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This has probably asked and answered a dozen times and forgive me if it has but, is the premium for ASE's always going to be there? I just don't like paying that $2.00 to $3.00 premium per coin for them. How far back does that kind of premium go? Has the ASE always had that kind of premium? As long as it is always going to be there it isn't a real big deal. I pay $3.00 extra per coin now and get it back ten years from now when I sell the coins. But is it going to be there in ten years?

Years back when Silver was $12/oz I bought the following:
1 Scuffy Maple $12
1 Silver American Eagle $13

It was a $1 over back then
the same guy has them for $4-5 over- Typical Local coin shop that doesnt care

Math Time:
$12 spot and $1 Premium 1/12= 8.3% Premuim
$29 Spot and $2.50 Premium 2.5/29= 8.6% Premium

Some things dont change

"A" premium, sure. "How much", not so sure. "Plus or minus", depends on who is buying.

All bets are off if the economy crashes.

My belief is that when silver is at $70 per ounce the premium will shrink as everyone and their mother will be selling ase's.
When silver has just fallen and then silver becomes stable, a lot of people will pay $3 over or more.
When silver rises quickly no one can bring themselves to pay $3 over.
Sometimes you cannot sell ASE's for even $2 over spot. (those days are kinda frustrating here when national dealers will pay that)

The "value" of the ASE isn't in the premium itself. Imo, the value is that it is widely recognizable. If the market for silver expands, you will have more buyers for ASEs than for Amark 1981 chunks.

In a barter economy, the recognizability of the ASE will give you leverage in a negotiation.

ND,
I as well ponder the same situation. Do I pay the same $2 - $3 premium for a ASE or does it matter that I am a silver speculator hedging my bet that silver will rise and that wouldn't generic silver round/bars do just fine. I do have a good share of ASE. One member on this site said it best I want the dirty, crusty, holed and the bent. Make it .400, .800, 90%, .999 as long as it is silver and is inexpensive. If silver ever rises to the lofty highs of $100/oz. it won't matter in what form it is in, every one will want some.

The premium will always be there because the mint charges a premium to the dealers. The dealers have to make something so the premium rises even more.

When silver hits $70/oz, or whatever, the private market premium might shrink, but the dealer market premium will still stay.

I don't necessarily agree with the argument that premiums (private or otherwise) will shrink as spot rises. Higher spot means more working capital tied up, whether it be in material for manufacturers or in finished products for dealers, and more capital tied up in hedging. More working capital tied up means more expenses (interest) or more capital investments (more profit splitting).

Just look at gold. Nobody is out there making new 1 oz gold for $2 over spot like they are with silver, because it takes a whole lot more working capital to deal with gold. $20 - $50 over is much more common. So if companies want to make $2 on $35 silver, it would only be logical (in my mind) to want $3-$4 on $70 silver. The percentage will scale down somewhat, but the dollar value of the premium will go up.

Maybe the Mint can subsidize the increased costs of greater working capital since they have the US government behind them, but private industry can't double their working capital without incurring new expenses. And when you're working on margins as thin as the PM manufacturing and distribution industries are, those expenses are going to show up in the product price.

natsb88 wrote:I don't necessarily agree with the argument that premiums (private or otherwise) will shrink as spot rises. Higher spot means more working capital tied up, whether it be in material for manufacturers or in finished products for dealers, and more capital tied up in hedging. More working capital tied up means more expenses (interest) or more capital investments (more profit splitting).

Just look at gold. Nobody is out there making new 1 oz gold for $2 over spot like they are with silver, because it takes a whole lot more working capital to deal with gold. $20 - $50 over is much more common. So if companies want to make $2 on $35 silver, it would only be logical (in my mind) to want $3-$4 on $70 silver. The percentage will scale down somewhat, but the dollar value of the premium will go up.

Maybe the Mint can subsidize the increased costs of greater working capital since they have the US government behind them, but private industry can't double their working capital without incurring new expenses. And when you're working on margins as thin as the PM manufacturing and distribution industries are, those expenses are going to show up in the product price.

+1

I think the only place you will see an ASE premium erode is on the private market as the coins change hands in one on one deals in a trade for service/cash/goods, essentially "eroding" the premium.

I don't see that happening here on RC, we have many members who are operating at a commercial level weather from the front seat of a Ford Explorer or as a Brick & Morter: MH, Doc, Nate, OBAAT, Ray, christostock.... Take at look at the overall Feedback page. I would consider the top 14 to be net sellers and 15 and below to be net buyers. There are exceptions of course, myself included, I sell about three lots for every one I buy, but the influence at the top will drive the market.

I just got back from hosting a couple of friends on a hog/deer hunt and we were sitting around a campfire last night finishing off a bottle of Woodford Reserve Bourbon and were discussing whether ASE premiums would go down, up or stay the same when silver hits $75 and 100 and 200. We agreed it would go up incrementally as silver increase because.....because....well, I can't remember exactly why we figured it that way but we just did.

Heres how I see it:

$100 Silver

For private and outside firms to achieve $100/oz they will sell their reserves to dealers or the market place- in which the dealers or market place may ask $5-$10 behind spot to hedge themselves regardless of its a Silver American Eagle or a Generic 999 round.

However if business continues like normal at $100/oz for the US mint and primary manufacturers then yes we will see spot and premiums achieved. That would also require a stable spot price of $100/oz achieved- not having to worry bout sharp corrections.

I remember back in the late 80's when we used to buy ASE's for $140 a roll. I don't think there was much premium back then.