What a year it has been for precious metals. While gold has backed off of its $2064 August all-time high to about $1891 (unadjusted for inflation though), the yellow metal is still up about 24% year-to-date. Meanwhile, silver is up about 46% year-to-date, currently trading at about $26.31/ounce, but off about 10% from the 2020 high it hit in August. Silver, however, is nowhere near the $47+ all-time high it hit in 2011 (also unadjusted for inflation).
One of the more interesting precious metals related anecdotes for 2020 occurred early in the pandemic when the spot price collapsed. The silver spot price fell below $12 in March, but that did not tell the whole story. At that time the price for actual, physical silver (in this case, "junk" silver, or 90% silver coins minted prior to 1965, without numismatic value) rose far above the spot price. In my March 18th column, I noted that the $100 face value bag of junk silver, containing 71.5 ounces, was selling for $1475, or $20.62/ounce, a 63% premium over the spot price.
That disconnect between the spot price and price for silver you could hold in your hand, was driven by demand in a time of great uncertainty. Since then, the price of spot silver has more than doubled, while the price for a $100 bag of junk silver, at about $2000, has risen about 36%. At current prices, junk silver is now trading at about a 5% premium to the spot price. The disconnect between the price of spot and physical silver, not surprisingly, has all but closed.
The best of both worlds had to be the Sprott Physical Silver Trust (PSLV), which is backed by physical silver, with each share of representing .3629 ounces of silver. In March, PSLV fell to $4.77, and closed Friday at $9, up 89% since the 2020 low. Interestingly, PSLV unit holders can redeem units for physical silver on a monthly basis, subject to minimum requirements. For instance, redemptions are done at the last day of the month and must be for the equivalent of at least 10 London Good Delivery bars (these mammoth bars weigh between 750 and 1100 troy ounces each). The redeemer is also responsible for delivery costs. At Friday's closing price, PSLV prices out at $24.80/ounce, a 4.5% discount to that day's closing spot price.
Where silver and gold head in 2021 remains to be seen, but you've got to give some credence to the theory that all of the money the government has been spending (which is our money), supporting a seemingly endless national debt, should bode well for metals.
