Can silver make you poorer?

Pat Heller writes a bullion commentary for a weekly e-newsletter that is sent out on Tuesdays.

He also writes a hard-copy newsletter for clients of his business, Liberty Coin Service.

I find his price list for the various bullion coins especially useful in keeping tabs on the market.

As every bullion buyer knows, when everyone wants to obtain something, the premium over melt value goes up.

The mystery is why more individuals don’t shift their purchases to buy the cheaper forms of bullion.

According to textbooks, in a normally functioning market, prices of what are essentially equivalent amounts of bullion should roughly be equal, but that is not the case at all.

In Heller’s most recent issue he offers his list of products as of April 8 as well as their premiums. Every buyer can see the differences. I focused on the silver coins.

On that date, if you had wanted to buy silver American Eagles, the markup over melt value was 17.3 percent.

That means for every $1 spent, the buyer is receiving roughly 85 cents of silver.

Why would anyone take that kind of haircut when there are other options?

Sure, the silver Eagle is well known. That is one important aspect of a bullion coin.

Sure, demand for Eagles has exceeded supply for almost the entire period since the financial crisis struck in 2008.

That means higher prices.

But do these two factors justify buyers in not looking for greener pastures?

The price of the old pre-1965 90-percent silver U.S. coins have a premium of 10.9 percent, or you get roughly 90 cents’ worth of silver for each dollar spent.

A 100-ounce silver ingot has a premium of 5.9 percent. A dollar spent here yields roughly 94 cents of silver.

Yet there is no noticeable change to demand patterns.

It has been a long time since the physical silver market could be deemed to be slow, but those with long memories remember when premiums were much lower.

On occasion, premiums have disappeared entirely for 90 percent silver coins.

Perhaps buyers of Eagle coins figure that because they are in top Mint State grades that they will always have some numismatic value to justify and maintain the higher premium.

This also would help explain why prices of the current year’s Eagle is usually higher than that of coins of prior years.

So every New Year’s Eve celebration also marks the point at which silver Eagle owners get a bit poorer as they lose that current year premium differential.

Will this always be so?

Buzz blogger Dave Harper is winner of the 2014 Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper "Numismatic News."