by Louis Cammarosano, Smaulgld:
Premiums on one ounce American Silver Eagle coins are at elevated levels.
Higher Premiums on American Silver Eagles are more a function of lower silver prices than a silver shortage.
Why Do Premiums on American Silver Eagles Rise?
When one ounce American Silver Eagle coin (ASE) premiums rise, it’s usually in response to an increase in demand. Sales of ASE’s hit records in 2013 and 2014 and are on pace to do so again this year. Premiums rise during sustained surges in ASE sales making it difficult for the U.S. Mint to keep pace with demand.
Lower Silver Prices Cause American Silver Eagle Premiums to Rise
One factor overlooked as to why ASE premiums rise is the falling price of silver that makes the retail price paid per coin rise on a percentage basis much higher than other silver products.
According to the United States Mint (the Mint), Authorized Purchasers (APs) of ASE’s, like Apmex, can purchase ASE’s for $2 dollars per coin over the spot price of silver with a minimum ordering requirement of 25,000 coins.
The Mint’s $2 charge per coin is the same whether the price of silver is $10 or $50 an ounce.
The constant Mint charge of $2 per coin acts to make the premium higher on a percentage basis the lower the silver spot price. For example, a $2 premium on $10 per ounce silver equates to a 20% premium over the spot price of silver on ASEs that AP’s purchase from the Mint; at $20 per ounce a $2 premium per coin equals a 10% premium over the spot price of silver; and at $40 it’s just a 5% premium over the spot price of silver. The higher the price of silver, the lower the premiums APs pay the Mint on ASEs.
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