Silver Coin Premiums

A

Ausecon

Member
Hello,

This is probably a question that has been asked numerous times, so apologies and if you can point me to the thread that'd be great.

When you look at the Perth Mint pricing of gold vs silver coins, the premiums on the gold are about 5%, whereas the premiums on the silver ones are closer to 20%. Obviously to some extent it depends on mintage, demand etc, however broadly my question is why is there such a high premium on silver coins, relative to gold, all things being equal.

Thanks guys, glad I found this site!

Cheers
 
Interesting point, is that the typical way to think about premiums? I would've thought you'd want to limit the premium in % terms over spot regardless of $ value?
 
Ausecon said:
Interesting point, is that the typical way to think about premiums? I would've thought you'd want to limit the premium in % terms over spot regardless of $ value?
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Not necessarily. There is a set cost in the work, equipment and materials needed to press a coin, regardless of if you are minting it out of gold, silver, or any other metal. For a cheap material (i.e. silver), that cost will be higher as a percentage of the value of the metal than for a more expensive one.

Like Bullion Baron above, I reckon the more appropriate question is: why aren't the premiums on gold less?
 
I don't agree, unless the lower pricing of silver allows you to get a volume discount which results in a lower premium relative to gold. That's the whole point of doing it in % terms, because if you spend an equivalent amount, you'll end up paying a higher premium for the silver in $ terms as well!

For example, based roughly on PM's last pricing, if i had $2k, i could:

1. Buy say 2.1 1/2oz gold bullion coins at ~8.6% premium to spot, which means i've paid ~$160 in premium

OR

2. Buy say 5 10oz silver bullion coins at ~18.8% premium to spot, which means i've paid ~320 in premium.

So in my mind my question remains, which is why are gold coins and bars at a lower premium than silver? Maybe because of perceived exchangability? I.e. can use silver as "currency" in theory. Might explain a small difference but not a huge difference in % terms (8 vs 18%!)

Anyone with any other insights?
 
Cimexus said:
Like Bullion Baron above, I reckon the more appropriate question is: why aren't the premiums on gold less?
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agreed.. thats the reason im not buying gold coins.. flipping massive premiums.. SOVs for me.
 
Ausecon said:
Is that your listing hiho? Seems cheap.
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no but I have been picking up floral emblems for spot or less all year and loving them

and a gold to facevalue ratio of 0.33/100 they are a good fallback coin
 
Yeah i noticed the face value thing. WHat are the others with a high ratio. today the coins from the PM look to be 1/100?
 
Ausecon said:
I don't agree, unless the lower pricing of silver allows you to get a volume discount which results in a lower premium relative to gold. That's the whole point of doing it in % terms, because if you spend an equivalent amount, you'll end up paying a higher premium for the silver in $ terms as well!

For example, based roughly on PM's last pricing, if i had $2k, i could:

1. Buy say 2.1 1/2oz gold bullion coins at ~8.6% premium to spot, which means i've paid ~$160 in premium

OR

2. Buy say 5 10oz silver bullion coins at ~18.8% premium to spot, which means i've paid ~320 in premium.

So in my mind my question remains, which is why are gold coins and bars at a lower premium than silver? Maybe because of perceived exchangability? I.e. can use silver as "currency" in theory. Might explain a small difference but not a huge difference in % terms (8 vs 18%!)

Anyone with any other insights?
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Why should gold have a higher premium in terms of a dollar value... answer.. NO REASON... its the same process as minting silver bullion and coins, in other words.. you are getting fleeced paying big % premiums for gold. Silver still has premiums but given the real cost of producing it a few bucks extra to cover minting and promotion and cases etc seems reasonable.. most other sectors its 100% mark-up ie: retail stores.. silver is just 10% or so really we are very fortunate to be able to buy silver as a function of the spot price at all.

I would always look at the premium as a fixed price to produce so a dollar amount over spot rather than a % would give a more honest reflection of the true value of production.. in this case it appears gold buyers are getting charged premiums WHICH DO NOT REFLECT there cost of production.. maybe they even subsidise the production of silver which may run at a lose (ie: lunar dragons)

Consider everything the mint must do after receiving the bullion blancs... artist designs coin, create die, mint them with staff, electricty, storage, machine maintainance etc, postage.. not hard to see where the tiny premiums for silver get gobbled up.

1for1
 
Thanks 1for1. I take the point you and others make re that production is fixed, so to produce 1oz it is the same. I guess the reason silver premium is higher is because of the lower sale price, which means you have "more" costs to allocate relative to gold.

Unless someone convinces me otherwise, IMO if you just want to buy gold or silver, you're better off buying gold as you pay less premium in % terms, which means you get more metal if you purchase the same $ value, per my example, as i can't see any instances where a higher volume silver purchase results in a lower % premium over spot, when comparing similar items.
 
I think most on here believe silver has much more upside longer term than gold.
Silver to $80 I think is more likely than gold to $4000
 
Nedsnotdead said:
I think most on here believe silver has much more upside longer term than gold.
Silver to $80 I think is more likely than gold to $4000
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On a silver forum? Surely you jest? :-)
 
Ausecon said:
Thanks 1for1. I take the point you and others make re that production is fixed, so to produce 1oz it is the same. I guess the reason silver premium is higher is because of the lower sale price, which means you have "more" costs to allocate relative to gold.

Unless someone convinces me otherwise, IMO if you just want to buy gold or silver, you're better off buying gold as you pay less premium in % terms, which means you get more metal if you purchase the same $ value, per my example, as i can't see any instances where a higher volume silver purchase results in a lower % premium over spot, when comparing similar items.
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Yeah but why would you use % is my point, real estate sharks talk percentage to make 000's seem like a single digit.. the price over spot is a constant and comparing apples with apples so why use % as they have the same value.. say $5 per one ounce coin..

EG: if silver was 1000 per ounce and it was only $1005 to buy a 1oz coin its still $5 to mint it.. ie: the spot price is irrealavant to mark-up over spot and increase in value.. if gold was $50 an ounce would you be happy to pay $120 for a 1 oz coin.. thats the logic im reffering to.

"you're better off buying gold" - i fully disagree... so cos silver is 55 times cheaper the per unit mark up seems higher.. this is a big time fallacy like those gold stackers who claim silver is too cheap so costs too much to store or takes up to much space.. arguments that are counter-intuitive IMO... id wager youd like silver more as an investment if it was $200 an ounce and they fleeced you $30 per ounce over spot for bullion (it would be cheaper than gold as a % right?)

I actually think the world is so messed up now silver would be hotter if it was over $100 an ounce.. people would think its CHEAP>.. right now (ironically) people think its to bulky and the premiums are to low to purchase (ok sounds mad but to an outsider).. maybe $20 per ounce over spot per unit would intice more investors.. shes a wierd wierd world alright Dorothy.

1for1
 
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