One of the most common questions we get at Bullionmark 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, lets 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 50% 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.

The trend is already clear with worldwide silver coin shortages and skyrocketing premiums. In Australia the 2009 1oz silver Kookaburra coins are selling at over 100% premium to spot up from 50% in 2008 and 25% in 2007.

Here are some things to consider:

• Coins are portable for trading goods & services and resale to the masses at some date in the future
• Mid sized bars are a good convenient store of value easily go in safety deposit boxes or safes.
• 1000oz bars are for your families store of wealth & security if you can securely store them and transport when necessary. Strategically safe and accessible storage is critical, but very expensive and complex. Difficult to divide and sell portions. 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.