cc8137 said:
I've decided to play the silver market a little bit at a time. I've noticed bullion rounds struck by different companies shown as celebrities, sports, etc. Is there any difference in true value of those type of rounds and American Eagles? Is it better to buy true bullion or junk silver coins? Why are American Eagles getting higher prices then regular ingot bullion.
It all appears a little confusing.
Charlie
The value of precious metals is reckoned in three ways: as bullion, as traded commodity and as art/collectibles.
Ingots, bullion, rounds and so on are valued based on the spot, or momentary international trade price of the precious metal itself. In addition to that, you must add the costs to refine, transport and trade/distribute the actual product itself. So bullion articles can be expected to trade at about 10% over spot, or what is called "Spot +".
Another term you will hear within this category is "specie." This has come to mean precious metal coins, what G. Gordon Liddy is hustling on T.V. these days.
These coins are usually not intended for circulation, and tend to be viewed more as an industrial or even consumer product. Krugerrands, Austrian "Philharmonics," Canadian "Maple Leafs"... these are examples of this.
You can also deal with the precious metal as a commodity, by buying stock in mining companies, for example. Of course, you don't get to actually hold the article in question. You are dealing in shares issued by a company, government entity, etc. You profit when market demand exceeds the supply for the metal. The companies stock value rises, then, because it (hopefully) has the metal available to sell to that market.
Or you have certificates to sell that you bought when the price was low, which now trade one-for-one against a stockpile of the metal... at the newer, higher price. Remember the old "silver certificate" dollars? That's what those were.
Lastly is the collectible coin. They are like bullion, in that they are mined, refined and delivered as a finished good. They are greatly DIFFERENT, however, in that they are also subject to other value factors. Take commemorative mint coins, like the Silver Eagle, for example. They are valued based on their spot price, plus all the other costs mentioned for bullion or specie coins.
But, in addition to that is the market, or "going price" for them as art/collectibles....what we would think of as the 'collectible market'. This sets its own price, based primarily on the what people will pay.
So, first, figure the spot price. Then add all the costs associated with refining, manufacturing, distribution and brokerage already mentioned.
Finally, add the collector up-charge, or "what the market will bear."
In other words, if people will pay $29 for an American Eagle then that is what they will sell for, on average.
Bullion and specie, on the other hand, normally trade on a more predictable, fixed value.
So should you buy junk silver or bullion, art pieces or commemoratives? Depends on what you want to do. Junk silver and bullion offers a predictable profit margin, since it is only valued for it's precious metal content. You pay "X" for it and you hold it until the the value increases (hopefully - there's that word again.)
Art and collectibles depend wholly on a fickle collectors market for their value above spot. Sports pieces, as you mention fall into this category. Generally, they are worth only a little more than spot. in the long run.
Mint commemoratives are somewhere in between. They have the backing of the US government and they tend to hold their value as collectibles. However, government backing is not the leak-proof thing it used to be - if the economy goes to crap and no one can pay for them, then their value inevitably falls to spot.
The simple answer to your dilemma is to stick to bullion and commodity/stock trading. This way you can measure and quantify your results.
