Why are Silver Premiums Increasing?

If you keep an eye on the silver spot prices frequently, you might see silver premiums increasing day by day. Such higher highs of premium levels in silver make investors scratch their heads. But how are such popular abundant metal prices at such a peak? This also results from the high silver premium on the bullion, like silver coins, bars, or rounds. Facing such circumstances brings you to the question: why are silver premiums increasing?

Basically, premiums are merchant fees above the spot, which are inevitable as they are manufacturing, packaging, distribution, and handling charges. These figures can significantly depend on the product, its metal content, its packaging, its market demand, the market conditions, and the dealer.

Let’s look at premium silver and then find out the reasons why silver premiums are increasing.   

What is Premium Silver?

First lets check out what is premium silver in terms of quality. – The long-term stability or appreciation of premium silver’s value makes it an attractive investment, particularly during times of strong demand. Premium silver goods’ desirability may rise and fall with the waves of market situations, product uniqueness, and consumer awareness of certain brands. 

Now, let’s look at the premiums on silver. – 

To understand the concept of premium silver, consider this simple maths:

Suppose the spot price of silver is $25 per ounce, and the silver bullion price is displayed as $30. The difference between the two prices is $5, which is the premium of the silver bullion over the spot price. The premium is often presented as a percentage, for example, 20% over the spot. 

These numbers are just for reference, and the premiums can be much higher or lower than this, depending on the factors mentioned above. The premiums are constantly fluctuating, but there has been a consistent rise. Let’s look at the reasons for this.

Why are Silver Premiums Increasing?

Silver may be less expensive than other precious metals like gold and platinum, but it shares the stage regarding rarity. Since it’s a precious and non-renewable metal with increasing industrial demand, refining, and mining costs are bound to increase.

With increasing demand and reduced resources, silver prices tend to rise. Adding to this are the production costs of turning raw silver into meticulously crafted bullion. This is a daunting task due to silver’s malleability and softness. These production costs, along with the secure supply and handling, result in increased premiums.

Furthermore, inflation and other struggles contribute to the increase in silver premiums. Since silver is a comparatively lower-priced precious metal, the premium addition is relatively high in percentage. For example, if a premium of $5 is added to a $1,500 gold bullion, that would amount to <1%. On the contrary, if the same ($5) premium is added to the silver bullion worth $15, it takes up the premium to a whopping 33%. 

Dspite all these circumstances, silver remains a highly preferred and sought-after bullion to add to your portfolio and collection. Here are some ways to handle the rising premium silver to safeguard your silver portfolio and ensure long-term value preservation.

How to Handle High Silver Premiums?

Handling your investment in times of increasing silver premiums is considerably easy. However, you must make sure that you consider and apply these points before investing in silver!

• You can opt for silver bars and rounds instead of monetized and government-backed silver coins, as they have lower premiums and prices.
• If you have a higher budget and investment objective, buy heavyweight silver bars, like 10 oz or 100 oz bars, which have lower per-ounce premiums and offer more silver content in a single purchase. 
• Make sure to buy only from reputable dealers who are associated with various mints, refineries, and coin-grading services like NGC and PCGS. 

Conclusion

Investing in any precious metal of any type involves premiums. While investing in silver, your objective should be confirmed and fixed to help you make confident and non-regretful decisions. Novices can also understand the silver premiums, and you can avoid losses with proper attention. 

Happy Investing with Low Silver Premiums!