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The Worlds Purest Market Thinks Gold and Silver Are Under Priced
http://bullionsupermarket.com
As the Silver price reaches yet another high, and gold again touches record highs, demand for precious metal seems to show no signs of slowing down.
In the media, the precious metal bears and bulls trade words over what will happen next. Allegations of silver price manipulation and silver price bubbles are rife in the blogosphere. As are predictions that Silver has a long way left to run. Look long enough and you can find a price prediction of just about whatever figure you want.
However, there is one market that is all too often overlooked by the precious metal community, and that is electronic auctions. The only game in town as far as precious metals is concerned is eBay, which turnsover close to a half a billion dollars a year in gold, silver and other bullion, which in the global physical precious metals trade is not an insignificant slice.
The electronic auction is the purest form of market. It allows two people, anywhere in the world, to strike a deal on an item at a price that both parties agree on. It is free from short selling, price manipulation, and other such distorting influences. It also a completely open medium that anyone with web access can have access to. eBay is a fantastic proxy for demand.
So what is this market telling us about gold and silver prices? Well, on the face of it, it seems even at the current highs, precious metals are under priced. As the market stands in March 2011, the prices being bid for 1 troy ounce Silver bars and coins are currently some 35 to 50% over the "intrinsic value" of the metal. Some well established brands such as Johnson Matthey Silver are fetching over 90% premiums on 1 ounce Silver bars. In a experiment carried out by the author of this article in March 2011, even Silver minted under a completely new, never before seen brand, attracted a 50% premium over the value of the silver contained in the bar at auction.
While it is usual for bullion coins and bars to change hands at a healthy premium over the value of the precious metal, the level of premiums being paid currently points to a expanding disconnect between the value of Silver at the exchanges (Comex etc) and the prices being paid for physical silver.
The reason for this stark elevation in premiums I believe is being driven by demand for the inflation insurance provided by precious metals. People are waking up to the fact that the purchasing power of the Dollars, Pounds and Euros in their pockets is dropping fast. Precious metals have shown how they preserved capital in the past, and now many are turning again to Precious Metal as shelter. At $1400 per ounce, rightly or wrongly, many people think the Gold ship has sailed, but At $35 per ounce, Silver still provides an affordable opportunity to get on board.
Jon Hunt is the founder of BullionSupermarket.com - The webs largest Silver and Gold price comparison site for bullion coinage and bars. For information and market intelligence on precious metals - Gold, Silver and Platinum prices, premiums, supply and demand visit BullionSupermarket.com
Article submitted Friday, March 18, 2011 & read 21 times.
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