COINS VS. BARS

One of the most common questions we get at BULIONMARK is "should I buy 1000oz bars or 1oz coins?"  Logic suggests you should buy maximum number of ounces as close to spot as possible.  1000oz bars are therefore the obvious choice, right?  Maybe, but let’s examine a scenario that demonstrates how this approach may not actually maximise your returns.

Firstly, let's exclude gold from this discussion as coin premiums are typically very low so the choice is a far easier one.  However, coin premiums in silver can range from 25% to more than 100% over spot so the decision is more problematic.

When investing in silver you must consider that you are warehousing silver today for sale at a higher price sometime in the future.  Deciding the target market for the future sale has a pretty important influence in your purchasing decisions today.

Some questions you should consider are:-

• Who will I be selling to in the future?
• What form will be demanded?
• Will I want to sell all at once or in smaller lots?

Owning the products that will have the greatest demand at your exit point is important.

History suggests that investment manias are bid up by the masses.  Therefore, if this occurred in silver, it is likely to be average Joe who bids up the price for your warehoused stocks, not a professional bullion dealer.  What type of silver will Joe want? 1000oz (30kg) bars or 1oz coins?  It seems logical to expect that Joe is going to pay the biggest premium for coins because they are recognisable, divisible, real money, transferrable, trustworthy and guaranteed in weight and purity. Most of those qualities do not apply to large bars.

This outcome was highlighted in the crisis of 2008.  Despite silver bullion prices falling, a worldwide shortage of coins meant skyrocketing premiums.  In Australia the 1oz silver Kookaburra coins premium jumped from 25% over spot to a near 100% premium to spot in a matter of weeks.  This example highlights that coins often have two values:  numismatic or scarcity premium and metal value.  Silver bullion bars only have metal value.

The equation of buying silver is actually quite simple:

• Bars = lower buying cost and lower sale price.
• Coins =higher buying price and higher sale price.

Obviously for these equations to hold true depends on the market conditions, supply demand and a range of other factors but generally the net financial effect of buying coins vs. bars is negligible.  It really comes down to your particular goals, circumstances and preferences.

Here are some things to consider:

• Coins are portable for trading goods and services and resale to the masses at some date in the future.
• Midsized bars are a good value, convenient store which will easily go in safety deposit boxes or safes.
• 1000oz bars are for your family's store of wealth and security if you can securely store them and transport when necessary.  Strategically safe and accessible storage is critical, but very expensive and complex.  These bars are difficult to divide and sell portions and may be limited to bullion dealers as a target market.

BULLIONMARK supports the quest to accumulate as many ounces as you can afford, but make sure they are profitable ounces.

Disclaimer

This information is provided for general information purposes only.  Please seek independent professional advice. Content views and opinions may be sourced from a third party.  BULLIONMARK does not guarantee the accuracy of this information.  BULLIONMARK accepts no liability for any loss incurred as a result of this information.  For more please read our terms and conditions or contact us.