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Premiums Jump in Bellwether Pre-1965 Silver Coins

Supplies of 90% silver U.S. coins coming to market fluctuate dramatically. Lower silver prices in recent weeks are producing the expected result: Fewer investors holding these coins are willing to part with them, and dealers are bidding higher to get inventory. Premiums spiked another $0.30 to $0.50/oz over the last week on dimes and quarters, following a $0.25/oz jump about 1 week prior.

The question for investors is: Will the higher premiums for cheap junk silver coins translate to higher premiums elsewhere? The answer is “yes” if the bargain hunting stimulated by lower spot prices drives more demand than mints and refiners can meet. It’s starting to look like that may be the case.

Demand for silver bullion in all forms is up significantly from August levels, especially for those collecting silver bars. Money Metals Exchange sold a record number of ounces in September. October sales volume is strong (though not at the prior month’s pace).

Sunshine Mint, a major supplier of blanks for the U.S. Mint’s silver American Eagle program, recently reduced production of silver bars to focus on meeting additional demand for blanks. As a result, Money Metals will be out of stock on the 5-ounce silver bars produced by Sunshine Mint indefinitely.

Last week, another major U.S. silver refiner began quoting longer lead times for 10-ounce and 100-ounce silver bars. Along with that, the Royal Canadian Mint began rationing deliveries of silver Maple Leafs --so far premiums for these U.S. Mint and Canadian coins are up a modest $0.10/oz.

There is enough tension between supply and demand to expect broadly higher premiums to quickly follow any additional buying interest in the coming weeks. Investors should carefully weigh any expectation for spot prices against the prospect of higher premiums when deciding the timing of their purchase.

Right now, the best deal available is on silver rounds, particularly because all orders placed with Money Metals Exchange this week ship free.

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