I just noticed that the physical gold premium and the spot price of gold are often inversely correlated. In other words, every time you would want to buy gold (when the spot price is cheaper), the premium appears to explode higher. So this throws a bit of cold water on the urge to make a physical purchase.

But is there a potential way to play this inverse correlation?

As a general rule, precious metal ETF’s don’t trade at a premium to spot. So, one way to take advantage of this potential signal might be to buy one of the gold ETF’s (GLD, IAU or PHYS) when the premium is high – maybe above 12% – and then sell it when the premium goes under 7% or so.

Unfortunately, this strategy would not have worked very well during all periods shown in the chart.

Still, this is something I am going to look closer at going forward.

If you are interested in this issue, check out a recent interview on Palisades Gold Radio. The host talks to Patrick Yip from APMEX about the premiums on both Gold and Silver Eagles.

UPDATE 10/19/22 @ 9:00 AM EST: The physical premium on American Gold Eagles reached 13.93% yesterday. This is higher than the premium from back during the Corona panic of 2020. The high point then was “only” 13.77% on 4/21/20. Its hard to believe that the premium was below 9% just under a month ago.

Something wicked this way comes?

UPDATE 5/17/22 @ 2:45 PM EST: Bullion Exchanges came back into the market in large quantity so the Physical Silver Premium has come way back down to 68.36%.

UPDATE 5/17/22 @ 1:15 PM EST: The Physical Silver Premium jumped above 80% this morning and continues to remain elevated. Current premium stands at $17.93/82.54%. No standard dealer has coins in quantity of more than 10, although Bullion Exchanges and DBS Coins have 10 tubes available for sale. Lowest cost in quantity is SJ Miller who has 100% positive on Ebay but I have never heard of him. Next lowest cost standard dealer in quantities of over 10, 20-coin tubes is Liberty Coin.

UPDATE 5/13/22 @ 8:15 AM EST: The Physical Silver Premium is at the highest point since I have been keeping track (I started this website in April 2020). This premium is even higher than the one that occurred during the “silver squeeze” of late January/early February of 2021. The high point of that squeeze was 66.48% on 1/31/21. Today the premium hit 71.25%.

Bullion Exchanges is the lowest price dealer selling in quantities of over 10, 20-coin tubes.

UPDATE 5/5/22 @ 7:30 AM EST: Maybe a false alarm? This morning the percentage premium has declined back to “normal” levels. Liberty Coin came in with coins in quantities over 10 and the physical premium is at 6.91%.

UPDATE 5/5/22 @ 2:00 PM EST: The physical gold premium is back up to 7.84%.

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It might not sound like much of premium when it comes to physical gold but I think it is noteworthy for five reasons:

1. The physical premium has not been consistently in the 7% range since December of 2021.
2. For most of 2022 the physical premium meandered between 6-7%.
3. This high 7% physical premium which began on 5/3/22 continues into 5/4/22.
4. The spread between the lowest and second lowest cost dealer on Ebay has exploded to almost 2%.

5. The physical gold/silver ratio has remained steady in the mid 50’s area while the spot gold/silver ratio has jumped above 80. You can really see the change when you look at the following chart. Note the upward slope of the Spot vs. Physical spread.

If you think I have an answer to the question posed in the title of this post, I am going to disappoint you. All I do here at my website is closely monitor the situation in the physical precious metals markets. But when I see a situation like the present premium in physical silver, I feel inclined to upload a blog post so that readers know that something unusual is going on.

The fact that the physical silver eagle premium has not been this high since the summer of 2021 makes me think that something may be going on in the silver market.

Could it have something to do with the Ukraine/Russian war?

It’s possible, but it could also have something to do with a strain in physical inventories. After all, did you see the situation in the nickel market when it spiked and the metal stopped trading?

Whatever the case may be, I will keep updating my charts so that readers can get a handle on what is going on.

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CURRENT UPDATE: 3/22/22 @ 2:30 PM EST.

Spot Silver Price (ounce) – $24.86

Physical Silver Eagle Price (based on a 20-coin tube on Ebay): $37.91. Pre-sales for future delivery are not counted.

Current Premium: $13.05/52.51%

Bullion Exchanges is the lowest price dealer selling in quantities of over 10, 20-coin tubes.

UPDATE 3/21/22 @ 1:00 PM EST: The Physical Silver Premium continues to spike and has climbed over 50% – it now stands at 57.83%. The lowest price on Ebay is not even a typical dealer but he does have Silver Eagles for sale in quantities over 10 tubes. The next standard dealer with offers in quantity is Liberty Coin but you have to pay over a 60% premium for those coins. The Physical Gold Premium remains low, historically speaking, as it is now 6.85%.

By 7:30 PM EST a standard dealer came in (Bullion Exchanges) and the physical premium has declined to 52.41%.

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CURRENT UPDATE: 3/21/22 @ 1:00 PM EST.

Spot Silver Price (ounce) – $25.12

Physical Silver Eagle Price (based on a 20-coin tube on Ebay): $39.65. Pre-sales for future delivery are not counted.

Current Premium: $14.53/57.83%

SJ Miller is the lowest price dealer selling in quantities of over 10, 20-coin tubes.