Junk Silver Pricing

lahmejoon

Hi All,

I primarily post in the sports card forum, but I have collected coins on and off in my lifetime. I'm hoping someone could shed some light on pricing.

Based on where silver is trading, if we ignore the possibility of key dates, dimes, quarters, and halves should be selling around 14x face. Out of curiosity, I checked out ebay and have seen that in the last two days, rolls of '64 Kennedy halves were selling between 18x and 19x face. Being out of the loop, is there a reason why junk silver is trading at a significant premium over melt? Is there an underlying theme that silver is perceived as undervalued, so people are willing to pay a premium?

Thanks in advance for my rookie questions!
Aaron

Brol

I think you can pay that forpaper silver on the market. Real metal cost more.

MsMorrisine

Despite falling metals prices, physical metal demand is strong.

Even premiums on ASE products widened from a few years ago.

lahmejoon

Thanks for your posts. I know there's always a premium on ASE's, but was very surprised to see the extent of the premium on junk silver.

LotsoLuck

Junk silver trades vey well on ebay and always has.

Davideo

I also find a good bit of variety on junk silver relative to spot, seems like typically anywhere from spot + 5% to spot + 20%

Overdate

There may be a bit of a scarcity premium also, since so much junk silver has disappeared into the melting pots during the past 50 years.

PerryHall

You may want to try the Precious Metals Forum here with your question.

LochNESS

<< <i>You may want to try the Precious Metals Forum here with your question. >>

TwoSides2aCoin

One man's junk are two other men's jollies.

That's how a premium gets attached.

derryb

<< <i>Being out of the loop, is there a reason why junk silver is trading at a significant premium over melt? Is there an underlying theme that silver is perceived as undervalued, so people are willing to pay a premium? >>


Yes and Yes.

precious metal spot prices are determined in the futures (paper) market. Futures are written promises of future physical delivery. A growing concern of the risk of paper promises for physical metal as well as a decline in the value (spot) of the promises has triggered a slow increase in the markup (premium over spot price) of what sellers want for their physical metal. The growing concern of paper risk is based on many factors that include an exponential increase in the number of promises and a belief the paper market may fail due to excess promises to deliver metal. Currently these paper promises are many times the multiple of the physical metal available to honor them. As this multiple grows, so does premium over spot.

Money deposited in banks is loaned back out at many multiples of its value (leveraging) just as futures paper promises are sold at many multiples of the metal available to back them. Paper futures are viewed by their sellers much the way bank deposits are viewed by banks: "What are the odds of everyone wanting it all at once?" The absence of a large increase in physical metal delivery demand at the futures exchanges (or massive deposit withdrawals at the banks) is the only thing that keeps paper exchanges and banks from failing (defaulting).

Premiums will continue to rise as long as the risk of paper grows. On the other hand, premiums would decline (possibly rapidly, and even below spot) if there was a mad rush to get out of physical metal. So far, premiums are determined by the laws of supply and demand. Ideally base prices for physical precious metals will be eventually allowed do the same by breaking free from the restraints of paper promise price setting.

lahmejoon

Thanks, everyone. I appreciate the clarification!

LochNESS

I made it through the first sentence of Derry's post. Then my head exploded. ugh. So many words!

I wonder if this is how my students feel when I teach them music lessons ...



<< <i>One man's junk are two other men's jollies. >>

man, I dunno about that. I've seen some real junk jewelry where I'm thinking "when and how was that ever attractive to wear?"

The biggest issue I've had with "junk silver" and jewelry in general is the owners always want more than it's worth. Because on some level they have sentimental attachment. Or they really need the money and have reached the level of desperation which requires digging into their jewelry box as a last resort. Either way, when you give them a fair price (and I mean a GOOD price) they still gripe and make faces. It's just a hard, emotionally taxing business IMO. Selling is easy but the buying ... that can wear you down, man.

Cougar1978

There is a tremendous demand for junk silver. Its affordability is a huge factor as the higher BV values on gold have priced many out of this material. Many collectors walking into a show are doing good if they have $300 in their pocket. So they might pickup a nice coin or two spending $200 and spend the balance on junk silver. Numismatic News has a helpful pricing section on this.

Tookybandit

<< <i>

<< <i>Being out of the loop, is there a reason why junk silver is trading at a significant premium over melt? Is there an underlying theme that silver is perceived as undervalued, so people are willing to pay a premium? >>


Yes and Yes.

precious metal spot prices are determined in the futures (paper) market. Futures are written promises of future physical delivery. A growing concern of the risk of paper promises for physical metal as well as a decline in the value (spot) of the promises has triggered a slow increase in the markup (premium over spot price) of what sellers want for their physical metal. The growing concern of paper risk is based on many factors that include an exponential increase in the number of promises and a belief the paper market may fail due to excess promises to deliver metal. Currently these paper promises are many times the multiple of the physical metal available to honor them. As this multiple grows, so does premium over spot.

Money deposited in banks is loaned back out at many multiples of its value (leveraging) just as futures paper promises are sold at many multiples of the metal available to back them. Paper futures are viewed by their sellers much the way bank deposits are viewed by banks: "What are the odds of everyone wanting it all at once?" The absence of a large increase in physical metal delivery demand at the futures exchanges (or massive deposit withdrawals at the banks) is the only thing that keeps paper exchanges and banks from failing (defaulting).

Premiums will continue to rise as long as the risk of paper grows. On the other hand, premiums would decline (possibly rapidly, and even below spot) if there was a mad rush to get out of physical metal. So far, premiums are determined by the laws of supply and demand. Ideally base prices for physical precious metals will be eventually allowed do the same by breaking free from the restraints of paper promise price setting. >>






Awesome! Great information.