If you want to know how meaningless the spot price of silver is, try to buy some physical silver. The spot price is currently about $14.80. To buy a generic ounce round, youll have to pay $16, an 8.5% premium. 10 and 100oz bars are cheaper (6.8% and 4.9% respectively). When I bought some 10 oz bars a few months ago, the premium was 2.7%. And then we come to my personal favorite: junk silver.
I saw on Bullion Stacker that a guy was buying junk silver for 13 times face value. I was amazed that he hadnt found a seller yet because that had to be high; I knew spot was around 10-11 times face. Indeed, he was offering a 21% premium. Yikes! So then I went to Compare Silver Prices and saw that regular online dealers were selling $100 face bags (2.5 kg or 5.5 lb) for even more. And thats a bulk buy from the cheapest of five dealers (a sixth is sold out) clocking in at almost $18 an ounce. The most expensive dealer demands a 36% premium that calls for silver at over $20 an ounce. ebay is even worse (dont buy there).
It used to be that junk silver had the lowest premium, even below spot price. Those days are long gone and even I pretty much missed the boat. The last year to do that was probably 2010, maybe even a bit earlier. What we see now is a decoupling of the nonsense paper price from the actual price of silver. The spot price is for paper promises of delivery in the future. There are allegations that banks and governments are deliberately suppressing the price of silver (and gold) to prevent it from surging. This would not be difficult to do, and I think they probably are doing it to some extent.
However, what is more likely to be happening is the US economy is crippled, but plodding along, while Europe is in absolute chaos. The Euro is at a ten year low against the dollar. Investors and wealthkeepers have fled the Euro in droves and bought up dollars and US bonds. With the value of the dollar gaining, precious metals obviously get weaker. Canada has been in recession, which combines with the USD buyup to reach a weak point it hasnt seen in over 5 years. Back then the US was alleged to be coming out of recession. I remember at the end of high school, the Japanese Yen was below 100 to the dollar. Now, its at 124.
When I went to Israel in the Summer of 2011, there were about 3.35-3.45 NIS to the dollar, which was great for them, but bad for us. They began to pursue currency debasement that year to “help” exports, which Henry Hazlitt explains doesnt help anything. In any case, the dollar is up against the shekel, but the shekel is gaining back. This means the Israeli economy is doing well and that the Euro is being ditched hard. The Swiss franc holding steady against the dollar also proves this.
If you are planning a trip to Canada, Europe, or Japan at some point in the next few years, and have some spare money lying around, now is the time to buy up. Youll be getting as much as a 25% discount when things temper back down. Or if you want a good investment, any of the three are. You should be able to cash out a 20-30% gain in the next 5-10 years.
What does this mean to prospective silver buyers? Should you still buy silver? Absolutely! It is a stronger store of wealth than dollars. It will recover, and even with these premiums, holders will ride a hell of a wave. The dollar will weaken again, sending precious metals back up. Unfortunately, I can no longer advise people to buy junk silver because the premiums are too high. Instead, try private mint rounds or government rounds (the US Mint wont be taking orders until at least August, demonstrating the shortage). Even Suns of Liberty Mint, a small operation here in New Hampshire, is offering cheaper prices on their 1/10 ounce chips than junk silver goes for. Whatever you can find that is the cheapest (not ebay) will be good. Silver is silver, usually. And of course, I love the Bullion Stacker forum for its person to person trades.