Precious Metals Premiums vs. Real Estate Premiums

Precious Metals Premiums vs. Real Estate Premiums

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Introduction

Many individuals are drawn to both precious metals and real estate when considering investment options due to their potential for long-term value appreciation and as hedges against economic uncertainties. However, a common misconception is that premiums on precious metals, such as silver and gold, are prohibitively high compared to those in other niches like real estate. In this article, we aim to debunk this myth and shed light on the realities of premiums in these two investment arenas.

Understanding Precious Metals Premiums

In the precious metals market, the “spot price” represents the current market value of the metal per ounce. However, buyers often pay a premium above the spot price when purchasing physical precious metals like silver or gold. The premium accounts for various factors, including manufacturing costs, distribution expenses, and supply and demand dynamics.

The precious metals market is highly competitive, with numerous dealers and mints vying for customers. This competition helps keep premiums relatively low as dealers strive to attract buyers with competitive pricing.

There are two primary types of precious metal products: 

  • bullion coins/bars
  • numismatic coins. 

Bullion products are valued for their metal content, while numismatic coins carry additional worth due to their rarity, historical significance, or condition. The premiums on bullion products are generally lower than those on numismatic coins.

Premiums on Precious Metals

The demand for precious metals is multifaceted. While there is investment demand from individuals and institutions looking to hedge against inflation and economic instability, there is also industrial demand. Many industrial applications, such as electronics, medical devices, and green technologies, rely on precious metals like silver. This industrial demand can influence the premium on precious metals, affecting the supply-demand balance.

The premium on precious metals can also vary based on the type and form of the product. Minted coins generally have higher premiums than bars due to the additional costs of minting, packaging, and marketing. Additionally, the purity of the metal can influence premiums. For example, higher-purity silver coins command a higher premium than those with lower purity levels.

The premiums on precious metals can fluctuate based on market conditions and supply availability. During periods of high demand or low supply, premiums may rise temporarily. However, given the global nature of the precious metals market, premiums generally remain competitive due to the ease of importing and exporting these commodities.

Premiums in Real Estate

The property’s location and type are among the most significant factors influencing real estate premiums. Properties in prime areas or with scenic views often carry higher premiums due to their desirability. Additionally, unique properties such as historic homes or luxury estates may command substantial premiums.

Real estate markets are subject to cyclical changes influenced by economic conditions, interest rates, and local factors. Real estate premiums might escalate During robust economic growth and high demand. Conversely, during economic downturns, premiums may moderate, and buyers may find opportunities for purchasing property at more competitive prices.

The amenities can also influence premiums on real estate and features a property offers. Modern conveniences, energy-efficient features, and high-end finishes can add to the property’s allure and justify a higher premium.

Real estate transactions involve various regulatory and legal requirements, such as property surveys, inspections, and escrow services. These costs can add to the overall premium paid by the buyer.

Comparing Precious Metals Premiums to Real Estate Premiums

Liquidity and Accessibility

One crucial distinction between precious metals and real estate is liquidity. Precious metals are highly liquid assets that can be easily bought or sold on various exchanges and through dealers worldwide. In contrast, real estate is relatively illiquid, and selling property can involve lengthy processes, real estate agent commissions, and closing costs.

Transaction Costs

When purchasing precious metals, the premiums are usually a one-time expense incurred at the time of purchase. These costs may be about 20% of the spot price. On the other hand, real estate premiums could be more transparent and include substantial transaction costs such as property transfer taxes, title insurance, maintenance fees, and legal fees. Most people need to realize that a house’s premium may run as high as 100% over the 30 years that your mortgage spans. 

Market Volatility

Real estate markets can experience significant fluctuations due to various factors, including economic conditions, interest rates, and regional demand. In contrast, while subject to price fluctuations, precious metals markets tend to have lower volatility than real estate.

Diversification Benefits

Both precious metals and real estate can serve as diversification tools within an investment portfolio. With their historically low correlation to traditional asset classes like stocks and bonds, Precious metals can offer a hedge against market downturns. Real estate, similarly, can provide a hedge against inflation and diversify risk across different asset classes.

Conclusion

Compared to premiums in other investment sub-sectors, such as real estate, the premiums on precious metals are relatively small, despite the widespread belief. Even though premiums are added to the current price of precious metals, these prices are typically competitive and fairly representative of the costs involved in minting, refining, and transporting the metal. In addition, investment portfolios can benefit from the precious metals’ liquidity, lower transaction costs, and potential for increased diversity. These characteristics make precious metals desirable additions to investment portfolios.

To make educated decisions concerning one’s financial objectives and level of comfort with financial uncertainty, it is necessary to conduct exhaustive research on the investment in question and confer with qualified financial experts. When constructing a varied and robust investment portfolio, investors can make more rational and strategic decisions if they have a thorough understanding of the true nature of premiums in real estate and precious metals.

So you have decided to buy silver online.

Great choice. Let’s talk about silver.

Silver is exceptionally popular today. Part of the reason for this is the belief that it’s potential for upside value increase is even greater than the same belief in gold. In fact, there is a very good book on this subject entitled: “ Why Silver Will Outperform Gold by 400% in the coming years”. It’s a very scholarly book and quite convincing. Give it a read if you have the time.

Silver Bullion Prices

Mind you, one need not look as far as that book to find evidence of the common belief that silver has great potential for growth in the near future. All one has to do is go to the web or even Youtube and there are advocates of this thought at every turn.

At Durham Precious Metals we believe that silver is an easy choice because it gives a sense of substance due to its lower cost per ounce than gold.

Silver Bullion

Probably 90% of our business is silver sales so this sentiment is fairly unanimous throughout the public. 10oz bars seem to be the most popular. Generic rounds and Silver Maples seem to be the next most popular and 1oz bars a close 4th place. It is our opinion that 10 oz bars and 1oz rounds are your best value as their premium over spot is very reasonable. However, there is no wrong choice when it comes to our silver product line because we try to concentrate on product lines with low premiums anyway.

Silver has always been a form of money. There are those that will argue that silver has been demonetized but we beg to differ. All one has to do is refer to the (CCRA) definition for 999 bullion. It is deemed by Rev Can to be a “ financial instrument”. Enough said on that subject!

Best Place to Buy Silver

From a utility standpoint, silver has somewhere in the neighbourhood of 60,000 industrial uses including painting the backs of mirrors to create the reflective surface to collecting radiation in solar panels. If nothing else, the lack of an above ground supply of silver ( which is relatively new historically) will keep the demand for this metal strong since for most applications there is no viable substitute.

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Can you imagine the mayhem that would ensue if all the major electronic manufacturers came grinding to a halt due to a silver shortage? It would be catastrophic to the economy. We believe that this fact alone will be a major driver of support for the silver price when the powers that be run out of tricks in their attempt to suppress the price of silver. And yes, we agree that this practice goes on in plain sight and that the regulators turn a blind eye. Let’s hope justice prevails and that the historic silver/gold ratio returns to its traditional level.

Buy Silver Online 

In the meantime…keep stacking!

So you have decided to buy gold online.

Great choice! Let’s talk about gold then, shall we?

Gold is, and always has been, a favorite of collectors of precious metals. Its 6000-year history of sustaining wealth is unprecedented. The yellow metal has launched wars, bought fortunes and has been a form of money throughout that history. It is one of the densest metals and also one of the densest elements on the periodic table. It weighs in at a density of 19.32 grams per cubic centimeter. Water, by contrast, has a density of 1 gram per cubic centimeter.

Buy Gold Online

Platinum is the densest of the common 4 precious metals at 21.45 grams per cubic centimeter.

People will often ask when gold is the right choice to buy as opposed to other metals such as silver. This is a very common question. There is no easy answer that anyone can give to someone so we always boil it down to practical applications.

Gold Bullion

Consider how much of an investment you are planning to make over-all throughout the course of your precious metals buying.  If you are planning on purchasing, for example, $10,000 worth of metals and then cap your spending then it really doesn’t matter which metals you buy. The volume of the purchase will be relatively small in terms of weight and size. Our main concern and Durham Precious Metals comes down to simple things like , cost of storage, cost of shipping and bulk. We are always trying to help our customers have the best experience as metals collectors.

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For example, if you were to tell us that you are considering selling a piece of real estate and use the proceeds to buy metals then gold would be our suggestion. The reason comes down to volume and weight at this point. Several hundred thousand dollars of silver would be an incredible amount of bulk at this spend level. Hundreds of pounds of silver would be hard to store practically and would be more expensive to store as well. If you are the DIY type it would also be harder to hide than a comparable dollar amount of gold.

Keep in mind that at the time of this writing gold is about 75 times more expensive in dollar terms as the same weight of silver. That equates to 75 times less bulk per dollar spend. This will make it much easier to hide or store if you are looking at large purchase amounts.

Price of Gold?

If you are only considering a small total purchase amount either of the metals is perfectly fine. The one consideration we always emphasize for small purchase amounts really comes down to personal perception. Here is what we mean. Silver is 75 times more bulky per dollar spend. Obviously, it is going to feel a lot more substantial if you buy $5000 worth of silver and have several hundred ounces to admire than only about 3 ounces. It’s a perception thing at this point but perception matters to people since perception can make us feel a particular way about what we spend our money on.

In closing, gold and silver are both great choices and neither is wrong in terms of their value of utility. They have both had a long history as a store of wealth and that isn’t likely to change any time soon.

Buy both with confidence. Buy Gold Online

We often carry pieces that we don’t list on site so feel free to call us for an up-to-date list.

About DPM

When you consider silver value and gold value, the wise choice is to stock up today. At Durham Precious Metals we make it easy and convenient to buy silver and buy gold online.

For those who are serious about investing in gold and silver bullion, DPM is your one-stop store to buy gold and buy silver, whether it be through our website or our retail store.

Many people want to know where to buy gold and do not realize they can avoid the traffic hassle of driving into the city and visit us at DPM located in Oshawa, Ontario. See our Retail Store page for directions. Our customers are delighted with our competitive silver price. We carry mint direct silver bars, silver coins, gold bars and gold coins.

Make Durham Precious Metals your choice for gold and silver bullion.

Consider a Gold IRA as well