Silver Price per Ounce: Why Is the Silver Spot Price Different from What You Pay for Silver Bullion?
The Hard Assets Alliance’s silver charts show the spot price in the USA and foreign markets both intraday and historically. They update in real time when markets are open.
Many investors wonder why the price to buy an ounce of silver bullion—whether it’s a coin or bar—is so much higher than the spot price. It’s because of a few factors.
First, the spot price is the price of a raw, unrefined commodity. Trading activity in the futures market determines its price. Silver has to be minted or refined into bars of various sizes before it can be sold to investors.
Second, the US Mint charges $2/oz. when selling coins to wholesale dealers. This represents the bulk of the premium; at an $18 spot price, it’s an 11% markup.
Retail dealers, (both online and brick & mortar) buy from wholesale dealers and add a small markup on their part, too.
Demand and supply can also affect silver premiums.
In the wake of the financial crisis in 2008, investors flocked to silver as a cheap hedge against a declining US dollar. As a result, Ssilver American Eagle sales surged over 400%. With the tight supply from the US mint, and low spot prices, premiums on Silver Eagles have remained high in recent years.
Why the Silver Market Is Volatile
The size of the silver market relative to other assets classes is very small. Just over one billion ounces of silver was produced in 2016. With an average spot price of silver at $17, this is only $17 billion dollars.
Combined with the availability of silver exchange- traded products it creates a volatile environment where the spot price of silver can move 5–10% in a short period of time. Investors should use the volatility to their advantage when making transactions.
Dollar cost averaging can be an especially effective approach when allocating funds to a silver bullion investment. A product such as Hard Assets Alliance’s Metal Stream™ service is a good, low-cost option for making monthly silver bullion purchases.