Why the different prices for gold and silver?

Discussion in 'Commodity Futures' started by peilthetraveler, Jun 2, 2009.

  1. I'm just wondering, why do gold/silver american eagle coins cost more than gold krugerands or plain silver rounds? 1 oz of gold is 1 oz of gold. 1 oz of silver is 1 oz of silver. If the fit ever hit the shan, all those american eagles would go down in price to the price of the gold krugerands and silver rounds. Nobody would pay a premium for them if they were ever used to trade again. So why do people pay more for it.

    And some 1oz silver coins like the australian kangaroo coin sells for something like 36 USD per ounce. Maybe its just my sound business sense, but really...what good is silver/gold except to hedge against inflation, or protect your wealth...why pay a premium for what is really just a pretty picture?
  2. tom438


    There are at least two factors that one must consider when placing a value on coins:
    1. The melt value or the cash value of the metal if melted down.
    2. more importantly the perceived value or rarity of the coin.

    You get at least the melt value of the coin plus the perceived add on value based on rarity, popularity of the coin etc.

    Take a look at stamps. Recently a 1cent stamp sold at auction for over 100K.
  3. 1) Confidence and greed.
    2) You only "think" you are being "logical".
    3) You believe someone else will pay a higher price and the premium can grow larger. :cool:
  4. jprad


    It's been a while, so things may have changed, or my memory is worse than I think it is... ;-)

    Anyway, I think the following only apply to the gold American Eagle, not the silver.

    One is that it's eligible for a cap gain rate of 15%, provided you're in the 15% tax bracket. Otherwise, it's at the same rate as all other forms of gold.

    Also, the gold Eagle is classified as a numismatic item, so it's exempt from government confiscation unlike other forms of gold.

    One other interesting point, which applies to all US coin, is that you're only taxed on the face value of your compensation, not market value. So, if you can get compensated in US coin at market value you're going to save a whopping amount in income and SS taxes.

    Of course, all of this is subject to the whim of Washington and I'm not a tax advisor, practitioner, et al.
  5. drcha


    I'm curious about the OP's question too, since I have some silver trades on now. Perhaps gold and silver have different industrial uses?

    As for the above, what does that mean? Our government will confiscate any damn thing it wants, I think. They change their "rules" all the time. Nothing would surprise me when it comes to the crooks in Washington.
  6. jprad


    You must have stopped reading before you reached the end of my post...
  7. American Eagles are official US bullion coinage. Weight and content of each coin is guaranteed by the US Mint. Furthermore, the US Mint sells bullion to authorized dealers only, and each coin is sold to the dealer with a premium. Premiums are determined by the Treasury Department and changes to the premiums are published in the Federal Register (as well as memos to authorized dealers.) Dealer "cost" is spot(paid) + premium + shipping + insurance + optional storage.

    Other mints, such as Perth Mint in Australia have very low mintages. I just read last week Perth Mint has already met 2009 mintage limits for I think it was Silver Kookaburra, but it may have been Gold Kangaroo. I don't recall.

    Yes it's true, an ounce of gold/silver is an ounce of gold/silver. But as you say, when/if the fit hits the shan you'll want recognized weights and trusted mintage, preferably marked in the language of the country where the exchange will take place.

    Once unthinkable, now unstoppable
  8. jprad


    Not true. all numismatic U.S. coins can be bought by anyone via the U.S. Mint direct:


    The reason you can't buy these coins from the Treasury department direct is because they are not in circulation. They are only struck as uncirculated, proof or high relief proof. The strike condition and lack of circulation is where the premium comes from.

    BTW, the high relief double eagle proof will begin shipping 6/19.
  9. http://www.usmint.gov/mint_programs/american_eagles/index.cfm?action=american_eagle_bullion
    Highlights added as direct response to your ET-standardized, ill-founded information.

  10. jprad


    #10     Jun 8, 2009