Bargain hunters who think they can game the precious metals market by buying genuine silver and gold bullion coins at 30 to 40 or 50 percent below “spot” prices of precious metals are on a fool’s errand.
Simply put, there are no discounts in the silver and gold markets.
Precious metals markets operate vastly different from wholesale and retail markets for consumer goods such as automobiles and clothes that are heavily discounted when new models or styles for the new season arrive or for food that is at the end of its shelf life.
Precious metals used in investment bullion coins (silver, gold, platinum, palladium) trade daily Monday through Friday (other than holidays) on trading exchanges worldwide.
There are four different pricing mechanisms in the precious metals market. If you’re planning to buy or sell precious metals, a firm understanding of terms is essential because the price you pay depends on terms of delivery. Most consumers buy based on the spot price of the precious metal they are purchasing.
SPOT PRICE is the current price for immediate physical delivery.
FUTURES PRICE is the agreed-upon future price for delivery on a pre-determined date.
LBMA PRICE is the global benchmark of unallocated precious metals delivered in London.
COMEX PRICE is for precious metals futures traded on the COMEX Exchange located in Chicago.
Throughout the world government manufacturing entities such as the United States Mint produce bullion coins of an exact weight and of a specified fineness. For example, typically mints purchase .999 fine silver in 1,000-ounce bars and through a labor intensive and exacting manufacturing process produce coins of varying sizes. Silver American Eagle bullion coins contain 1 ounce of silver and are .999 fine.
Silver bullion and bars trade close to the spot price, which may change (higher or lower) literally by the minute when world markets are open. Bullion coins produced by private mints or governments sell at higher prices because they charge for manufacturing.
The United States Mint does not sell its investment bullion coins directly to the public. Instead, it distributes its bullion coins through a network of official distributors called “Authorized Purchasers” who, in turn, create a two-way market buying and selling to wholesalers, financial institutions, and other secondary retailers.
Currently the U.S. Mint has nine Authorized Purchasers located in the United States. To become a U.S. Mint Authorized Purchaser of gold, silver, platinum, or palladium bullion coins, the firms must meet certain financial and professional criteria, based on metal type.
Premiums and minimums
Prices for American Eagles are based on the prevailing price of gold, silver, platinum, or palladium plus a premium to cover minting, distribution, and marketing costs. Prices change on a daily basis, as the gold, silver, platinum and palladium markets fluctuate and are based on the PM (closing prices) of the London Bullion Market Association (LBMA), an international trading association representing the global market base that includes the majority of gold-holding central banks, private sector investors, mining companies, producers, refiners, and fabricators.
According to the U.S. Mint:
American Eagle Silver Bullion
- U.S. Mint Authorized Purchasers are charged the LBMA PM Silver Price plus a $3.05 per coin premium.
- Minimum ordering requirement: 25,000 ounces.
American Eagle Gold Bullion
- U. S. Mint Authorized Purchasers are charged the LBMA PM Gold Price plus a percentage premium as follows:
- 1-ounce: 3%
- 1/2-ounce: 5%
- 1/4-ounce: 7%
- 1/10-ounce: 9%
- Minimum ordering requirement: 1,000 ounces.
American Eagle Platinum Bullion
- U.S. Mint Authorized Purchasers are charged the LBMA PM Platinum Price plus $65 per coin.
- Minimum ordering requirement: 100 ounces.
American Eagle Palladium Bullion
- United States Mint Authorized Purchasers are charged the LBMA PM Palladium Price plus a 6.25% premium.
- Minimum ordering requirement: 100 ounces.
Authorized Purchasers must also pay shipping costs from the Mint’s manufacturing facility to its business or vault locations. Also, there are charges to each dealer level in the distribution chain. Due to the competitive nature of the precious metals markets, profit margins on bullion coins are razor thin.
Most dealers price bullion coins based on the daily “spot” price of the precious metal.
So, if the spot price of silver is USD $28.90 per ounce, what would lead anyone to believe he could purchase a genuine silver American Eagle bullion coin for $19.99? Common sense would dictate that a genuine silver American Eagle bullion coin is going to be priced above the spot price of $28.90 because the dealer who is selling the coin to you has had to pay the distributor’s price and add the profit margin he needs to stay in business. Generally, that ranges between $6 and $7 per coin for large high-volume dealers, but it is likely to be higher for smaller retail dealers.
If you believe that a merchant in China is going to buy genuine silver American Eagle bullion coins from one of the U.S. Mint’s Authorized Purchasers, take delivery in China, and then sell one or more to you online for significantly less the spot price of silver, you’re living in a world of absolute fantasy.
There’s only one explanation based in reality. Silver American Eagle bullion coins or any other precious metals coins advertised and sold online for significantly less than the value of their precious metals are counterfeit.
Take responsibility for your own actions. Check the spot price of whatever precious metal content coin you are contemplating purchasing. Spot prices for silver, gold, platinum, or palladium are available online 24/7. Use Google or your preferred search engine to find the spot price of the precious metal content of the bullion coin you are interested in purchasing. Then make your decision based on reality.