“There's a very big illusion out there that because the spot price is down, there's all this abundance of product, that a lot of people must be selling.”
There’s a lot of confusion among investors regarding the difference between the spot price and the physical price of gold and how that difference impacts the availability of physical products. It’s a common misconception that low spot prices mean that inventory is abundant.
The reality is a bit more complicated than that. Watch the video to hear what Precious Metals Advisor Todd Graf & Sr. Precious Metals Advisor Steve Rand are saying about the availability of gold and silver coins and bars and why now is a great time to invest.
Spot Price vs Physical Price
There’s an understandable amount of uncertainty regarding the terms spot price and physical price in relation to precious metals. In short, the physical price of gold is the straightforward value of the asset while the spot price is determined by futures contracts which are agreements to buy or sell a commodity at a predetermined time in the future.
The relatively low spot price of gold is a misleading metric for the availability of precious metals products. Contrary to popular belief, lower spot prices don’t automatically translate into increased inventory. As a prime example, the current precious metals market is seeing a dearth of physical assets due to rising demand even as spot prices remain at relative lows.
The Harsh Reality of Availability
As more investors, institutions, and governments increase their exposure to physical precious metal assets, the availability of these products greatly diminishes. Supply chain issues are also contributing to the lack of physical precious metals. Even the assets that are available take time to source.
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It’s not just everyday investors which are having a tough time finding products either. Precious metal dealers are having a difficult time tracking down specific gold and silver assets. Orders are still being filled, but the shortage is making it harder and harder to find certain precious metals items, like gold bullion bars and silver bullion bars.
Physical Precious Metals Premiums
When purchasing precious metals, investors often wonder why they’re paying a little over the spot price of gold and silver. Some investors incorrectly assume that precious metals dealers are artificially inflating their prices to take advantage of the physical metal shortage. In reality, the slightly higher physical price of these assets derives from a premium on precious metals.
A premium – described as the price a customer pays over the spot price – is representative of the work it takes to fabricate, distribute, and store these physical assets. Everyone pays premiums for common assets such as gas and lumber. The same applies to physical metals. Coin dealers can’t even escape these premiums.
Gold Prices Primed for Upward Movement
Investors shouldn’t be fooled by the current gold and silver spot prices. Just because they’ve settled slightly lower than recent highs, that doesn’t mean they will stay at this position forever. As reliable hedges against inflation, these assets tend to increase in value as the economy worsens.
Currently, economists and governments around the world are warning of rising inflation. This dismal forecast for the economy is signaling a major run for precious metals in the near term. Bank of America is just one of several institutions that anticipates gold to hit record highs in response to the tumultuous economic situation.
Don’t Wait to Buy Your Gold, Buy Your Gold and Wait
One of the most common mistakes investors make when dealing with precious metals is waiting for the “perfect moment” to diversify their portfolios. This waiting game nearly guarantees investors miss out on the upward price action of gold and silver. The tried-and-true investment method is to buy gold and wait, instead of waiting to buy gold.
Spot prices might be down and supply issues are increasing, but it’s still a fantastic time to get in on an undervalued asset. Learn how to protect your wealth with gold and silver by requesting your FREE COPY of our popular precious metals investment guide today!