionally, we offer various services, including appraisals, IRA facilitation, and liquidation choices, providing flexibility regardless of the market conditions.
Get Physical Precious Metals
In times when premiums soar, the danger is not only in the movement of precious metals. It's in the amount above the spot you have to pay for it. With foresight and discipline, however, you can still build steadily.
Always remember that premiums soar when uncertainty dominates, but savvy strategies like comparing dealers, preferring bullion, and averaging purchases can protect your buying power.
A reliable partner keeps you away from typical pitfalls and makes your investments safe.
When premiums rise, Pacific Precious Metals stands ready to assist investors in turbulent markets with confidence. Discover gold, silver, and other precious metals through a reliable prism.
