For the past several years, I have been slowly building up a physical gold position. But in the past several months I haven’t bought any physical bullion.
No coins. No bars. Nothing.
That’s simply because, since the beginning of the COVID pandemic, prices and (especially) premiums on gold bullion have been quite high. So I’ve been holding off on acquiring any more.
However, following the flash crash earlier this month, COMEX gold prices are overall lower for the summer of 2021 and premiums on bullion have fallen. And so I’ve been recently buying again.
Trading now for just over $1,800 an ounce, COMEX gold is still almost 6% lower than highs reached back in June.
Meanwhile, premiums on gold bullion — which were at record levels during parts of the pandemic — have mostly returned to pre-COVID levels.
Right now, a one-ounce American Gold Eagle is “normally” priced with a 5% to 10% premium to COMEX prices. And that’s just about where premiums for AGEs are at right now.
But even though prices and premiums have lowered, gold is still quite expensive.
As mentioned, spot gold on COMEX right now is just over $1,800 an ounce. A 5% premium on that puts the retail price of gold at +$1,900 an ounce.
A 10% premium puts it at over $2,000.
… And there’s a good chance that’s what most retail investors are (and have been) paying for gold.
In short, bullion dealers charge premiums on physical gold based on two things: 1) how much you’re buying and 2) how you’re paying.
APMEX is one of the most reputable bullion dealers around. Here’s its current pricing* scheme for a random year one-ounce American Gold Eagle:
*prices are based on APMEX’s last-checked gold quote of $1,818.50 an ounce
As you can see, dealers give the largest premium discounts to customers who buy in bulk and pay with cash or bank wire.
Thing is, it’s highly unlikely most customers are really buying a lot of gold at once. I actually don’t know any serious gold investor who simply bought a lot of gold all at once. Typically gold investors will acquire their positions over time with multiple purchases. So I don’t think APMEX is processing many orders over 100 American Gold Eagles. That much gold would set an investor back right now almost $192,000.
And, because it’s so much easier, I’d guess a lot of customers just use their credit cards to buy bullion online, despite the higher premium. I’ll be honest with you, I do myself.
To pay with a bank wire, customers have to call in. I would just rather plug my credit card information into their website. And I don’t think I’m alone.
So I’d guess most customers are paying premiums on the higher end.
That means, dear reader, even at today’s prices, many (if not most) retail customers are paying over $2,000 an ounce for gold now.
And to add to that, the 5% to 10% premium on a one-ounce American Gold Eagle is much more reasonable than the premiums found on many other gold bullion coins.
Right now the retail price for a one-tenth-ounce American Gold Eagle, for example, is about $250. So anyone buying them is paying $2,500 an ounce.
So even though COMEX gold is just over $1,800, the retail price for investors is more like +$2,000 an ounce.
And it has been that way for months and months.
In fact, back in June it didn’t matter how much gold you bought or how you paid; you were spending +$2,000 for an ounce of gold from retail bullion dealers.
Of course, you can avoid paying premiums on physical gold bullion altogether and get investment exposure to gold with stocks — specifically shares of companies that explore for gold, construct and develop gold projects, and physically mine and process gold products.
I’ve recently put together a new report that details five small gold exploration companies that are well-positioned to take advantage of a major gold rush unfolding in Canada’s Newfoundland.
You may have already heard about this gold rush in the news. A company named New Found Gold made a major gold discovery a few months ago and now everyone and their brother wants a property nearby.
There are today about two dozen public companies with significantly sized projects surrounding Queensway. And over the past several weeks I’ve slogged through every single one to cherry-pick five companies that are best positioned for repeated success.
And I’ve put my findings in a new report published just a few weeks ago.
For more details on how to access this report for free, which gives the names and stock symbols of these five gold explorers, simply click here.
