There's a gold rush on.
Demand for buying physical gold and silver is high locally and nationally. But plan on having a long wait. Especially if you want gold. Buyers vastly outnumber sellers.
"We cannot keep it in stock. It's probably easily five buyers to one seller," said Jolene Neher, who along with her husband, Steve, own Kansas Coin Connection, 846 Ill.
Although the Neher's had some gold coins in stock this week, most all had been pre-ordered for customers and were waiting to be picked up.
Investors are especially interested in gold and silver, according to Neher and Rich Lorenzo, of Berthal Fisher & Co. Financial Services in Lawrence.
"People are hoarding it because they are worried about the world," Lorenzo said. "They are worried about the economy and inflation on down the road."
Lorenzo's firm does not have gold and silver on hand and only refers its clients to dealers. When they are able to find it, it's at a ridiculous price, he said.
Public interest in buying gold and silver has been growing for several months. But prices have fluctuated and were even falling during the recent downturn in the stock market. That is contrary to what normally happens to gold and silver during a down market. It's also contrary to the law of supply and demand because physical gold and silver were still scarce.
"We're shocked," Lorenzo said.
On Oct. 7 the price of gold on the market was $900 an ounce, according to Neher. By this week it had dropped down into the $700 and $800 range. Silver, which is much cheaper but still scarce, sold for $12.25 an ounce on Oct. 1. Friday morning its price was $9.98. Three months ago silver was selling at $17 per ounce, Neher said.
On top of the base price, called "spot price," dealers add premiums to the price. Premiums in precious metals are similar to the relationship between wholesale and retail prices on store products. Premiums, too, have fluctuated. Premiums for silver might be a few dollars over the spot price. But premiums for gold have been considerably higher.
The three most popular gold coins are the American eagle, Canadian maple leaf and the South African Krugerrand, Neher said. American eagle coins typically have a premium of $20 to $25 over the spot price. Recently the premium has gone up to $80 to $90 over spot price, Lorenzo and Neher said.
Despite the tremendous demand for physical gold and silver, an upturn in prices began only earlier this week.
"When the stock market went down, people were selling the gold and silver paper contracts to cover their losses," Neher said. "That flooded the market, which drove the prices down."
Lorenzo wonders if there is some market manipulation going on but doesn't know where it is originating.
People who want physical gold are afraid the federal government's policies will lead to high inflation.
"Investing in gold is looked at as an insurance policy against a catastrophic situation," Lorenzo said.