gene arensberg reports that the premiums charaged on silver and gold coins are back to normal. but the point he doesn't emphasize is that the premiums, large or small, only reflected the true values of silver and gold bullion, and their divergence from the phony prices at the comex. when silver was at $14 there was a small premium for coinage. then when silver was driven down to $9 by the short selling of two banks, silver bullion still cost $13. i know because i tried to buy some at $9 and $10 and $11 and $12. now that silver is back at $14, the premium has gone away, as the paper and physical markets are more or less aligned again.

Physical metal more available, at least for now

HOUSTON – Late last year, when both gold and silver were sold down along with everything else in a sell-anything-with-a-bid panic, the world was getting pretty scary. Demand for physical bullion, real gold and silver coins and bars, outstripped dealers’ ability to supply the metal to investors anywhere near spot prices. Premiums, the amount charged and paid by dealers over the prevailing cash or spot prices, skyrocketed to record or near record levels.

During the panic, citizens everywhere wanted to get their wealth out of banks, out of stocks and other investments, into cash and into something, anything they perceived as safe. For a growing number of investors that also meant putting some of their wealth into the one thing people have trusted as a store of value for thousands of years – precious metals, gold and silver.

Two separate markets for gold and silver developed during the crisis. There was one market for small amounts of bullion, the so-called “retail” bullion market and one for the very large commercial-sized bars that trade on the futures and global over-the-counter (OTC) markets. The cash or “spot” price tracks the larger, futures-related market which, in the fall of 2008, was under tremendous pressure from large holders seeking liquidity, massive deleveraging and that market fell prey to opportunistic sell-side traders taking advantage of the extreme volatility.

The retail bullion market disconnected from those artificially low spot prices as the very high premiums of the panic period show. Now that both gold and silver have returned to higher prices and the world has less fear of a global systemic economic collapse (at least for now), the physical bullion markets have returned to premium levels that are approaching normal.

Premiums reflect demand

In more normal markets there is usually ample supply from both buyers and sellers in the smaller, retail bullion markets, but as we have just witnessed, when there is significant fear and more people want to buy metal than sell it, something has to offset that demand/supply imbalance. That’s where premiums come in.

Premiums are a direct gauge of retail demand for precious metals. Very simply, the higher the premiums, the higher the current demand at current cash or spot bullion prices for the smaller bullion items most people are able to trade.

http://www.stockhouse.com/Columnists/2009/June/22/Gold-silver-premiums-back-near-normal-Got-Gold-rep