Jeff Garrett: Buying Gold and Silver Today

Rare coins have been the focus of my career for over 45 years. Like most rare coin dealers, my companies have also been very involved with selling precious metals. Indeed, my career was literally launched during the great silver price explosion of 1979 and 1980. Bunker Hunt and a group of his close allies tried to corner the market, and for a short time, silver jumped in price from about $5 to nearly $50.

This created a mad rush, as everyone tried to cash in on the boom. People were lined around the block selling precious metals, primarily silver. Sadly, however, silver prices crashed when the federal government placed limits on the commodities exchange. Over the next few years, silver drifted down and finally settled in the $5 range for years.

The recent COVID-19 crisis and the extremely sharp drop in stock market values has led to another boom in precious metals. But this time, people are lining up to buy gold and silver.

For reasons that I do not fully understand, silver prices have plunged since the start of the COVID-19 crisis. In the last 30 days, spot silver prices started with a high of around $18 and have now fallen to about $14. This represents a loss of 22%, roughly equivalent to the loss of the S&P stock averages during the same period.

While spot silver prices have plunged, this has not tempered the physical demand for the precious metal. Many investors and even the general public have turned to the purchase of silver as survivalist play. I must personally admit that the sight of empty shelves in our local grocery stores can induce pangs of panic. 

For many years, I have told those interested in buying gold and silver that you should not consider the purchase as an investment. Rather, you are buying insurance in the case of a financial train wreck with the US and global economy. This nearly occurred during the 2008 financial crisis. But trying to buy gold and silver now is like trying to buy home insurance while your fire alarm is going off — very high premiums!

Unprecedented times, indeed

During the gold and silver boom of 1979 and 1980, physical precious metals traded for steep discounts. The refiners could not process silver fast enough to deliver to the Comex in New York. Coin shops around the country were paying anywhere from 20-40% less than the spot metal price for anything made of silver. A lot of family heirlooms ended up being melted during this time. As mentioned above, the party soon ended, and premiums returned to normal for the next few decades.

The exact opposite is now being played out in the gold and silver market. Spot prices on the commodities exchanges are low, but the price premium for actual physical precious metals has skyrocketed. Anyone who is trying to purchase precious metals at reasonable prices is extremely frustrated.

Another historical event that has occurred in the precious metals market has been the ratio of gold to silver prices. Gold is now about 115 times more costly than silver. This can probably be explained with the reasoning that silver is more closely tied to industrial use (which has fallen) and gold is considered a monetary instrument.

Gold and Silver Eagles certified by NGC Click images to enlarge.

As I have mentioned many times before, I am not an economist. My advice is based solely on my observations over the years. Based on what is going on in the world, it is easy to understand why so many people are interested in owning gold and silver. Governments around the world seem determined to support fragile economies with stimulus spending. The two plus trillion-dollar plan just approved in the United States is staggering in size and scope. Additionally, lawmakers have made clear that more will be approved if needed. This is on top of already-record deficit spending.

For those interested in buying gold and silver, the options currently are difficult to navigate. You can no longer run to your corner coin shop and buy gold and silver. Most have very little or no physical stock on hand. Our coin shop in Florida is actually rationing small amounts to longstanding customers. Many other shops around the country are doing the same.

You will have better luck finding gold and silver online, but the premiums are stomach churning at current levels. A quick check today found the following average prices for silver:

The premiums for gold coins are much less for commonly traded issues. One-ounce US Gold Eagles are selling for about $1,750 each with spot gold at $1,600 (about a 10% premium). In a typical market, the expected premium would be around 5% over the spot melt price.

Based on the above, I would give the following advice depending on your circumstances.

Preppers or anyone who feels panicked by current world affairs

Buy small amounts when paying high premiums. Look for unusual bullion-related coins that can be purchased for less. Many older vintage world coins that have bullion content fit the bill. The NGC Coin Melt Guide is an amazing resource for this purpose. Consider vintage Morgan and Peace Dollars in mint condition. The prices for these have remained stable and are great bargains at current levels. (The previous link is to the melt values for US silver coins. Here are the US Gold Coin Melt Values.)

The gold coin melt value calculator on NGCcoin.com Click image to enlarge.

I cannot recommend strongly enough to only deal with well-known companies and buy NGC-certified coins when possible. I have seen very deceptive counterfeit bullion coins and silver dollars in recent years. If the deal seems too good to be true, it’s probably not genuine.

Investors who have sold other assets and are looking for financial insurance

For anyone looking to spend considerable money on bullion, your only option is to carefully price shop. Call local shops, let them know your interest and ask to be put on a waiting list. Shops buy material every day, and you might get luck. I would urge caution buying bullion for future delivery. World conditions can change a lot in three to four months. You would also have to pay a deposit, and this is only protected by the company you are dealing with. For all purchases, I would recommend only transacting with well-established dealerships.

Large buyers looking for long-term investment

The only very low premium method of buying large amounts of silver at the moment is 1,000-ounce bars. These are used for delivery on the commodity exchanges. The obvious downside is the bars’ size and weight. Your other option is to wait until premiums fall, which is guaranteed to happen at some point in the future.

These are uncertain and unprecedented times. Gold and silver have been considered financial safe havens for millennia. As with any financial decision, exercise patience and do your homework. Buying in panic mode usually leads to poor results.

The good news for the hobby of numismatics is that some percentage of new bullion buyers will discover rare coins. This has happened many times over the last several decades.

Finally, I would also like to recommend two books that I authored a few years ago (pictured below): Gold – Everything You Need to Know to Buy and Sell Today and Silver – Everything You Need to Know to Buy and Sell Today. Both were produced by Whitman Publishing and should be available online.

Jeff Garrett's Gold Buying Guide

Jeff Garrett's Silver Buying Guide

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