The inside scoop on gold’s price during the pandemic, premiums, silver as an underdog

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It shouldn’t come as a surprise to precious-metals observers about what’s driving the high prices in gold: gold bullion is as hard to find as ever, and the COVID-19 pandemic quickened what may have come to pass anyway. It’s been noted many countries were eager to get hold of as much gold as possible. For the past while, they have been collecting new reserves and bringing it home from overseas storage to an extent never seen in modern times.

Also, as the stock market tanks, as it did when the pandemic first struck North America, the price of gold shot up, as the shiny metal is often viewed as a reliable safe-haven asset during times of crisis. 

As ForexLive wrote on June 5: “[Gold] is experiencing an unprecedented shift in value amid the pandemic confusion and is trading at its highest level since April 2012.”

Gold is often viewed as a safe bet, as we learn in this report: “Some haven assets have delivered better returns than others, however. And gold has been one of the best performing safe-haven assets for 2020. Between 1 January and 17 April 2020, gold outperformed US treasury bonds and bills, USD-denominated investment grade agency and corporate debt, and Eurozone sovereign bonds.”

What is debasing paper currency is the trillions of dollars the U.S. government has been printing in order to help the economy recover, via bailouts or relief programs. That can’t happen with gold, of course.

“Gold is the only currency that central banks can’t arbitrarily print more of, and as such it is the only currency that acts with stability during a time of crisis,” said Bryan Slusarchuk, CEO of Fosterville South Exploration. With more and more paper currency in circulation, the currencies become inherently worth less and less, the CEO added.

Mike Malnick, a precious-metals specialist based in Toronto, points out how premiums are a factor for gold buyers. “When the price is set for gold and silver, there are lots of things that go into that, such as demand from governments and financial institutions and as a hedge against inflation. The true price of gold is what the common person pays for it and there’s a huge spread for physical gold but the public is willing to pay $2,000 USD an ounce, and that’s what we are seeing on the market.”

Coins are also part of that equation. BNN Bloomberg writes in late March that premiums for gold coins are “staying at highly elevated levels for longer than ever before, as investors flock to bullion at a time when physical-supply flows are disrupted.

American Eagle gold coins are selling for about 5% above the spot price of bullion, the most since the 2016 Brexit vote, according to Everett Millman, a precious-metals specialist at Gainesville Coins in Florida. That’s about double the regular premium and has stayed at such levels for two weeks, he said.

The pandemic added several hurdles to allowing institutions to stock up on gold. The rigorous movement of gold has been a boon for logistics companies, but also a challenge. Not only have passenger flights — on which shipments are typically transported — been grounded, but New York City, where many Comex warehouses are located, has also been a hotspot for COVID-19, further complicating matters..

For example, to help manage with flows, Loomis International U.K. opened up additional vault capacity. Malca-Amit thought about using airports in Boston and Philadelphia, but hasn’t needed to yet.

What is recommended reading around this time is learning about what influences metals prices, and one particularly intriguing study analyzed how prices can be affected by the level of inventories of commodities, meaning how much is being held in storage, and the extent to which people are hedging against their prices going up or down.

Gold.TO also wrote about the virus making waves with gold’s price in this blog post on how the pandemic influences the price of gold.

Don’t forget about silver, too, notes Malnick. The less sexy cousin of gold, it’s been on the rise since the pandemic began, he says. “Silver has a lot of upside and I’m seeing investors stocking up on both gold and silver,” he says.

Silver investment demand increased 12% in 2019, and some specialists predict “silver physical investment to extend its gains this year, with a projected 16% rise to a five-year high as investors rotate out of equities in search of safe haven vehicles.”

Because of gold’s skyrocketing price, and expectations it may also reach $1,800 USD this year, it might be an ideal time to trade in your gold for cash, especially if you and your family are in dire need of cash flow. Read this list of trusted gold buyers you should approach, and if you’re interested in trading in your jewellery, be sure to find out everything you need to know about gold jewellery. 

Our experts are available to assist you with any questions you have about gold, silver, bullion or selling/buying gold. Contact us anytime and we’ll be happy to assist you with any query.

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