As the price of precioius metals go up, does the % of the premium for 1/10 and 1/20 coins go down?

CoinHusker · February 11, 2008 8:00AM

Has the high premium usually associated with these small coins remained the same or has the increase in the price of metals eaten into that premium at all?

Deadhorse · February 11, 2008 8:12AM

The premium usually tends to increase across the spread with lesser than full oz. coins.

The smaller the denomination, the greater the spread as a rule.

CoinHusker · February 11, 2008 9:44PM

Interesting.

bluelobster · February 11, 2008 9:58PM

the question you asked was about rising metals prices affecting premium.....I think it's clear it shrinks the premium( as a% pf price) no matter what denomination.

CoinHusker · February 11, 2008 10:40PM

Thanks, that was my question. I was particularly wondering about the 1/10's and the 1/20's as they seem to carry the biggest premiums.

gecko109 · February 11, 2008 10:48PM

This is a GREAT question! At a gold price of say, $500, expect to pay about $54 for a 1/10th AGE, or an 8% premium. At $900 gold, and the same 8%, a 1/10th AGE should cost about $97. What if gold hits $1800? Would a 1/10 AGE sell for $194? I doubt it. As the spot price goes higher, I would expect the premium to drop very slowly. Maybe from 8% on $500 gold to perhaps 7% on $1000 gold, and maybe even just 6% on $1800 gold. Think about gold at $200 for example. The 1/10th AGE will still cost melt + $4 at a minimum. Thats a 20% rake.

CaptHenway · February 11, 2008 11:42PM

None of our suppliers have cut their markups as gold has increased.
For example, MTB charges us 40% over melt on a 1/20 oz. Australian Lunar coin.
When gold bottomed out at around $250. the coin melted at $12.50 and we paid $5 over melt.
Now, at $900 gold, the coin melts at $45 and we pay $18 over melt.
I don't think we can blame MTB, however, as I assume that the Perth Mint is still charging them the same percantage over melt as a distributor.
Same with the U.S. Mint. They still charge the distributors, such as MTB, 9% over melt. MTB sells them to us at 11% over melt.

jmski52 · February 11, 2008 11:45PM

At some point, competitive pressures might affect the premiums, but I wouldn't expect it to start happening this early in a price run-up like the one I am anticipating. I think we are still less than 50% of the way to fair market value for the PMs. And alot still depends on how many more stupid moves our government makes.

gecko109 · February 12, 2008 12:06AM

<< <i>None of our suppliers have cut their markups as gold has increased.
For example, MTB charges us 40% over melt on a 1/20 oz. Australian Lunar coin.
When gold bottomed out at around $250. the coin melted at $12.50 and we paid $5 over melt.
Now, at $900 gold, the coin melts at $45 and we pay $18 over melt.
I don't think we can blame MTB, however, as I assume that the Perth Mint is still charging them the same percantage over melt as a distributor.
Same with the U.S. Mint. They still charge the distributors, such as MTB, 9% over melt. MTB sells them to us at 11% over melt. >>

I wonder why that is. You certainley dont pay 40% over on a 1 ounce coin. As gold prices rise Tom, it doesnt cost any more for the Perth mint to make 1/20th ounce pieces than it did before the gold increase. What I mean is that it costs any mint, to make any coin, melt value + "x" to make the piece. You used to pay $12.50 + $5 for that coin. Now you pay $45 + $18 for the same coin. Does the current cost of production now take $13 per coin more than it did 7 years ago? Absolutely not. Eventually the premium has to drop when looked at this equation from this perspective.

CaptHenway · February 12, 2008 12:14AM

The holding costs of owning the gold have gone up considerably, but the manufacturing costs have not gone up nearly as much.
The Mints charge the higher premiums because they can.
However, the customers no longer buy the coins because the premiums are too high.

ziggy29 · February 12, 2008 12:23AM

I'd imagine the dollar amount of the premium stays close to fixed or rises slightly, but not in proportion to the rise in the bullion value. Thus the percentage could fall even if the absolute dollar amount of the premium rises slightly.

As the price of precioius metals go up, does the % of the premium for 1/10 and 1/20 coins go down?

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