The wave of investors buying physical gold and silver over the past two years has certainly impacted the markets.

Retail demand for coins, rounds, and bars is now multiples of what it was prior to the COVID outbreak and the 2020 presidential election. Mints and refiners are still working to add enough capacity.

While American investors at large may feel more than a little nervous about their portfolios, most are still listening to their financial advisors. The decision to dump some paper assets and buy physical bullion still looks like a radical move. Only a small fraction are ready to make it.

Long-time goldbugs wonder when, and if, bullion investing might move from the “fringe” into the mainstream.

The perception is that a reckoning is coming in the conventional financial markets. If the bubbles there start popping, there will be very few places to run. It will be time for physical metal to shine.

The theory makes plenty of sense. But it has been making sense for the past one and a half decades. The “when” is, in many ways, more important than the “why.”

So when will the trickle of Americans buying bullion give way to a flood?

Correctly guessing the answer is essentially an exercise in mass psychology, which is to say it is anything but an exact science. The best we can offer is a signal we think is likely to indicate this migration has begun.

Watch the premiums for large bars – 1000 oz silver bars and one kilo gold bars. Dealers like Money Metals offer these bars and publish their pricing.

These are the bars, along with 100 oz gold, stored and traded in the COMEX vault system. Mints, refiners and other industrial users for precious metal purchase large bars for use in production. If a large investor wants to buy physical metal, these bars are by far the most economical way to do it.

Premiums for large bars are historically quite stable. Buyers have generally been able to get metal in whatever quantity was needed at something very close to the paper market price.

Demand for retail-sized coins, rounds and bars spiked higher just over two years ago when demand overwhelmed the ability of producers and dealers to supply. Large bars, however, have remained in stock and available.

At least for the most part. There was a tremor in thousand-ounce silver bar premiums in the spring of 2020.

Prices took a healthy leap higher when bullion banks sold more paper silver than they should have and were caught short by the number of buyers taking actual delivery.

Premiums have stabilized since then. Outside of that event, higher premiums have been driven exclusively by too little fabrication capacity to meet the surging demand for smaller products. Surging premiums for larger bars will indicate a shortage in supply rather than manufacturing capacity.

Mine production is sufficient to meet demand for industrial use and for a modest level of investment demand. It will not be anywhere near sufficient for any larger scale rotation out of conventional financial assets and into metal.

The inventory of COMEX silver bars dropped to a 4-year low last week. These inventories are certainly worth watching.

In truth, however, there hasn’t been a reliable correlation between lower COMEX inventory and higher prices. When declining stocks translate into higher bar premiums, investors can know something is afoot.