The American Silver Eagle coin is one of the well-recognized and admired silver coins in the world. Silver Eagles represent the quality and craftsmanship that is typical of the U.S. Mint. Many peopleoften wonder why these coins carry the premiums that they do. Here we will break downwhy Silver Eagles are typically more expensive than other types of silver bullion.
Premiums Vary by Condition
First of all, mints such asthe U.S. Mint do not make coins or other bullion products for free. They are, in fact, for-profit entities that make coins and bullion in order to make money. Producing coins or bullion is not as easy as it may sound. Dealers must come up with design ideas, ways to strike the coins, means of packaging and more. There is a line of costs that are associated with producing American Silver Eagle coins.
The U.S. Mint produces American Silver Eagles in varying versions, as well. There are the standard uncirculated Silver Eagles and there are Silver Eagle proofs. The standard uncirculated, sometimes referred to as “brilliant, uncirculated” coins are what typically end up in buyers’ hands. Of course, there may be a large price difference between uncirculated Silver Eagles and proofs. Let’s examine both of them.
Uncirculated Silver Eagles are designed to be beautiful, affordable and symbolic. They contain one troy ounce of .999 pure silver. The coins carry a face value of one dollar, and are one of the only US silver coins eligible for IRA accounts. These coins have been minted since 1986 and are a true American icon. The U.S. Mint produces these coins with costs based on the silver content, minting costs and distribution. The U.S. Mint does not sell uncirculated American Silver Eagle coins directly to the public. The Mint sells the coins to a network of wholesalers and dealers who then sell to the public.
American Silver Eagle proof coins are made more for coin collectors. A proof coin is struck multiple times giving the coin more detail and a frostier look than standard coins. These proof coins are then placed in protective cases to help ensure their condition. The proof coins may also come in special boxes. The American Silver Eagle proofs carry a significant premium over the spot silver price. This is for a few reasons.
First, a proof coin is simply more expensive to make. The coin is struck using special dies. Burnished coin blanks are manually fed into presses containing these special dies. The coins are then struck multiple times. In addition to the enhanced minting process, the proof Silver Eagles are then placed in protective plastic capsules and mounted in a custom presentation case along with a certificate of authenticity. This obviously all adds cost to their production. The U.S. Mint does sell these coins to the public, as well as networks of wholesalers and dealers.
Dealer Markups
Once the coins are sold to networks of wholesalers and dealers, these companies will make the effort to market and sell the coins. Some of these dealers may be online and some may be in brick and mortar stores as well. These dealers, just like the U.S. Mint, are in the business to try to make a profit. There are numerous costs associated with running a bullion store or dealership. Dealers must recoup these costs along with some type of profit on sales in order to stay in business.
It is also important to remember that dealers can buy in much larger quantities than the average customer can. In doing so, dealers get wholesale pricing while those who buy from dealers pay retail pricing. In fact, it is really no different from any other retail business out there.
Uncirculated American Silver Eagles typically carry a premium of a few dollars over the spot silver price. American Silver Eagle proofs, however, can carry premiums that are three times the spot price. The premium on a proof coin will depend on the year, scarcity and condition. Proof coins also can have fluctuating premiums based on collector demand.
The world of coins and bullion carry with it a list of charges and expenses that must be passed along. These costs include design, mintage and distribution as well as dealer markups. The American Silver Eagle coin carries good premiums for a reason — it is a well known and respected product of the U.S. Mint. The next time you are looking at Silver Eagles, we think you will have a whole new appreciation of what really goes into these magnificent coins and bringing them to market.
All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.
