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Pierre_Henri

Why pay more than the silver price for a normal silver Krugerrand?

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Pierre_Henri

The silver Krugerrand (not the proof issue) is a bullion coin.

That means that you buy 1 ounce of silver when you buy a silver Krugerrand. 

Why do people pay R550 for a coin that is worth R350 today?

If you wish to resell it tomorrow you are going to loose a lot of money.

Be warned.

Pierre

 

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GROOVIE COINS
On 2/22/2022 at 7:03 PM, Pierre_Henri said:

The silver Krugerrand (not the proof issue) is a bullion coin.

That means that you buy 1 ounce of silver when you buy a silver Krugerrand. 

Why do people pay R550 for a coin that is worth R350 today?

If you wish to resell it tomorrow you are going to loose a lot of money.

Be warned.

Pierre

 

Hi Pierre,

Point taken on overpaying for a normal bullion coin.Though who says a silver ounce is worth R350?

The SA market values an ounce of physical silver (in the form of a government issued bullion coin) is between R480 to R550...

Regards Robert

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Mike Klee

Hi Robert

I think that Pierre's point is that the current silver price is R350 or the equivalent in US$, GBP, AUS$, etc. It is what it is.

The South African market value of silver is roughly R350,  so even though the South African Government-issued silver bullion is sold at R550 for a one-ounce coin, whoever pays this is already paying R200 per ounce over the real silver value.

Another way of looking at it is to predict how many gold one-ounce Krugerrands would be sold at a premium of 57% over the prevailing gold price? None....

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GROOVIE COINS
1 hour ago, Mike Klee said:

Hi Robert

I think that Pierre's point is that the current silver price is R350 or the equivalent in US$, GBP, AUS$, etc. It is what it is.

The South African market value of silver is roughly R350,  so even though the South African Government-issued silver bullion is sold at R550 for a one-ounce coin, whoever pays this is already paying R200 per ounce over the real silver value.

Another way of looking at it is to predict how many gold one-ounce Krugerrands would be sold at a premium of 57% over the prevailing gold price? None....

Hi Mike

I understand the R350 figure represents the current silver spot price taking into the Rand Dollar exchange rate. But just how realistic is that figure? 

One would be hard pressed to readily find a silver Krugerrand or even another country denominated silver ounce at R350, bar some sort of discount deal depended on other factors or an impaired coin.

Edited by GROOVIE COINS
Incomplete

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GROOVIE COINS

Your other point about gold not selling at a 50% is true, though I would think South Africa has a stronger gold market hence, lower premiums are a given.

I'd reason if SA had a stronger and more mature silver bullion market, there'd be more competition, and even private competition to the SA-mint, bringing down premiums closer to home international spot prices. But as it stands we do not and the SA-mint determines the base price of silver bullion unopposed, hence we have a market that values a silver Krugerrand at R480-R550 regardless of spot price.

Regards Robert

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Pierre_Henri

Well , if one wants to buy silver for bullion reasons, why not buy the old R1 silver coins that are frequently sold on BoB for as low as 10% to 15% over the bullion price.

Silver is silver, being it a Krugerrand or a 1966 silver R1.

Last mentioned silver value is R136 today. Anyone willing to pay R200+ for it?

Then why pay R550 for a silver Krugerrand?

 

 

 

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Little Miss Muffet

The way I see it is a premium is added for the article--a coin.

It is not just a piece of silver

A piece of antique jewellery can weigh a certain amount but there is value in the article as well

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Pierre_Henri
4 hours ago, Little Miss Muffet said:

The way I see it is a premium is added for the article--a coin.

It is not just a piece of silver

A piece of antique jewellery can weigh a certain amount but there is value in the article as well

I agree 100%.

But not for a bullion coin. 

The reason it was struck was for its intrinsic silver value.

It has no collectable value like antique jewellery.

Pierre

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jwither

The price spreads on physical silver have been above those pre-COVID, around March 2020.  I recall this was discussed in another topic previously.

As an example, right now on golddealer.com (a PNG dealer I have cited previously), "bid" is $26.35 and "ask" is $26.90 for the 1oz bullion KR. Spot is $25.34 "bid" and $25.38 "ask".

These premiums are actually "low" since COVID hit.

But yes, if you buy from this dealer and immediately sell back, assuming no change in spot, you are immediately out $3.55 for each one or about a 13% loss on your "investment".

Since silver is less available and presumably less liquid in SA versus US, i would expect wider spreads in your country

Contrary to what anyone has read here before, these spreads and the more recent increase are not due to anything other than lower liquidity.

If it was really due to demand, dealers (market makers) should increase their buy price, narrow the spread, which should increase the supply available for sale and thereby make more due to increased volume.

My assumption for the higher spreads and why dealers won't do that is because of the cost or impracticality of hedging.  I don't know how many (if any) bullion and coin dealers hedge their silver inventory.  These hedges wouldn't be exact and aren't free either.  So presumably, the dealer needs to have a big enough spread to compensate for a potential decline in the price between the time they buy and sell.

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Pierre_Henri
On 3/1/2022 at 10:44 PM, jwither said:

The price spreads on physical silver have been above those pre-COVID, around March 2020.  I recall this was discussed in another topic previously.

As an example, right now on golddealer.com (a PNG dealer I have cited previously), "bid" is $26.35 and "ask" is $26.90 for the 1oz bullion KR. Spot is $25.34 "bid" and $25.38 "ask".

These premiums are actually "low" since COVID hit.

But yes, if you buy from this dealer and immediately sell back, assuming no change in spot, you are immediately out $3.55 for each one or about a 13% loss on your "investment".

Since silver is less available and presumably less liquid in SA versus US, i would expect wider spreads in your country

Contrary to what anyone has read here before, these spreads and the more recent increase are not due to anything other than lower liquidity.

If it was really due to demand, dealers (market makers) should increase their buy price, narrow the spread, which should increase the supply available for sale and thereby make more due to increased volume.

My assumption for the higher spreads and why dealers won't do that is because of the cost or impracticality of hedging.  I don't know how many (if any) bullion and coin dealers hedge their silver inventory.  These hedges wouldn't be exact and aren't free either.  So presumably, the dealer needs to have a big enough spread to compensate for a potential decline in the price between the time they buy and sell.

Welcome back!

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jwither
9 hours ago, Pierre_Henri said:

Welcome back!

Thanks, I check in here occasionally but there hasn't been a reason to comment.

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GROOVIE COINS

Morning all

I see on a popular gold and silver group on social media, American Silver Eagles are going for $9 - $10 over spot price. The question was asked why, and the over all responses were, "because that's what the market is paying for them".

Now granted the reason for that is no doubt the uncertainty brought on by the war in Ukraine. Though as I recall with the global recession in 2007 and it's aftermath when markets were panicked, that ASEs were going well over spot as well as higher than any other private/generic bullion or constitutional silver (old coinage).

Yes the premiums are high, but during times of uncertainty those premiums prove their worth.

Regards Robert

 

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jwither
On 3/7/2022 at 2:14 AM, GROOVIE COINS said:

Yes the premiums are high, but during times of uncertainty those premiums prove their worth.

 

Why?

It's the same type of reasoning that led to the abnormal premiums with the COVID outbreak.

US CPI inflation is rising at the fastest pace since 1982 which is a more traditional reason, yet silver spot has stagnated.  Too bad a former poster isn't here to remind us that this is more evidence for the sinister and dastardly conspiracy to manipulate the price lower using "paper" silver.

Face it, physical silver is an awful proposition at current spreads.  In the US, the ASE has the highest premium and anyone buying it is automatically in the hole by over 25%.  With unfavorable taxation laws, a 50% increase in spot translates into about a 14% profit.

That's pathetic.  Somewhat better for other silver options but still poor or very poor.

I presume it's worse anywhere else, since the ASE is less liquid outside the US.

The buyer has to be a long-term die hard bull to take this position.

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GROOVIE COINS
On 3/22/2022 at 1:17 AM, jwither said:

Why?

It's the same type of reasoning that led to the abnormal premiums with the COVID outbreak.

US CPI inflation is rising at the fastest pace since 1982 which is a more traditional reason, yet silver spot has stagnated.  Too bad a former poster isn't here to remind us that this is more evidence for the sinister and dastardly conspiracy to manipulate the price lower using "paper" silver.

Face it, physical silver is an awful proposition at current spreads.  In the US, the ASE has the highest premium and anyone buying it is automatically in the hole by over 25%.  With unfavorable taxation laws, a 50% increase in spot translates into about a 14% profit.

That's pathetic.  Somewhat better for other silver options but still poor or very poor.

I presume it's worse anywhere else, since the ASE is less liquid outside the US.

The buyer has to be a long-term die hard bull to take this position.

Good afternoon 

 

In South Africa silver Krugerrands have not retreated since the onset of the Covid pandemic. I remember they were going for R350 (which itself was a heavy premium back then) prior to shooting to the R500 an ounce range. The question is would you offload as they say and take gains or wait?

My take is the current higher premiums on ASEs are driven by panic hedging rather than investment. 

I see alot of people new to metals jumping in now then asking why metals are not going up when inflation is raising. One has to keep in mind silver was down to $12-14 and gold was down to $1300 a few years back so how much more do you expect to gain out of it?

 

As for why ASE demand higher premiums, I think this must be due to their recognition as government backed bullion. They are the first the market including institutional investors seek when panic sets in.

 

Pierre alluded to, if one where in silver for the "investment", then there are plenty of options for getting as close to spot price as possible, in our case old silver rands which trade at spot and rand to dollar exchange. But to the panicking novice, they could care less about trying to figure out what a silver rand's fineness. They want the recognisable government back ounce of silver.

 

What happens sometime down the line when markets calm down again and silver goes back to $18/ounce, this is what people have to ask themselves. It's going to be all tears until the next crisis.

 

Regards Robert

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jwither
On 3/24/2022 at 8:27 AM, GROOVIE COINS said:

My take is the current higher premiums on ASEs are driven by panic hedging rather than investment. 

Yes, that's exactly what is.

On 3/24/2022 at 8:27 AM, GROOVIE COINS said:

I see alot of people new to metals jumping in now then asking why metals are not going up when inflation is raising. One has to keep in mind silver was down to $12-14 and gold was down to $1300 a few years back so how much more do you expect to gain out of it?

They ask this question out of ignorance.  The price of silver has nothing to do with inflation.  "Metal bugs" and those promoting it make this claim but it's easy enough to disprove.  The price of silver has moved all over the place,  arbitrarily using 1971 (when the US ended gold convertibility altogether) or 1965 (when US coinage no longer had 90% silver) as a starting point.   

Silver isn't really a monetary metal anymore either.  It's still bought by "metal bugs" for this reason but it has no role in the global monetary system.  It's predominantly an industrial commodity but looking at the prices of other industrial commodities which have recently spiked, obviously of less importance than some of the base metals, like nickel.

A real inflation hedge would have a high correlation which silver does not.  Neither does gold for that matter.

It appears to be but that depends upon when you bought it.  If you bought at or near the 1979/1980 or 2011 peaks, you're underwater on both.  Silver has lost about 50% in nominal terms over the last 42 years.  Other than stocks or bonds that went to zero, I can't think of another "investment" which has done worse.

If you bought at the 1999/2001 or 2008 lows, you made a boat load in both up to 2011.

So, what it really comes down to is timing your purchases, which is just another speculation and hardly "investment".

On 3/24/2022 at 8:27 AM, GROOVIE COINS said:

Pierre alluded to, if one where in silver for the "investment", then there are plenty of options for getting as close to spot price as possible, in our case old silver rands which trade at spot and rand to dollar exchange. But to the panicking novice, they could care less about trying to figure out what a silver rand's fineness. They want the recognisable government back ounce of silver.

Buying obsolete silver circulating SA coinage is an option in SA.  In the US, I'd only buy US or Canadian.  Everything else isn't very liquid.  Problem is, premiums on "junk" US and Canadian silver are higher than bullion coins and bars.  It's always bene this way as far back as I can remember.  It's primarily bought as a contingency for use as money in a SHTF scenario.

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Pierre_Henri
On 4/10/2022 at 4:03 AM, jwither said:

They ask this question out of ignorance.  The price of silver has nothing to do with inflation.  "Metal bugs" and those promoting it make this claim but it's easy enough to disprove.  

Well, Bitcoin bugs have proved me wrong, so I would rather stay silent for the rest of my days regarding this or that investment in whatever.

But as long as one is a collector, and not an investor per se,  it does not really matter does it?

Pierre

 

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jwither
On 5/10/2022 at 12:29 PM, Pierre_Henri said:

Well, Bitcoin bugs have proved me wrong, so I would rather stay silent for the rest of my days regarding this or that investment in whatever.

But as long as one is a collector, and not an investor per se,  it does not really matter does it?

Pierre

Don't worry, BTC is headed for a total price collapse too.  It may (be one of the few current crypto "currencies" to) survive, but its price is completely dependent upon the broader mania.  Its highly correlated to the maniacally inflated US NASDAQ stock index, which is still in the equivalent of deep outer space even after a 30%+ decline as of today's close.

Right now, BTC is trading at $28,014.  It's been a huge winner for those who bought it a few years ago or earlier but down almost 60% from the all-time high of about $63,000.  Purportedly, 40% of current BTC holders are in a loss position.

This shouldn't be surprising since BTC and all other crypto are literally nothing.  The supply is "limited" (to 21MM tokens) but anyone can create a new crypto any day of the week.  Last I read, at least 15,000 existed.  My prediction is that when the asset mania reaches a bottom decades from now, well over 95% will disappear entirely.

As for being a collector, of coins, yes.  It's an alternate form of consumption for those who treat it this way.

Personally, I've lost interest in the majority of the coins I used to collect and have even less interest in most I never did buy.  I'm still interested in adding to my (primarily Bolivia and Peru) pillar collection, occasionally Spanish colonial quarter real, and Bolivian decimals if the right coin comes along for the right price.

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