The price of gold has pulled back nearly 4% in the past three weeks, leaving many wondering if it’s a good time to buy.
After touching $1,300 an ounce at the beginning of the month, gold prices have fallen below $1,250 after the minutes from the Fed’s April FOMC meeting (released on Wednesday) showed that a rate hike was on the table for June.
So should you be buying gold on this dip?
Not physical gold — not just yet.
Here’s why…
Even though the price of CME gold spot and futures has fallen, the price of physical gold coins and bars has not.
In other words, if you bought physical gold today, you’d pay exactly what you would have paid when gold was at $1,300 an ounce.
Why’s that?
Because bullion dealers want to make money, like everyone else.
And they know that any significant drop in the price of CME gold spot and futures will attract attention and prompt buyers to go looking for a deal.
Remember, bullion dealers are private businesses and can charge whatever they want for their products.
Three weeks ago, when CME gold spot and futures were around $1,300 an ounce, you would have paid about $49 over spot for a one-ounce American Gold Eagle.
Today, APMEX is charging between $55 and $118 (depending on purchase size and payment method) over spot for the same coin.
Seeing as bullion dealers have jacked up their premiums for gold, I’d avoid buying the physical metal right now. Rather, investors looking to add physical metals to their portfolio should take a look at silver…
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Silver was one of the top-performing assets in the first decade of the century. From the beginning of the natural resource bull market in 2002 to when they hit nearly $50 an ounce in 2011, silver prices saw increases of up to 1,000%.
The price of silver has dropped about 8% since the beginning of the month from about $18 an ounce to around $16.50 an ounce today. But unlike gold, premiums for physical silver have not increased.
A one-ounce American Silver Eagle will still cost you somewhere between $2 and $3 over CME silver spot right now.
And privately minted one-ounce silver rounds can still be purchased for less than $1 over spot. SDBullion.com seems to have some of the lowest premiums around for privately minted one-ounce silver rounds at just $0.49 over spot.
(Note: I’ve never personally purchased gold or silver from SDBullion.com, nor am I affiliated with them in any way. But they do have good reviews online — and even with the BBB.)
Over the next week or two, the gold and silver market will most likely be waiting to see exactly what the Federal Reserve has planned for its June FOMC meeting. And I don’t expect a lot of movement in precious metals in that time. So it will be a good time to add physical silver to your portfolio if you haven’t done so already.
Over the weekend, I’m going to write to you again to give you a complete report of exactly which silver bullion I think is the best to own and which I own myself.
Until then,
Luke Burgess
Energy and Capital
