Gold and silver have experienced a dramatic bull run this year that probably has more room to go, which is driving the cost of precious metal coins ever higher. But it is still possible to find good value in this supercharged market.
This column address silver bullion coins and a future article will discuss gold and other precious metal coins.
Buying lower mintage bullion and relatively low premium collector coins provides some downside protection against major corrections in silver. If there is a major metals correction, don’t sell in a panic unless you absolutely have to raise funds. Instead, be patient and prices will be back up before long, as has happened twice with gold in the past month. Precious metals are best seen as a long-term investment, not something to trade in and out of.Premiums for bullion coins have been rising because supplies, especially of silver, are getting tighter as demand continues to rise from investors. I recently came across an interesting comment somewhere which noted that there is not enough silver in the world for every person in China to own a one ounce coin or bar.
Five and ten ounce silver bars are a nice compact way to buy, but with current premiums, I would opt instead for relatively low premium coins, especially those with low mintages, which have the best long-term potential.
Silver eagles vs. ATB coins
In terms of American silver coins, there is no question that the best value in the current market is to be found among the five-ounce America the Beautiful bullion coins, specifically the 2011 issues.
In a recent column, I discussed the pros and cons of the numismatic versions, but investors should not overlook the bullion coins, which currently sell for about the same premium over melt as bars and rounds. Dealers are currently selling the 2011 bullion issues for about $2-$4 over spot per ounce depending on the issue, whereas American silver eagles are going for at least $5 over spot.
And yet the 2011 ATB bullion coins are made in much smaller numbers than silver eagles, providing a potential future price appreciation that silver eagles do not have.
The lowest mintage issues of the year are the Chicksaw and Vicksburg coins, which are shaping up as the keys to the bullion and perhaps the overall series.
These coins are an excellent example of a strategy that has worked in the past, which is to not buy what everyone else is buying, and you will reap the rewards later.
While sales of silver eagles continue to hit new records, interest in the ATB series has diminished. Some very low mintage issues are emerging that could well carry substantial premiums down the road. And if they do not, the rising price of silver will increase their value.
Canadian issues
Another approach is to look abroad to our Canadian neighbors and to our allies in Australia.
Within the realm of Canadian coins, most investors purchase maple leafs, which are not a bad choice and which are certainly made in smaller numbers than silver eagles. Some past issues with low mintages carry substantial premiums, and a record number of maple leafs were sold in the past year.
But the best-performing Canadian bullion coins in recent years are the wildlife series coins, which include wolves, grizzly bears, and beginning later this month, cougars. Two new issues are being released each year and each has a mintage limited to one million. The coins have seen strong demand, and the existing issues already carry significant premiums around 50% above melt value.
The wildlife coins have appealing designs and were quite difficult to obtain. They sold out from the Canadian Mint to wholesalers very quickly and retail prices have continued to outpace rising bullion. Canadian bullion is distributed basically the same way U.S. Mint bullion coins are, in other words, though a network of dealers...
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