I sometimes write about a silver bullion coin I can recommend with an expectation that it’s premium will rise over and above the spot value of the metal it contains.
My basic plan when buying silver bullion coins is to target those with a limited mintage which may attract growing interest over time. So rather than buying a 1 ounce silver bullion coin with a $2-3 premium over spot price (e.g. American Silver Eagle or Canadian Silver Maple, etc), I instead buy coins with a $4-7 premium over spot price (e.g. Perth Mint Silver Lunar, Kookaburra or Koala, etc) with the expectation that the premium will increase along with the coins collectibility. Here’s how it works with $5000 to spend:
Now: Spot price is $25
1: Buy 178 low premium silver coins for $28 each ($4984)
2: Buy 161 high premium silver coins for $31 each ($4991)
Future: Spot price is $50
1: Sell 178 low premium silver coins for $53 each (premium hasn’t increased)
2: Sell 161 high premium silver coins for $70 each (premium increased by $14)
The profit using option 1 is $4,450. The profit using option 2 is $6,279.
This is a pretty conservative example given some of the old Perth Mint bullion coins have attracted even larger premiums.
If spot price falls you may end up with a smaller profit or even a loss, but if you’ve selected your coins carefully then you will find the additional premium achieved provides a better buffer still than if you’d bought low premium silver coins. As I wrote in a precious article:
Many of the sought after, mintage limited Perth Mint bullion silver coins have held their values (or at least cushioned the blow compared with low premium products) even as the spot price has tanked in recent years. An example being the 2012 1oz Bullion Silver Lunar Dragon Coins I bought in late 2011 for circa $38-42 per coin (pre-ordered from various dealers before release), despite spot price falling some 40% lower since then I recently sold some rolls of these for around what I paid. Not a great return admittedly (break even over 4 years held), but still a far better return than on low premium silver bars. I like many of Perth Mint’s silver bullion coins as a hedge against spot price downside as premiums increase with demand for the specific coin. Of course like any investment, there are no guarantees that premium holds and you do need to pick carefully.
A couple of recent examples I have recommended are the:
I bought a box of the Wedge Tailed Eagles and made a nice profit when selling, despite spot price falling while I held them. There was only 5,000 released in Australia with a mintage of 50,000. I didn’t end up buying any of the Koala’s, however Perth Mint advised they sold out of these in May and I expect that in the next 12 months they will start attracting a higher premium than they had on release (regardless of whether spot is higher or lower):
This is a bit of a controversial release (see this thread on Silver Stackers) as until recently the 2016 Silver Kangaroo Coin was advertised as and widely believed to be the first in the series. Little did investors know that a small run of 300,000 coins had been minted in 2015 (with a lower finesse of 99.9 & slightly different design/finish differences) with a majority of them shipped over to a coin dealer in the United States. Perth Mint have released 50,000 of the coins to local buyers directly and through their dealer network (see the release from Perth Mint here).
Perth Mint now has higher coin manufacturing capacity and the unlimited mintage 2016 Kangaroo Coin is looking to finish with sales around the 10,000,000 coin mark, far in excess of the 2015’s 300,000. I expect the 2015 Kangaroo Coin will be a ‘key date’ for the ongoing series (meaning the lowest mintage compared to any future years). It is available today at regular bullion coin prices.
To compare with another key date bullion coin… the lowest mintage in the American Silver Eagle Series (bullion) is 3,603,386 in 1996 and that coin now sells for around double spot price. I think the 2015 Silver Kangaroo could achieve a similar premium over a similar time frame if the kangaroo coin series continues and collectors become interested in completing a set. Even if you don’t buy with that sort of time frame in mind, I would be surprised if these don’t quickly achieve an additional $5-10 premium over spot within the next year or two.
If you are currently looking to buy silver bullion coins I would highly recommend you buy some of these before they sell out at bullion prices.
You can purchase the 2015 coin (recommended above) at Gold Stackers and Perth Bullion.
Site sponsor Bullion Money is stocking the 2016 coin if you are looking to complete the set, though I expect the high mintage of this coin will reduce the likelihood of an increase in the premium over spot.