Private issue mints offer a seemingly endless variety of products: from well-known rounds like Sunshine, Silvertowne, and A-Mark, to the no-name brands minting everything from Obama heads to bar mitzvah designs. If it weighs one troy ounce and its purity is .999 or greater, anything silver falls into this category.
As mentioned above, silver's average monthly spot price has been $14.51 over the past seventeen months. The average premium for an order of 500 silver rounds has been $1.87. The percentage of premium to total is 11.4%. This percentage peaked in December of 2008 at 24% ($10.28 spot + $3.25 average premium) and currently sits at 6.0% ($17.17 spot + $1.09 average premium).
CONCLUSION
Several conclusions may be drawn from the data above:
-Gold offers the best premium to total cost ratio. Following this ratio exclusively, gold is a more conservative investment than silver. Similar to spot price movements, gold's premiums fluctuate less dramatically than silver's, meaning one's investment is less beholden to upward movements in spot price in order to realize "profit."
-Silver's premiums fluctuate widely, spiking due to supply constraints at the mints and dropping when demand eases. This is especially true of government coins.
-The significant price difference in silver premiums between government coins and privately minted rounds opens arbitrage opportunities during large market disruptions, like in 2008.
If metals prices fall under deflationary pressure, expect buyers to place demand pressure on the markets - especially in silver - and the premiums to rise congruent with 2008 levels, especially with respect to government coins. Should hyperinflation ensue - a scenario I deem less likely in the near term - average buyers may be priced out of the market altogether.
'Til next time, that's my Saab Story.
As mentioned above, silver's average monthly spot price has been $14.51 over the past seventeen months. The average premium for an order of 500 silver rounds has been $1.87. The percentage of premium to total is 11.4%. This percentage peaked in December of 2008 at 24% ($10.28 spot + $3.25 average premium) and currently sits at 6.0% ($17.17 spot + $1.09 average premium).
Several conclusions may be drawn from the data above:
-Gold offers the best premium to total cost ratio. Following this ratio exclusively, gold is a more conservative investment than silver. Similar to spot price movements, gold's premiums fluctuate less dramatically than silver's, meaning one's investment is less beholden to upward movements in spot price in order to realize "profit."
-Silver's premiums fluctuate widely, spiking due to supply constraints at the mints and dropping when demand eases. This is especially true of government coins.
-The significant price difference in silver premiums between government coins and privately minted rounds opens arbitrage opportunities during large market disruptions, like in 2008.
If metals prices fall under deflationary pressure, expect buyers to place demand pressure on the markets - especially in silver - and the premiums to rise congruent with 2008 levels, especially with respect to government coins. Should hyperinflation ensue - a scenario I deem less likely in the near term - average buyers may be priced out of the market altogether.
'Til next time, that's my Saab Story.
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