Monday, October 11, 2010

Silver - Intrinsic and Numismatic Value

In 2005, when silver spot price was below US$10, few took notice of this metal. And I was one of those who rather put my money in stocks than silver. In 2006, silver cleared the US$10 mark to reach US$15, I still was deeply immersed in stocks. It was only in 2007, when the US$ has been weakening and news of US housing bubble, that got me sitting up to look at alternative investment opportunities. In November 2007, I bought my first ounce of silver – the Canadian Maple Leaf when spot price was US$14.73 (S$27.65 at that time, inclusive of shipping, insurance and tax).

Naturally, the beautiful shiny silver round enticed me to look at other types of silver pieces available. I bought Pan-Am silver bars when spot was US$18.48 (S$28 at that time). My first high-premium silver piece was the 2007 Silver Britannia, which I paid S$56 for it. I also bought the Australian Lunar Series I Box Set at S$457 (S$38 per ounce) and a few other one and two ounce of the Lunar Series.

So what’s my point here about intrinsic and numismatic value?

When I got started writing this on 28 August 2010, silver spot price was still below US$20. At present moment, 11 October 2010, silver spot price is above US$23.23, monex is selling Canadian Silver Maple Leaf at US$25.37 (S$39.49 inclusive of shipping, insurance and tax). Let’s do some simple mathematics. Spot price has gone up 57.7% (US$14.73 – US$23.23) from the time I first made my purchase. Bullion price of the Canadian Silver Maple Leaf has gone up 42.8% (S$27.65 – S$39.49). Though I do not have the data to show that in Singapore Dollar terms, the gain is not a much, but let’s look at coins that I regard to have numismatic value – the Australian Lunar Series.

The Australian Lunar Series that I bought at S$457 is sells at S$846 without the box (85% gain). For key date coins, like the dragon, a 1 oz coin would cost S$90 (136% gain). A 2005 Britannia bought in June 2008 for S$47 was sold for £51 on 2 September 2010 - before silver price rally. The Chinese Silver Panda is another story of its own.

Hence, I would say, for silver investors, the preferred type of silver would be those that has low premium over spot price:

  • American Eagle
  • Austrian Philharmoniker
  • Canadian Maple Leaf
  • Mexican Libertad (except for 1998, 1999)
Silver investors would probably buy them by monster boxes of 500 oz. to be profitable. And it goes back to why take delivery in the first place or why buy physical silver?

Whereas silver collectors who look at what was being stamped on the silver rounds would have plenty of choices:
  • Australian Kangaroo, Koala and Kookaburra
  • Chinese Panda
  • New Zealand Kiwi
  • UK Britannia
  • Australian and Chinese Lunar Series
  • Somalian Elephants
The Russian St. George coin is an interesting prospect, while having mintage of less than 300,000, it has the same design for each year and yet commands quite a high premium. Recently, there were also reports that the gold version was found to be rusting.

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