The 1 kg pieces are certainly enticing -- quite the conversation piece!
I've considered them in the past but have stopped short when considering their bullion value vs. selling price. For the current piece (if I'm doing the math correctly) the selling price is more than double the current silver bullion value.
I know that collector coins shouldn't necessarily be considered in terms of their bullion value, but when the difference is in the range of $1,100 it causes me to consider it.
These pieces will likely always carry a collector premium over bullion, but I've looked at some of the
RCM's other KG silver coins and while they are selling above original selling prices, it appears the increase has been largely due to silver's rise in value. (WARNING: Math ahead!)
For example, in September 2007 the
RCM was selling the "Early Canada" one kilogram coin for $1,299.95. Silver was about $12.10 an ounce at that time, so the bullion value of the coin was about $389. The difference between the selling price and the bullion price was about $910 or a premium of roughly 234%.
Today, I can buy the coin for about $1,900. That's about $600 more than when it was originally sold by the
RCM, so a nice profit for original purchasers. The change in the coin's bullion value between September 2007 and today, however, is approximately $630. So, while the coin increased in value, it seems fairly clear that the increase was likely due to the increase in the price of silver. At $1,900, the coin is selling for about $880 more than its bullion value -- a premium of 79%. Compare that to the original premium of 234% and you can see that the difference between the current selling price of the coin and its bullion value is trending down. How close will they come, I wish I could tell you!
If five years from now the 2012 1 kilo coin sells for a premium of 80% over bullion, the coin would sell for $1,835 if silver is still at today's price of $31.71 per ounce -- this would be a loss of $415 from its current selling price. If silver is $50 per ounce five years from now, the coin would sell for $2,895 (assuming the 80% premium) -- a profit of $645 vs. the present-day purchase. Who knows which way it will go?
One last calculation, if I purchased 1 kg of silver at $12.10 an ounce in 2007, it would likely have cost me somewhere in the neighborhood of $430-$440 (with dealer markup). Today, the silver would be worth about $1,020, giving me a gross profit of about $580.00.
So, bottom line, whether I bought a 1 kilo coin or invested in one ounce bullion coins equal to 1 kg, I'd be holding something today that is worth about $600 more. Which allows me to conclude that future profits on these one kilo coins are likely tied more to silver's bullion value vs. the coin's numismatic value. Of course, I could be wrong!
Use all of this mess at your own discretion -- I can't predict the future!
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Posted 04/09/2012 12:02 am
