Precious metals markets are trading mixed this week. Despite a significant drop in the U.S. Dollar Index which might have served as a catalyst for a big breakout week for gold and silver – futures traders had other ideas and kept metals prices relatively capped through Thursday.
Today, however, we’re seeing a nice month-end rally developing in gold and silver prices.
Silver’s outperformance brings the gold:silver ratio back below 100 after reaching historically high levels from the panicked market conditions of March. Although the ratio itself doesn’t trade on any exchange, some metals traders do try to profit off trends in the ratio by going long one metal and short the other. Long-term bullion investors also use the ratio as a measure of relative value when deciding whether to favor gold or silver in new purchases.
Right now, in terms of both relative value and near-term momentum, silver has the edge over gold. Although anything is possible near-term, including another spike higher in the gold:silver ratio, any reading in the 100s would represent an historically rare opportunity to nab some silver on the cheap. Even in the 90s, silver is still an extraordinary bargain, relatively speaking, given that the ratio traded in the 30s as recently as 2011.
Also looking cheap on a historic basis is platinum. Since 2008, platinum has gone from commanding more than double the gold price to less than half. Like silver, platinum has gained some ground in recent weeks.
Meanwhile, the COVID-19 pandemic and the global economic lockdowns that followed have brought out the best in some… and the worst in others.
Some scam artists have cruelly used the crisis as an opportunity to prey on the hopes and fears of vulnerable people. Whether it’s peddling fraudulent coronavirus charities or fake cures for the disease, sham investment opportunities or counterfeit medical masks, crooks are finding creative ways of cashing in.
We’ve even seen increases in some types of fraud in the precious metals markets. For example, counterfeit coins are showing up in more places.
The Anti-Counterfeiting Educational Foundation warned this week that fraudulent advertisements for gold and silver coins are appearing on Facebook.
Some of the scam offers are for supposed numismatic coins that are placed in plastic capsules with phony certifications that appear to come from genuine coin grading services. Slabbing a coin with a doctored grade can potentially add hundreds or even thousands of dollars in artificial value.
The good news is that these sorts of fraud schemes can’t be pulled off on bullion investors who stick to common coins, rounds, and bars that are priced mainly on their metal content and not on their supposed rarity or collectible value or their fancy certifications.
Even genuine numismatic coins can be ridiculously overpriced and overhyped by dealers. Some have faced prosecution for consumer fraud in recent years, and other sketchy operators in this space have ramped up their advertising during the pandemic to try to lure people who want the protection of bullion into the weeds of high-priced and illiquid collectible products.
Sticking to low-premium bullion items is the first and most important way to avoid being scammed in the precious metals market. Always keep your eye on the actual melt value of the precious metal contained in the item you are buying. But even if you stay in in the realm of honest money, there are scams to be aware of.
According to the Anti-Counterfeiting Educational Foundation, as well as our own research, there are many fake one-ounce silver American Eagles being peddled in online marketplaces. The fakes are composed of cheaper base metals, often without any disclosure.
It may seem hard to believe that fraudsters would go to the trouble of creating realistic-looking phony silver coins given that they will sell for only a small fraction of what counterfeit gold or numismatic coins can garner. But perhaps they are exploiting the fact that bullion buyers tend to be less careful and less suspicious when shopping for silver.
You should never have to wonder whether what you’re buying is the real deal. That means never buying from disreputable or unknown sources. Naturally, illicit operators will try to tempt you away from what good sense dictates by offering what appears to be an unbeatable deal.
The reality is that anyone who wants to sell you gold or silver at prices that are too good to be true is trying to hoodwink you. Either the product isn’t genuine. Or it won’t come at all. Or it’s a bait and switch scheme designed to get you in the door, so-to-speak, so that a salesman can harangue into buying something much pricier.
When it comes to buying physical precious metals, only reputable dealers that specialize in what you actually are interested in owning deserve your business.
We are certainly proud of the reputation we have built over the years at Money Metals Exchange and will continue to work hard to keep it. And you never have to wonder about the authenticity of the products we sell as our rigorous and highly sophisticated testing equipment verifies every piece of metal that passes through our building.
Our reputation is on the line every time we ship out and item -- and we guarantee everything as being exactly what we are representing it to be.
In the meantime, we will also continue to keep an eye on shenanigans within our industry and the broader global market for precious metals – and report to you some of the things we are seeing.
Meanwhile, the Commodity Futures Trading Commission and Justice Department are engaging in investigations into price manipulation and other fraud schemes carried out by traders working for big banks. A handful of institutional futures traders can push paper prices for gold or silver up or down for no real fundamental reason on any given day.
But at the end of the day, long-term investors should ignore the noise and stay focused on the supply and demand fundamentals for gold and silver. As long as you stick to physical metal, the physical fundamentals will ultimately win out.
Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 50,000 customers. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.
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