Demand for physical precious metals strong despite drop in prices

The large drop in gold and silver prices last month would indicate that there is very little demand and there is an abundant supply of precious metals. However, recent data suggests that demand in physical gold and silver remains strong as many see this as a tremendous buying opportunity.

To understand how high demand is, the United States Mint is on pace to produce 60 million American Eagle Silver coins, which is a record high, but it still won’t be enough to satisfy demand. The Mint has created more coins in the first quarter of this year than in the entire years of 1996, 1997 and 1998 combined.

“I think what you see is investors that thought they might have missed the price before saw the price drop in April, and this was a great opportunity for them to get into the market,” said Scott Carter, CEO of Lear Capital, the largest seller of physical gold and silver in the country, in an interview with CNBC. “So, we’ve actually seen on the physical side a big bump in investors wanting to add to their position or jump in for the first time. So, demand at the mint level for coins, demand at the retail level in our business, is at an all-time high right now.”

Financial experts and analysts have downgraded their outlook on the yellow metal and have urged investors to sell their gold. Warren Buffett made headlines this week when he said he would not purchase gold, even if it dropped to $800. “It just sits there, and you hope somebody pays you more for it.”

Despite these statements, many still see precious metals as a lucrative investment or a great safe haven, especially at a time of inflation, a difficult economic climate and central banks acquiring the yellow metal.

Ryan Denby, president and CEO of Austin Rare Coins and Bullion, said in a news release Tuesday that precious metals paper might have experienced a sell-off in large numbers but buyers of physical gold and silver controls the margin of 50:1.

“Our clients are certainly not selling and other companies are expressing the same scenario to me – there just isn’t enough to go around at these levels and premiums have risen as a direct result,” said Denby in a statement.

In the Wednesday morning trading session, gold is up $19.60 and is trading at $1,468.40. Silver is also up $0.10 and is inching toward $24 per ounce.

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