Guide to buying silver in Australia (resurrected)

Discussion in 'Silver' started by goldpelican, Feb 20, 2010.

  1. goldpelican

    goldpelican Administrator Staff Member

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    This is an introductory article for newcomers (and oldtimers) for the various investment forms of silver available in Australia. Please feel free to discuss this article in the thread below.

    Silver comes in many forms - bullion, coin, scrap, silverware, even paper, and varying finenesses - a new stacker might be at a loss knowing where to start, or what sort of silver they should be acquiring. The first question that should be answered is "WHY are you buying silver" - is it for investment purposes, wealth protection, nest egg, fallback stash, or even for some survival scenario! Once you've answered this question, you will be in a better position to decide what silver to acquire and from where. This article will cover the different types of physical silver commonly available in Australia for investment or stacking purposes.

    Bullion bars

    The most commonly recognised form of investment silver to most people would be bullion bars. In Australia, there are a few manufacturers of new bullion bars, and a ready supply of older second hand bars available for sale. Condition really should not matter with bars - they are for all intents and purposes merely a lump of metal that is eventually destined for industrial purposes. What matters is the purity and weight - most bars in Australia are .999 or better fineness. Commonly available weights are 1oz, 10oz, 20oz, 1kg, 50oz, 100oz and 5kg - even 1000oz bars are available. Larger sizes like 5kg and 1000oz bars may not have an exact weight, e.g. 5.005kg, and they are usually priced according to the exact silver content. Amongst casual investors though, perhaps the most commonly held sizes are 1oz, 10oz and 1kg.

    Bars may be minted, milled or poured - most Australian bars are poured bars, with the maker's mark, purity and weight being stamped into the bar. No new 1oz bars are currently being manufactured in Australia, but they are commonly available, new bars usually having been sourced from the USA, and are usually minted. Older poured Australian 1oz bars are available, but not commonly sighted.

    Occasionally bars gain a collectors status, and their worth can be more than their intrinsic value alone - usually they are historic bars, or bars associated with defunct mints or companies. For the casual or novice stacker though, these are best avoided as the premiums are subject to the whim of the markets.

    Do consider liquidity issues when buying bars - larger sizes like 100oz or 5kg may be difficult to sell privately, particularly if a dramatic increase in the spot price occurs. The 1kg bar that is affordable today may be beyond the reach of many casual investors in a few years time if you plan on selling privately - so consider a mix of sizes.

    Bullion rounds

    Another form of bullion are rounds - also known as generics. Usually 1oz in size (although available in larger sizes as well), these look like coins, but are privately minted. As they are effectively just a round form of bullion not issued by a government mint, they should not be priced any higher than the equivalent sized bullion bar, however they are usually minted and of a higher quality finish.

    Some rounds have outlandish designs (e.g. Christmas or political messages) that may not appeal to a wide range of buyers, so consider liquidity issues when it comes time to sell. The 1oz size however is a very nice size for smaller sales if you do have to liquidate part of your stack. Best to stick to tame generic themes that don't have the potential to offend or turn off potential buyers though.

    Predecimal coins

    A sometimes overlooked source of low-premium silver is Australian pre-decimal coins - namely threepence, sixpence, shilling, florin and even crown coins. Many of these coins can be picked up at or around the spot price, their condition or mintage numbers making them worth less from a numismatic perspective than their silver content. Two different silver contents were used in Australian predecimal silver coins - sterling, or 92.5% silver in coins dated 1910 to 1945, and 50% silver in coins dated 1946 to 1964, the last year silver pre-decimal coins were minted for Australia. These are commonly known as pre-46 and post-46.

    Usually sold by the kilogram, these coins are priced according to the actual silver content. So a kilogram of pre-46 silver coins has an actual silver weight (ASW) of only 925 grams - so the spot value of these coins can be calculated by multiplying the spot price of a kilogram of silver by 92.5%. Post-46 coins are only 50% silver, which adds to their bulk when storing in any quantity. Obviously, a kilogram of 50% silver only contains 500 grams of silver, and should be priced accordingly. It is common for florins of either fineness to be sold in lots of 50 as opposed to by the kilogram. Kilogram lots usually contain a mix of all denominations.

    Older pre-46 coins (particularly earlier George V issues) can be quite worn, and may weigh less than when originally minted - hence the practice of pricing trades by the kilogram, rather than on a per-coin basis. Crowns were manufactured only in 1937 and 1938 - the 1938 is particularly rare, however the 1937 can occasionally be found at or near spot, and is worth buying on the simple basis it can usually be flipped as a numismatic coin to collectors regardless of condition.

    One difficulty with stacking silver in this form is liquidity - on the open market this silver often sells below spot, and is not always in favour. However it is the easist and cheapest way to obtain fractional silver in Australia, with the occasional upside of a numismatic find amongst bulk purchases.

    1966 50c

    When Australia first introduced decimal coins in 1966, the 50c piece was the only coin to retain any silver content, of which it was a relatively high 80%. For many Australians this is one of the most recognised forms of silver to collect, and doubtlessly sock drawers in bedrooms across the country hold a small stack of "round fifty cents" somewhere at the back. By no means rare, over 36 million were struck, but an unknown number have been melted in that time. It's not uncommon to see lots of 100 to 1000 coins being offered at a time.

    Each 1966 50c contains 0.3416 troy oz of silver - just over a third of an ounce. 75 coins make a kilogram (gross). Sold either by the coin or by the kilogram, these coins usually sell at a premium over the spot price - anywhere from 50c to $2 per coin over spot depending on the source. As most coins were pulled from circulation after a very short time, it's not uncommon to find extremely fine to about uncirculated coins in bulk, and for stacking purposes, there is no point paying a premium for "better" graded coins - only uncirculated coins have any numismatic value. There is a variety known as the double bar, where two small bars appear behind the emu's head in the coat of arms, but it's not uncommon to find these mixed in with bulk lots. It can be worthwhile to search for better graded examples and try flipping them as numismatics.

    These coins are a very liquid, recognisable form of silver in Australia - bound to find buyers should you need to divest.

    Perth Mint issues

    Australia's best known modern silver bullion coins are the Perth Mint issues, comprising the Kookaburra, Koala and Lunar series. These coins are issued in .999 fineness and various sizes, from 1/2oz all the way up to 10kg! The 1oz size is the most commonly minted, and all three varieties are recognised world wide for their quality and purity. Perth Mint issues these coins in capsules, ensuring they retain their mint state, and they are usually priced according to the spot price of the day with a decent premium that reflects their quality.

    These coins are a favoured form of silver for many Australian investors, but one downside is that the high premiums result in the buyer being able to buy fewer ounces compared to say buying bullion bars. This can be offset however by the numismatic potential of some coins due to scarcity or desirability - some of the larger denomination coins are quite scarce, and can fetch premiums beyond the original issue premium. Expect to see premiums of $5-$10 an ounce as the norm (sometimes much higher in retail stores), however with some shopping around and buying in lots of 20 or 100, better prices can be achieved, particularly with the 1oz coins - sometimes up to $4 or $5 cheaper per coin than the retail prices from Perth Mint.

    A number of numismatic editions of these coins are produced, such as proofs, gold gilded, privy marks and coloured versions - avoid these for general silver stacking purposes unless you wish to delve into the numismatic side of these series.

    A good mix of sizes will cover all resale scenarios - some people like to collect 10oz or kilo sizes, and these usually have a ready market of buyers willing to snap them up, while the 1oz size allows you to liquidate as little or as much of your stack at a time as you need. Unfortunately premiums on the 1/2oz sizes usually make them an expensive proposition to acquire for bullion purposes.

    Perth Mint also produces a number of commemerative type silver proof coins, sometimes for other nations such as Cook Islands or Tuvalu. These retail for far more than their intrinsic content, and are targeted at the collector market, not the silver stacker. Some of these coins go through a "boom-bust" hype with unimaginable prices being paid - the classic example is the 2006 Red-Back Spider from the Deadly and Dangerous series - 5,000 of these were minted, issued as coins of Tuvalu - collector hype soon pushed up the issue price of $149 for an ounce of silver to $1500 or more. They still regularly sell for over $1000, but the quality of these coins as an investment when purchased at the top must be questioned.

    A leverage technique employed by many silver investors is to buy these commemeratives for the sole purpose of flipping them, hopefully at a profit, and buying silver bullion with the profits, however there's numerous examples of "dud" commemeratives that resell at or less than issue price, so this really can be a gamble. No-one wants to pay $90 or more for an ounce of silver, only to have the price fall... you're not going to recoup that loss with silver in the $18-20 AUD price range for a long time!

    Royal Australian Mint issues

    The Royal Australian Mint has not traditionally released bullion coins, however since 1993 have released the 1oz Silver Kangaroo, in both specimen and proof varieties. Due to low mintages these coins usually attract a numismatic premium, however should they be seen available for near spot price should be snapped up, due to the potential premiums available at resale. The mint has made some coins in this series in cupro-nickel, and these have no silver content at all, so be sure of what you're buying.

    World bullion coins

    Three very common world bullion coins are the American Silver Eagles (ASE), Canadian Maple Leaves and Austrian Philharmonics. These are all 1oz silver coins, and issued for bullion purposes. As a rule, these coins come loose in tubes of 20 or 25 depending on the country of issue, and have the appeal of international recognition. Generally mintages for these coins far exceed those of Perth Mint issues, and locally they should be priced accordingly - the mint quality of an encapsulated Perth Mint Kookaburra compared to a loose ASE is unmistakeable. Expect to pay more per ounce for these government mint issued coins than generic bullion rounds, but there should never be a need to pay the same or more for these coins than for local Australian bullion issues.

    Other forms of silver

    There are numerous forms of silver beyond that covered in the preceeding paragraphs available for purchase - however by sticking to these recognised forms of silver, the average stacker will find themselves building a stack of recognised silver with generally good liquidity. Below are some of the more dubious forms of silver to acquire:

    Sterling commemeratives

    A number of sterling silver (.925 fineness, or 92.5%) commemerative silver coins were released by the Royal Australian Mint, particularly in the 1980s and 1990s, such as state series, bird series and endangered animals, usually with a face value of $10. For silver stacking purposes, these numismatic issues are best avoided, primarily due to their unpopularity with silver investors. They do have a high face value in relation to their intrinsic value, however they remain unpopular.

    edit - as an update, $10 sterling coins have gained popularity recently. The high face value is seen as a built-in "stop loss", and are being recognised by stackers as high quality government minted coins with low premiums.

    Graded slabbed coins

    A common sight on auction websites are graded silver coins in plastic slabs, usually accompanied with guarantees and praise for their investment potential. Don't be ripped off. Unless graded by a recognised tier one grading firm like PCGS or NGC, any grading is generally suspect. For bullion purposes, gradings have no meanings other than the potential numismatic premiums that a grading might attract, and for bullion coins in Australia, collectors of such items are few and far between. It is common to see world silver coins such as US Morgan dollars in plastic slabs from "no-name" grading firms - avoid paying anything more than spot price for such items - the slab is merely fancy packaging and a trap for the unwary. Another commonly slabbed coin is the American Silver Eagle - coins in MS-70 slabs from PCGS or NGC do attract massive premiums, but in the Australian market, the choice of such an investment could be questionable.

    World silver coins

    Most countries throughout the world have issued silver coinage at some time or other during their history. It's not uncommon to encounter silver coins from Papua New Guinea, Great Britain, USA or New Zealand. For silver stacking purposes, these coins are often available under spot in Australia, but liquidity is an issue at resale time, and you may find it hard to recoup your investment if the spot price has not moved greatly. These coins are best left to collectors, unless you can obtain them for under melt value (which is the price a refiner will pay you, which is usually only a percentage of the spot price).

    Sterling silver

    Sometimes bargains can be found in the form of sterling silver - whether it be in the form of flatware (cutlery), ornaments, commemerative issues... unless the items have particular historical or antique value for resale, paying spot for such items is a questionable investment. A better pricing guide is to find out the current melt prices that a refiner might pay for hallmarked silver, and use that as a pricing basis, ensuring that if you can't resell the items as antique, you can scrap them and sell to a refiner. Be very wary of accidentally purchasing silver plate items over sterling silver - plated items have no value whatsoever from a refining perspective. There are numerous websites with good references on the various hallmarks, and you will soon learn to identify hallmarked pieces as sterling or plated. As a beginners guide, anything marked A1 or EPNS is merely silver plated - the relevant hallmark to search for on most Australian pieces is the lion with raised paw, indicating sterling silver of English origin.

    In summary

    Hopefully this primer has given new stackers an appreciation of the Australian physical silver scene. If after reading that and you're still stuck, I think most readers would agree that the following three classes of silver would be a good place to start your stacking adventures if you were just looking for someone to tell you what to buy! :)

    * Perth Mint Kookaburra, Koala or Lunar issues
    * Bullion bars or rounds
    * 1966 50c

    What next?

    An excellent book on gold & silver for new buyers has been recommended by many forum members, and is available through Amazon at the following link:

    [​IMG][​IMG]

    Amazon: Rich Dad's Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future by Mike Maloney

    Book Depository: Rich Dad's Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future by Mike Maloney

    Stack em cheap, stack em high!
     
    66rounds, Dynoman, Ivykoin and 3 others like this.
  2. alexisio

    alexisio New Member Silver Stacker

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    Thats very informative for us novices, and im sure it will be appreciated by more than just me.Thanks
     
  3. numismatation

    numismatation Member

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    Thanks Ben, very informative, this will help many people
     
  4. Guest

    Guest Guest

    Excellent post mate, it was the exact thing I was hoping to see here.

    Can we please make this post a sticky?

    Cheers
     
  5. Aurora et luna

    Aurora et luna Well-Known Member Silver Stacker

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    Good unbiased post. Identify most of the pros and cons involved in stacking the various types of bullion.
    Easy for a newbie to make a decision on what to stack with this information
     
  6. Amazing Squid

    Amazing Squid New Member

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    Excellent work mate!
     
  7. Roo

    Roo Active Member

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    "high Five"
     
  8. chimpanchu

    chimpanchu New Member

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    Very good. I actually learnt new stuffs from your writing. Thanks heaps.
     
  9. Austacker

    Austacker Active Member

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    Having read it when I first got here it did not sink in, after a few days learning I can see how good a resource that is. Excellent work.
     
  10. an9ie

    an9ie New Member

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    A well-organised and useful read. This n00b salutes you!
     
  11. LovingtheSilver

    LovingtheSilver Active Member Silver Stacker

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    Cheers for that Ben.. wish i read that not long ago, just bought a kilo bag of pre-1946 same price as a kilo perth mint bar, thought it was worth a bit more (than 925g) due to them being old coins also. Oh well, live and learn. Now im just focusing on Lunars,and Kooks for coins and bars >10oz. Will leave it at that.
     
  12. Guest

    Guest Guest

    Don't discount the 1966 50c piece mate. Very liquid for a fractional, probably the #1 fractional in Aus. Well worth getting.
     
  13. Precious50

    Precious50 New Member

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    THIS SITE ROCKS!!

    Well written GoldPelican birdy . . or should that be SilverPelican? :)

    Such a great intro to the silver subject and the forum should not go unrewarded. I've no doubt your well chosen and skillfully written words will give great value to many on their trek into the silver beyond. All the thanks in the world to you for that one!

    Cheers, Precious50
     
  14. silverstash

    silverstash Member

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    Awesome post! Really helpful for newbies like myself and spoken in such simple and clear language - exactly what I was looking for!

    Cheers
     
  15. holycreation

    holycreation New Member

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    forgive me for being such a newbie but whats premium? do we have to pay if we make purchase for big amounts? or we have to pay for any amounts of PM we get?
     
  16. DutchBullion

    DutchBullion New Member

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    When I buy a Kookaburra, I pay for the bullion value of the silver and a premium. The premium usually covers the shipping (to the seller, not to you), storage & a profitmargin
     
  17. goldpelican

    goldpelican Administrator Staff Member

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    Premium is just part of the price - it's markup over the spot price. Covers manufacturing costs & provides a profit margin etc.
     
  18. Nugget

    Nugget New Member Silver Stacker

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    As I understand it


    Spot Price for gold is if you are buying a 400 ounce bar (currently $577'200). The way I look at it is that spot is the "wholesale" price. What Perth Mint charges you is the Retail price. The Goal is to pay as close to wholesale as possible.



    Look - Gold and Silver is a very liquid and IMHO very open market. You want to know what you should get when you sell? Check Perth Mints bullion prices and they'll have the rate that they will buy at. That is the minimum you should EVER sell for. Check out their sell price and unless you are after numismatics don't EVER pay over that. When buying you would be well advised to check out this sites sponsors whom sell UNDER Perth Mints sell price ;)


    Try getting the equivalent price discovery in the Real Estate market.
     
    Ivykoin likes this.
  19. Austacker

    Austacker Active Member

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    Use the Calculators that are at the top of the page, have a look at the gold and silver by qty and you can see how much makes up actual gold price and what actually is premium.
     
    Ivykoin likes this.
  20. holycreation

    holycreation New Member

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    thanks to all of you.. get the picture clearer now ~

    Crassus: im comparing the prices too, just dont want to over pay as theres already a 3-5dollars over the per spot margin or raw price for p/oz

    Shipping fees kills it sometimes.
     

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