It’s that time of year for reflection. And just like every year, we like to take a step back and assess the previous 12 months. While past performance is no guarantee of future returns, oftentimes, you can glean something important from the prior year which can possibly provide some insight as to where we may be headed the coming year and, in the years, to come with regards to the precious metals market.

For us, 2022 was one of the more interesting and significant years in the history of gold, silver and precious metals coin and bullion market. You may be wondering why, what was the cause? We believe it was driven by several factors including war, shortages, record-level purchases, and unprecedented demand, which ultimately had an impact on prices and premiums.

While we would love to sit down and analyze every event that led to 2022 being a record year, it’s simply not possible. There are not enough hours in the day! Rather, we’re going to take this opportunity to highlight significant events, as well as identify trends that started during the year, and in some cases, have continued, as well as to try and add some context surrounding what has become a historic year in the precious metals coin and bullion market.

Russian-Ukrainian Conflict

Regular readers of our blog know that a number of factors affect gold, silver, and precious metals prices. For those who are curious to learn about these contributing factors, we recommend you read this article. One of the many factors we’ve mentioned that affect prices are geopolitical issues. Keep in mind, “geopolitical” is a broad term. For the purposes of our article, we’re primarily referring to the Russian-Ukrainian conflict, which officially began on February 24. This is when the Russian military crossed the Ukraine border with the goal of annexing the Donbas Region. Unfortunately, the conflict has turned out to be a long, costly and drawn out war with the U.S. and many other NATO countries entering the fray, by providing Ukraine with financial and defense support.

During periods of conflict or uncertainty, investors tend to gravitate toward safe haven investments and a flight to quality.

Historically, U.S. treasuries and precious metals have been the recipient of these funds. This time around is no different, which resulted in a new all-time high set in a couple of precious metals.

Gold & Palladium Record Highs

Gold is considered to be the ultimate safe haven investment, so it’s no surprise that the yellow metal set an all-time high shortly after the Russia-Ukrainian conflict began. The high was set on March 8, 2022 at $2,075, which was only slightly higher than the previous all-time high of $2,060 set in August of 2020 during the depth of the Covid pandemic. The high in 2022 was short-lived, as gold prices fell somewhat significantly following the peak, but have since rebounded and were in positive territory by the end of 2022.

Another precious metal that saw a significant spike in 2022 is palladium, topping out at $3,440 an ounce in March of 2022. Palladium is an afterthought for many investors, as it is used primarily for industrial purposes. In fact, only about 5% – 10% of palladium is used for investment purposes versus 25% for gold.

Palladium made headlines in 2022 in large part because Russia is the largest palladium producer in the world. With sanctions being imposed on Russia by the U.S. and most of Europe, the concern was that there wouldn’t be enough palladium to meet demand for industrial purposes. The primarily use of palladium is for catalytic converters.

Much of that concern has since waned, causing palladium prices to collapse. In fact, at the time of this writing, palladium is about 50% off its all-time high. This may provide investors with an opportunity to purchase this rare metal at a discount. We believe that palladium may have the most upside in 2023 and is an investment to pay attention to, especially as the Russia-Ukrainian conflict draws out with no end in sight. Another factor to take into consideration is the rarity of palladium. It’s 30 times rarer than gold and 100 times rarer than silver, which makes it an intriguing investment for this fact alone. 

$50 Million Anonymous Gold & Silver Purchase

In July 2022, Miles Franklin reported that an anonymous purchase of $50 million in gold and silver coins had been made. There’s still speculation as to who this anonymous buyer may be, but it’s believed to be a Wal-Mart heiress. The billionaire investor shared with the coin broker she used that this is the first of a few purchases that she plans on making. This is one of the most high-profile purchases made in the industry; at least one that was made public. Of course, China has been secretly adding to its gold reserves for years!

The significance of a billionaire making such a large purchase is significant for a couple of reasons. One, she clearly believes that this is one of the best places to invest her wealth for preservation and upside potential. Secondly, most billionaires have high profile connections on both Wall Street and in the financial arena who are typically plugged in with what is happening in the economy and where things are headed.

As we highlighted in a previous article, the physical gold and silver coin market is smaller than it may appear, and a purchase of this magnitude has a significant impact on available supply. In fact, it is believed that the buyer was interested in filling the entire order with American silver eagles, but there wasn’t enough in the wholesale market to complete the order. Rather than waiting for enough silver eagles to fill the entire order, the investor filled the balance of her order with 90% silver half dollars, possibly Morgan and Peace silver dollars, and pre-1933 U.S. gold coins.

Considering that the wholesale market was drained of American silver eagles, it’s not surprising that premiums increased due to the lack of supply. We saw the same thing happen with 90% silver coins and pre-1933 gold coins.

All-Time High in American Silver Eagle Premiums

Not only was the wholesale market depleted of American silver eagles following the $50 million purchase, but the U.S. Mint announced shortly thereafter in September of 2022 that they ran out of silver planchets and would not be producing silver eagles for the remainder of the year. While final figures aren’t yet available, it’s estimated that only 15.9 million silver eagles were produced in 2022, which is the lowest mintage in three years.

As a coin dealer, we can attest that American silver eagles were non-existent for months. In fact, supply was so limited and demand so high that premiums hit an all-time high. For a period of time, premiums actually exceeded the spot price of silver. We saw silver eagles selling for as high as $42 with the spot price of silver at $20, which we don’t recall ever happening before in our 13 years in business.

At the time of this writing, the premium for silver eagles is still above normal levels but has subsided quite a bit since the 2023 silver eagles have made their way to market.

90% Silver Coin Resurgence

American silver eagles weren’t the only U.S. silver coin to see strong demand and high premiums in 2022. 90% silver coins, including 90% silver dimes, quarters and half dollars, saw a resurgence in 2022 and traded at premiums not seen in years. Half dollars traded at slightly higher premiums than dimes and quarters, but all three denominations were in high demand with limited supply. As with American silver eagles, inventory seemingly dried up overnight.

Historically, these coins were seen as a low-cost way to invest in silver coins. In fact, they’re commonly referred to as “junk silver” coins, which means that they trade for their underlying silver value as opposed to any type of collectible or numismatic value. Very few people these days attribute 90% silver coins with the term “junk.”

The free market is truly a great thing, which always self corrects. Some long-time holders of 90% silver coins saw an opportunity to cash out some of their holdings at a decent profit and took advantage of the opportunity. This resulted in higher supply and inventory levels, pushing premiums back down. Even so, demand remains incredibly high with no end in sight.

Pre-1933 U.S. Gold Coin & American Gold Eagle Demand

Not to be outdone by silver, gold demand also increased throughout the year. In particular, demand for pre-1933 U.S. gold coins reached a multi-year high, resulting in limited supply and above average premiums. Historically, these coins have traded closer to their bullion value, but premiums reached as high as a few hundred dollars and only recently have settled back down. Even so, these coins continue to remain popular; especially among folks who are concerned with the possibility of confiscation.

Most common date pre-1933 U.S. gold coins fall under the category of semi-numismatic coins. This simply means that they’re a bit of a hybrid. While most of the value of the coins is derived from the underlying gold or bullion value, they do carry some collectible value due to their age and historical significance.

While not in the same stratosphere as pre-1933 U.S. gold coins, demand for American gold eagles also increased, causing supply to dry up and premiums to increase. Some online coin dealers were demanding premiums as high as $250 over the spot price of gold at the peak of the market. This, much like premiums for pre-1933 gold coins have subsided, but demand has continued to remain strong with slightly elevated premiums.

2023: A Look Ahead at Precious Metals & Global Economies

We believe that 2023 will continue to be a strong year for precious metals prices. While we’ve seen some fairly high predictions, we tend to shy away from specific figures, as each year brings unexpected surprises, which as you can see, will impact prices.

That being said, we believe that U.S. economic fundamentals are weak, which could push the economy into a recession. Recessions typically accompany a pullback in stock prices, which could cause all stock indices into bear market territory. At the time of this writing, the Nasdaq and Russell 2000 are in bear market territory (a 20% decline from recent all-time highs), the S&P 500 is on the cusp at a decline of 19.4%, while the Dow has held up a bit better with a decline of only 9% in 2022.

Historically, the Federal Reserve has pursued an accommodative monetary policy during a recession, which may cause it to pivot from its current hawkish stance by lowering the federal funds rate and purchasing bonds with the goal of reducing interest rates.

Other factors to consider is that we have a record high national debt quickly approaching $32 trillion, annual deficits in the trillions of dollars and a debt to GDP ratio that would make most banana republics blush. Not to mention, the present value of our unfunded liabilities for social security, Medicare, Medicaid and the prescription drug plan is estimated to be as high as $300 trillion. Furthermore, the derivatives market may be as high as $2.5 quadrillion, which could all come tumbling down if some of the most systematically significant banks, such as Deutsche Bank, come tumbling down.

Of course, none of this takes into consideration the apparent de-dollarization by foreign countries and the protracted Russian-Ukrainian conflict, which could ultimately give rise to World War III and the possible use of nuclear weapons. The above risks, including others, may warrant a more defensive investment position in the form of gold and silver coins as we enter the new year.

Summary

In conclusion, 2022 was one of the more interesting years in recent memory. We are still the closest that we’ve been in years to entering into war against one of the world’s superpowers. This concern continues to contribute to higher precious metals prices, increased demand, and higher than normal premiums.

Of significance, we saw record highs in the price of gold and palladium during 2022. Additionally, supply of American silver eagles and 90% silver coins vanished for a period of time, pushing premiums to record levels. Gold coins, especially pre-1933 U.S. gold coins and American gold eagles, also saw increased demand, which caused these popular coins to trade at above normal levels.

Considering the size of the gold and silver markets, another $50 million dollar purchase could put a massive strain on an industry that is just beginning to recover from the last transaction. Regardless of large one-off purchases, the current economic, fiscal and geopolitical environment appears to bode well for precious metals in 2023.

If you’re in the market to buy or sell gold or silver coins, you’ve come to the right place. Atlanta Gold & Coin Buyers can not only help you meet your investment goals but can provide insight and guidance regarding which options may be best suited for your unique situation and circumstances. 

Reach out to one of our coin and bullion experts today and take steps to protect and build your wealth as we face an uncertain future.