Precious metals are on fire as uncertainty looms large, the national debt continues to grow toward unsustainable levels (in my view), and paper dollars don't look all that great in the future.
Last Friday, gold hit a record high of $1933.30 an ounce and is trading at around $1,950 as I write this piece. However, if you adjust for inflation, as I believe you should, gold has a way to go before hitting an inflation-adjusted high estimated to be in the $2,700 range based on the 1980 price.
Silver continues to run higher as well, closing at $22.80 an ounce on Friday, and is up 8% to $24.70 as I write this. Silver has quite a way to go to hit its recent high of about $47 in April 2011, while the all-time high of nearly $50 an ounce in 1980 would equate to nearly $160 an ounce adjusted for inflation. However, silver's 1980 top-out was influenced by the Hunt Brothers' attempt to corner the silver markets. (In January 1980, restrictions on margin traders precipitated a 50% drop in silver prices over four days.)
Physical silver -- in this case "junk silver," coins minted prior to 1965 -- continues to command a premium over the spot price; here on Monday morning that premium is about 18%. That means physical silver will cost you around $29 an ounce. That premium is well below the 63% we saw in mid-March as silver spot prices have recovered and physical silver prices have also risen but not kept pace, as expected.
Meanwhile, the gold/silver ratio, which measures the number of ounces of silver it would take to purchase an ounce of gold, stands at about 79, well above the 60 average of the past 20 years and the 20th-century average of 47. It hit 124 in March as the pandemic ensued and the spot price of silver fell below $12 an ounce. This measure, which has been used as an indicator of when to buy silver, has lost some of its luster over the years but still offers some perspective, especially considering that there is 17.5 times as much silver as there is gold in the earth's crust.
Theoretically, the best metals play at this point may be the change in your pocket. Pennies minted through 1982, which were 95% copper and 5% zinc, are currently worth nearly 1.85 cents in metal value, according to coinflation.com. All you need to do is source a whole bunch of pre-1983 pennies at your local banks (where a penny is still valued at a penny) -- $100,000 of those pennies would give you $185,000 in value. Keep in mind, you are prohibited by federal law from melting these coins, but they still have value nonetheless.
Of course, sourcing that many of the 95% copper variety is not easy, as I found out on a couple occasions. Interestingly, one of the stumbling blocks was a bank teller at my bank, who was put off by my request for just $10 in rolled pennies and asked that I call ahead the next time. So much for full-service banking.
