Scarcity premiums drop as silver soars

This article was originally printed in Numismatic News.
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A new all-time high in gold of $1,445.30 was reached since last deadline and silver reached a new cyclical high of $36.73. I get a lot of inquires as to whether it is too late to buy. Until the Fed or our politicians get some monetary discipline, logic says up, up and away. There also seems to be only one way out to finance all our debt and that is to inflate our way out of it. Remember in 1980 gas was about a third of what it is today. Let us say prices triple over five years instead of 30, that would effectively decrease the debt load by two-thirds. Whatever you do, be careful and don’t bet the farm. I remember how it looked in 1980 and we all thought it was going to the moon, but somehow the financial wizards put Humpty Dumpty back together again.

If you are considering adding to your precious metals, then consider items where intrinsic value has increased to the point where premiums have nearly disappeared. You see this most often in the circulated grades of 20th century silver series. This accomplishes a theoretical floor based on numismatic value and in theory since many lower premium items are currently winding up in refining lots they will be scarcer in the future. An example would be XF or AU Walking half dollars. Melt is about $12 and they can be found for $1-$2 over that, but spend another $1 and you can get the less common mintmarked ones. Don’t buy bright shiny cleaned-up coins. Another example is G-4 Barber coins. Many dealers are throwing them into melt lots because theoretical retail is only 10 percent or so higher and it does not pay to package them and wait for a customer who needs that date. Buy only full rim coins. There are many G-4s with weak rims. Use this market to your advantage. Offer to take a dealer’s full rim Barber coinage at 10-15 percent over melt.

There is a strong premium attached to silver Eagles presently and as a pure silver investment they are pricey. When these markets eventually calm down, holders of bulk silver Eagles will have a hard time recovering any premium and could even be offered a slight discount from spot silver prices. A really good bet are common date pre-1921 Morgan dollars in low-grade culls (no holes). Most dealers sell these wholesale at 92-95 percent of melt. Offer 98-100 percent and you will find some. If you care to move up the food chain, buy F-12 to VF-20 at 10 percent over. Which makes more sense, a 100-year-old coin at +10 percent or a fairly recent issue at +10 percent?