Coronavirus & Impact on Premiums

With the coronavirus pandemic and the steep correction in the equities markets earlier in the year, investors are flocking towards safe haven assets such as gold and silver. OneGold and its parent company, APMEX, are seeing precious metal demand at multi-year highs.

Typically, when investors purchase precious metals, they have to pay more than the spot prices quoted in New York and London. This markup is known in the precious metals industry as a premium. At the beginning of the year, OneGold was selling gold and silver at approximately a $5 and $0.05 premium over spot, respectively.

However, with the coronavirus lockdowns spreading worldwide, the supply chain of precious metals has been severely impacted. Many mining companies halted operations, while refineries and mints paused production. Also, logistics and transportation companies limited routes.

The combination of high demand and a stressed supply chain has caused precious metals premiums to spike upwards. Unlike some ETFs, which may sell a paper promise of precious metals ownership, OneGold will only sell metal that it physically has in its possession. As a result, OneGold’s costs to acquire the metal has increased, causing a rise in costs to investors

As the world slowly returns to normal, OneGold expects the precious metals supply chain to ease up and for precious metals premiums to gradually return back to normal levels.

With every change comes an opportunity. In recent months, investors who would typically purchase physical precious metals have taken advantage of buying digital metal on platforms like OneGold. The premium for a 1 oz Gold American Eagle, the most popular retail investment coin in the U.S., was recently as high as $135 over spot per ounce a few weeks ago. Many investors are choosing to purchase gold through OneGold at a 1.00% premium, approximately $17 over spot per ounce, and will be looking to use OneGold’s Redeem functionality to swap their digital metal holdings to physical products such as the 1 oz Gold American Eagle when premiums return back to normal around $60 to $70 over spot per ounce for physical gold coins.