Insights into Precious Metals

Insights into Precious Metals

Some people invest in precious metals, others do not.  The intent here is to give some insights into precious metals, not to influence any investment decisions. 

In order to understand precious metals, there are several things that are important.  Among them are the purity of the metal, the better value sizes of a metal to buy, and whether the metal is a bar or round, or if it is a legitimate coin.  Then, one must ask who stands behind the stated weight and purity.

The Precious Metals

The three common precious metals are platinum, gold, and silver.  But palladium and iridium are sometimes also mentioned. 

The Purity of Gold

The major mints have been attempting to produce as pure of a product as possible.  Pure gold is 24-karat gold.  While this may be too soft for many uses, it works well for bullion coins.  Many mints reached the purity of 0.999, then some went on to 0.9999, and even 0.99999.  Is that really necessary to refine gold past 0.999?  No, except people seem to think the more nines the better.  In reality it is not enough of a difference to matter, except in perception.

Some mints including the United States for the American Gold Eagle and the Royal Mint for the Sovereign produce 22-karat gold coins, which is 0.9167 pure, or 22 parts of 24.

Other purities are possible, so always check the specifications for the AGW (actual gold weight).  Know what the coin or bar really is.  Use the AGW to determine if a one-ounce 22-karat coin has one ounce of total metal including impurities or one ounce of gold.  In other words, know if the weight is the AGW or the weight of the object.

The Purity of Platinum

Platinum coins are not normally found in the same purities as gold and silver coins.  The best you can expect for platinum is 0.9995 purity.  This is not a major concession to having pure platinum.

The Purity of Silver

Older United States coins had a purity of 0.900, considered coin purity.  Some coins from Europe and Canada have a purity of 0.925, which is Sterling silver.  These are preferred if they are to be melted down for jewelry.

Fine silver bullion coins have purities of 0.999, 0.9999, and even 0.99999. 

Similar to the AGW is the ASW (actual silver weight).  As with gold, know what the weight refers to, the ASW or the total weight, especially if the piece is not fine silver.

Coins Vs Bars and Rounds

Bars and rounds also may have the weight and purity stamped on them.  While many coins contain this information, it is unnecessary, since the mint has records.  But bars and rounds should show the information prominently. 

Coins usually cost a slight amount higher than bars and rounds, but coins have a greater chance of increasing in value.  And the mint offers its reputation in support of the purity and weight.

Many people will not look at a coin, since there is a slight premium, but coins have a better chance of attaining a numismatic value, especially today when mints are offering limited mintages.  And they carry the mint’s reputation. 

Size

There is a cost with minting any coin, round, or bar.  As a general rule, if it weighs less than a half of an ounce for silver, and a tenth of an ounce for gold, the cost per ounce is rather high. 

Larger pieces might be pricy because of low mintages.  Also, selling larger pieces might be more difficult. 

For silver the half-ounce, one-ounce, two-ounce, five-ounce, and ten-ounce coins are desirable coin sizes.  For the ten-ounce coins the Queen’s Beasts coins appear to have some appeal.  The large two-ounce and ten-ounce Queen’s Beasts coins are popular, and may have pushed the desired size upward.

To get an idea of how many silver bullion coins are issued in a year, and the number seems to grow annually, please see Collecting Silver Bullion Coins.  Annually there seem to be more and more collectible silver bullion coins available.  There is a demand, and many mints are responding.

Gold coins from one-tenth ounce through one-ounce seem to be popular.  

For more on buying fractional gold, pieces of gold less than one ounce, please see Gold Does Not Have to Be Expensive.  Gold coins come in a multitude of sizes.  Many are smaller than one Troy ounce, so they cost lass, much less.

Platinum coins are harder to find larger than one ounce, and some platinum coins have sizes no larger than a half ounce.

These sizes are what seem popular, but no guarantee is made.  Indeed, preferred sizes seem to be changing with the larger Queen’s Beasts coins leading the way.  Is it a new trend, or is it an illusion?  Time will tell.

With coins, mintage is important, but right now there seems to be few collectors for large ten-kilogram coins.  Value depends on demand. 

The Guarantee of the Standards

If you have a large bar of a precious metal, it might be difficult to make a claim the markings are accurate.  When selling, expect a potential buyer to want assurance the markings are accurate for both weight and purity. 

Some bars are produced by large mints, among them are the Royal Mint and the Perth Mint.  Having their official mark on a bar is quite helpful.  Marks of respected private mints might also suffice.  In fact, designs on bars and rounds can often identify the mint that produced them.

Unspecified chunks of metal might require an assay, which can cost time and money.  And since that assay is not permanently attached to the metal, it has use only if acquired in the presence of the potential buyer.

Spot Prices Vs Futures Prices

Often visiting multiple sites makes it seem that the values of precious metals have a range, rather than a specified value.  That is an illusion caused by the fact some sites use spot prices, others use futures prices.  The spot price is the cost of a physical piece of a precious metal.  The futures price is the cost of the metal at some future time on the commodities market. 

To make things more complicated, there are buy and sell prices, which are different.  Dealers will buy at a lower price than they will sell.  Actually, dealers can deviate from these, since there is no rule they must buy or sell as a referenced price.  And, somewhere in between is an average price.  Which price is being quoted, the average, the sell, or the buy? 

Often physical metal is quoted in spot prices, but remember if a dealer says the buy price is a certain value the sell price is less.  Larger volumes might transact at the spot price, but expect a fee from the agent handling the sale.

Tracking Precious Metal Values

One easy place to track the value of precious metals in just about any currency is at XE.  The identifier of silver is XAG, gold is XAU, and platinum is XPT.  A good location for current precious metal news is Kitco.  Kitco also gives interesting charts on the precious metals.  These are good sites, but we do not take any responsibility for any errors they might contain.

Protecting Coins, Bars, and Rounds

Coins, bars, and rounds must be protected from damage to get the best value in the future.  The 2X2 flips do not come large enough for many bullion pieces.  Capsules are often desired, but you should always use the proper size.  You are protecting from wear, so you do not want the coin to slide or flop.  And you are protecting from environmental damage, so you wish to limit the air trapped inside. 

Conclusion

It is not difficult, but please understand the terms before looking at metals.  Avoid getting less than expected.

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