Fears of a global recession stemming from the coronavirus panic, coupled with a dip in commodity prices, sparked an overwhelming flight to gold and safe-haven assets.
Investors looking to buy physical gold right now will find themselves in a market of unusually low inventories and extraordinarily high prices.
Today, we’ll briefly look at the gold bullion market, and I’ll show you the most affordable ways to own physical gold bullion right now.
Flight to Safety
The market sell-off beginning in February spilled into gold and precious metals, quickly pushing the metal down to six-month lows of under $1,500 an ounce. As a result, the demand for physical bullion became so high, many retail dealers actually sold out of their most popular products.
Major bullion dealers began a series of “pre-sale” options and noted shipping delays ranging between three to 15 days. Many also implemented temporary purchase minimums of $300. Bullion dealer Provident Metals wrote to its customers:
Our website is sold out of almost all bullion products across all metals. We have secured several million ounces of silver and tens of thousands of ounces of gold to arrive in the coming weeks. We are being conservative about preselling these future deliveries, given the current uncertainty in the supply chain. As products arrive to our vault, we will relist them on our website.
As I write to you now, many bullion dealers have, in fact, restocked some of their bullion products. However, prices for gold bullion are extraordinarily high.
The spot price for gold closed yesterday at just over $1,610 an ounce. But if you went to buy one, you’d most likely pay over $1,800. Depending on how you pay and your purchase size, you could even pay closer to $1,900.
Here are APMEX’s prices right now for a random year one-ounce American Gold Eagle:
Now, a premium for precious metal bullion is standard. Regardless of world events, you’re always going to pay a premium for any kind of bullion.
But due to disruptions in dealer supply chains right now, premiums for gold bullion are outrageous.
In a normal environment, investors can expect to pay a premium of between 5% and 9% for a one-ounce American Gold Eagle.
Right now, comparing prices across multiple dealers, you should expect to pay a premium of between 11% and 19% for the same coin.
Unfortunately, there’s no great way of avoiding higher gold premiums. The premium for all gold bullion products has increased dramatically — and that’s if they are even available at all. As mentioned, many popular products, including the Canadian Gold Maple Leaf, are still difficult to find available from bullion dealers.
But if you were looking to buy gold as close to spot price as possible right now, you’ve come to the right place.
Most Affordable Gold Right Now
The most affordable way to buy precious metal bullion, in any environment, is in bulk. As such, the premiums for 10-ounce and kilo gold bars are among the lowest right now.
You can expect to pay a premium of around 7% to 8% for a 10-ounce bar and about 5% to 6% for a kilo bar.
Normally, you wouldn’t pay more than 1% or 2% over spot for these products. So they’re not a great deal. Besides, most people aren’t looking to drop tens of thousands of dollars on a gold brick. These 10-ounce bars cost over $17,000 right now — a kilo gold bar is worth over $50,000.
There are a handful of much smaller gold coins that also generally sell closer to spot prices than government minted bullion.
And because they’re so common, these coins are still mostly available. But they come with a warning…
I consider these coins “junk gold.” They’re historic gold coins with little to no collector appeal. That means when you go to sell them later on, you’ll probably receive a price slightly under spot price. However, if you were looking to buy gold as close to spot as possible, these would be your best bet.
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European Gold Sovereigns
Minted in the 19th and 20th centuries, European gold coins were used as currency and wealth preservation. But unless they have been preserved in perfect condition, they have little to no collector value today. So, coins like the 1908 Hungary 100 Korona and 1915 Austrian 100 Corona are typically priced near spot prices.
1908 Hungary 100 Korona
1915 Austrian 100 Corona (Restrike)
The premiums for these still only between 1% and 2% over spot price, although some dealers have them priced higher.
And because they’re so common, European Gold Sovereign coins are still widely available from most dealers. A quick search in the gold coins from Europe on your favorite bullion dealer’s website will show you what they have.
But remember, when you go to sell these, you’ll probably receive 1% to 2% below spot price.
Modern U.S. Gold Commemoratives
The first-ever U.S. commemorative coin was struck in 1848. Since then, the U.S. Mint has produced varying commemorative coins in gold, silver, and copper.
Modern gold commemorative coins are considered those from 1986 to date. They’ve been issued to honor special anniversaries in the nation’s history or people of significance. But they fail to hold much collector appeal.
As such, modern U.S. gold commemorative coins are usually priced near their melt value. Modern $5 U.S. commemorative coins, for example, contain .2419 ounces of gold — so, about a quarter-ounce of gold.
Right now these coins are carrying a premium of between 5% and 11%. Usually, they are priced with a much lower premium. But if you were looking to buy gold as close to spot as possible and only spend a few hundred bucks, U.S. gold commemorative coins are probably the way to go. But, remember, they’ll most likely resell for 1% or 2% under current spot prices.
Until next time,
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bull and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.