Gold/Silver price differentials

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jumblies's picture
jumblies
Status: Silver Member (Offline)
Joined: Jun 13 2010
Posts: 244
Gold/Silver price differentials

I'm looking at the prices of gold bars and their price differentials. Looking at the 1kg gold bar prices at bullionbypost.co.uk I can see that a Metalor bar (£30841) is more expensive than the Umicore bar (£30982). But they are both 1kg, same fineness and have no numismatic value.  They're investment grade bars. So why is one more expensive than the other? (by £141 per bar). 

Now with coins I can [kinda] understand the price differences. I mean, a 1oz Maple Leaf (£1006) has the same gold content as a 1oz Krugerrand (£978) yet the Maple Leaf is £28 more expensive. That's a lot. I can't imagine someone looking at oth coins side-by-side and saying "I'd happily lose 2.8% of my money to have a picture of a leaf than a deer". And in terms of recognisability, I would posit that the Krugerrand is universal whereas the Australian Year of the Rabbit is questionable.

I do not understand. If TSHTF as is suggested, are you really telling me that the rotten-toothed, radiation-ravaged trash-heap scavenger will look at your Krugerrand and say "No picture of a birdy, no deal"?

And, more's the point, are you telling me that the same trader, or some other gnarly hunchbacked, snaggle-toothed opportunist would scoff at my Metalor bar in favour of a Umicore bar?

And what of Silver coinage? The 1oz Austrian Philharmonic is £23.98, whereas the 1oz American Eagle is £25.48, The Chinese Panda is £27.80 and the Auastralian Koala is £28.80.

These are significant differences in price. So what warrants them? And are you/we/I better off buying bars than coins? For example, a 1oz gold bar costs £977 whilst the cheapest coin (Krugerrand) is £978. What's the best investment?

If one is considering more than a few ounces, it makes a significant difference. So what's the perceived wisdom? (I'm based in the UK)

PS. I based these off prices on bullionbypost who provide live updates, so the prices did change whilst writing this. I went back over the quotes but what you see whilst reading this will be different to what I saw whilst posting. I have no affiliantions with them nor have I ever done business with them. I could have used another provider like goldline or atsbullion, neither of which I've used either. They may be cheaper, better, more expensive or utterly terrible. I have no idea. Do you own due diligence.

 

skidod's picture
skidod
Status: Member (Offline)
Joined: Jun 29 2011
Posts: 1
My own understanding has

My own understanding has been that price differences are often a reflection on mint production, that is that the more coins or bars that are produced of that type/plate, the lower the cost per unit and that carries over into the retail price. Some mints intentionally limit the production of select items to make them more of a commemorative or future collectible, amd this is part of the price (in this case you really are paying more for the picture-that is truly meant to be part of the coin's value at the time). And demand plays a part too - there has been a huge demand for eagles lately with the mint selling out in record times, so they charge a bit more. I have also known dealers to charge a higher premium on specific items that they cannot keep in stock - my favorite dealer is quite honest and this is a simple supply/demand strategy. He sells out right away so he adds a bit more, partly to take advantage of the demand and partly to help sell his other items.

Personally, i dont mind paying a little more sometimes, but i like having a little bit of everything, for every occasion. Most of it is just bars at a great price, well half and the rest are coins. I split coins up to include ugly used bullion for selling to dealers (or in some nicer ones they make great gifts). Then I have a lot in widely recognized types for better bartering reliability, and junk silver for that too. I even have a section with just Christian pictures for the people who might really be drawn to it. Big silver bars are great for short or medium term trading if you're into that sort of thing precisely because their price is so close to spot.

In the long term i really dont think it matters that much. My bigger concerns are things like portability, ease of recognition, and some mild far out speculations on future laws regarding certain select coins. That said, i dont really go for numismatics. Amyway, if price is the number one factor, no, there's no bullion difference between tw identical products but the prices may be different based on other factors like supply/demand especially in the case of limited production items or small batches.

And no, when tshtf you might find it impossible to even figure out a fiat price. But i really don't think many people ever buy it for that reason at all. There's definitely a market for rare or beautiful coins, really there's something out there for everyone.

jumblies's picture
jumblies
Status: Silver Member (Offline)
Joined: Jun 13 2010
Posts: 244
So in that case when buying

So in that case when buying investment grade bullion bars buy the cheapest one as the price differential is merely a reflection of the differeing production costs for the refiner.

And when buying a monster box, for example, with the intent of either keeping them to trade/barter with then use the cheapest coin (1oz Krugerrand) because the gold/silver content is the deciding factor. Whereas if you you're collecting coins because they have nice pictures then get a selection.

Would you agree?

 

Ken C's picture
Ken C
Status: Platinum Member (Offline)
Joined: Feb 13 2009
Posts: 753
jumblies wrote: So in that
jumblies wrote:

So in that case when buying investment grade bullion bars buy the cheapest one as the price differential is merely a reflection of the differeing production costs for the refiner.

And when buying a monster box, for example, with the intent of either keeping them to trade/barter with then use the cheapest coin (1oz Krugerrand) because the gold/silver content is the deciding factor. Whereas if you you're collecting coins because they have nice pictures then get a selection.

Would you agree?

 

Also, sometimes there are local reasons to buy/hold one coin versus another. For example, Canada has an import tax on any gold coin not 24k. This means that Canadian Maples would not be taxed but Krugs or Eagles would be taxed because Krugs and Eagles are 22k.

But in the bottom line is that an ounce of gold is still an ounce of gold whether you have Maples, Krugs, or Eagles or other.

 

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