Does paying a higher premium for U.S. Silver Eagles, compared to generic silver rounds, make sense? Indeed, sometimes it does. Silver Eagles are generally priced with a higher premium, but depending on the premium difference, your time horizon and your purpose for buying silver, Silver Eagles can actually carry a lower overall “cost” compared to silver rounds.
Paying the higher premium for an American Silver Eagle can be justified, provided the difference in price is reasonable, and the return on an ounce of silver via Eagles, versus rounds can be higher, despite the premium. This isn’t always the case though. The key is to understand what we we will call your round trip transaction cost for both the purchase and sale of your silver.
In PMBull’s guide to silver bullion, we discuss how and where to buy silver at the best price. The objective of the guide is to identify good dealers with low prices, and how to compare dealer premiums over spot silver prices. Buying silver at the lowest possible cost allows you to maximize the amount of silver purchased.
If maximizing the amount of silver you acquire is your objective, you might conclude that choosing lower premium generic silver rounds over higher premium government coins like American Silver Eagles makes sense. Is maximizing the ounces of silver one holds a reasonable objective though? What about maximizing the value of your silver stack instead? The question that needs to be answered is whether or not Silver Eagles are sufficiently more valuable than a specific silver round to justify the higher price at the time of purchase.
A silver buyer preparing for a currency collapse, hyperinflation or a financial system reset might choose to buy the cheapest precious metals with the lowest possible premium over current spot silver prices that he can find. He may do this because he believes there will be no difference between coins and round prices under these circumstances. An ounce of silver is an ounce of silver, regardless of the design engraved into it, right?
Not necessarily. This argument is only correct if you assume that the simple engravings that designate a government coin will carry no value or meaning for the people to whom you will sell your silver, or with whom you wish to trade for goods and services. It doesn’t matter whether you are living in a post-collapse doomsday situation, or just a basic shift in the economic order, where society continues on. Your belief in the value of your silver is less important than your buyer’s, at the time of sale. Continue Reading …