Earlier in the year, I was able to make a little money selling some gold coins back to the online dealers that I bought them from several years ago. In January, the spot price was $1570 per ounce and silver was $18.30 per ounce. I sold two 1-ounce gold coins and 40 ounces of silver bars.
Then in July, the price of gold had gone up to $1800 per ounce, so I sold two more gold coins, telling myself that if it went to $2,000 per ounce, I would sell two of my last three gold coins and keep the the very last one as a souvenir, paid for with gains from the other coins (a 1922 Double Eagle, which surprisingly don’t have a huge premium).
A couple of weeks later, silver shot up to $20 an ounce and I figured I could make about a 20% gain on some things I had that were not favorites (a bunch of silver bullion coins from the UK that I shouldn’t have bought, let alone 40 of them, plus a tube of 20 US silver eagle coins, my last 10 ounce bar, and some rounds (privately made coins). 75 ounces altogether, it made for a pretty heavy box (over 5 pounds).
Yesterday, gold hit a new record of $2,000 per ounce, so it was time to sell my two gold coins. But silver had really been going up like crazy, from $18 in January to $20 in July to $26 an ounce yesterday. At that price I could make money on everything I had bought despite premiums as high as $5 per ounce. I decided to really pare down most of my collection, keeping only my Australian coins which have pretty high premiums as well as a number of 5-ounce silver coins based on the America the Beautiful quarters. These should be able to fetch much better prices to private parties than selling back to the dealers for a little over spot. This time I scrounged together 134 ounces (9 pounds!) of coins for an average gain of about 33%.
The key takeaway is don’t buy silver coins as an investment since they are really hard to sell. If you want to collect, then okay, but don’t expect to get much back doing that. If you can’t resist, you want to start slow. I bought a ton of stuff in 2014 and 2015. Prices in 2014 were kind of high, but in 2015 were a lot lower. It is better to spread out purchases and buy when the prices dip. I tried to pick bullion coins instead of collector coins, but most bullion coins still have pretty substantial premiums and you rarely get that back. I bought coins from the UK and Austria, and the premium I got on those yesterday was about 99 cents per ounce after paying more like $2.99. I also had bought coins nominally made by smaller countries, but really made by private mints on behalf of governments. These came from Somalia, Armenia, Fiji, Nieu, and Tokelau. The Somalia ones were nice, with elephants and the design changes every year, but still no premium from the dealers (about 25 cents). The one premium that holds up pretty well, or at least did this year, was for the US mint’s silver eagles. I paid a premium of about $3.50 and got back about the same premium yesterday. It helps that production at the mint of new eagles hasn’t been keeping up with demand due to the rapidly rising cost of silver plus the effects of Covid. The dealers are selling these with a $10 premium right now!
This brings up another point. This seems like a terrible time to be buying silver or gold and yet that is exactly what people are doing, driving the spot prices higher but also the premiums. When I was stuck with paper losses on my silver holdings I thought there is almost no industrial use for silver right now (used to be for film developing and expensive flatware that seems out of style now) and so the price would probably never go up. People are counting on the value of the dollar dropping and making silver go up, which is probably happening, but maybe not to the extent of what is happening in the metal market. People sell in a panic, but they seem to buy in a panic too. Silver may well go up to $30 an ounce like Goldman Sachs says, or even more (I still have some left). And I was happy when I was getting $18 in January, but if I had held on could have gotten $26 like yesterday. So maybe I am selling too early (silver was $27 today), but I am happy to make some money and reduce my holdings.
Another point is to have an exit strategy. Are you going to sell on eBay and pay fees and deal with shipping a few coins at a time? Or will you take the easy way and send stuff to the online dealers for barely over spot price? Or will you take it to a local dealer? One thought I had was to try to sell on some of the silver and gold forums directly to others for prices I could set, but I never got around to that. May try that for my remaining coins since it minimizes fees, but you’re still dealing with just a few coins at a time.
Gold was much easier to deal with in general. Also, the exchange traded funds that invest in silver and gold are very easy to jump in and out of, but they charge fees for holding all of that metal in vaults somewhere, so I think over the long term, losing up to 1% per year on fees (way tinier a charge than you would pay some place to store metals for you), your holdings could evaporate slowly (I had most of these coins for 5 or 6 years). But buying silver and paying 10% or 20% in premiums is terrible. With silver bars you can usually get decent premiums (regularly less than a dollar an ounce in the past, now $3), but the ETF isn’t a terrible way to go for silver. Gold coins and bars are maybe good for long term holdings and don’t take up as much room as pounds and pounds of silver (the 9 pounds of silver I sold yesterday was still worth less than the two gold coins I sold with it). Plus I didn’t want these shiny coins to get damaged or tarnished, so I spent a lot on coin capsules and tubes plus anti-tarnish paper and silica gel, which worked for the most part, though I don’t know that the dealers care (they do, though it might not be worth much, see comments) and some of the coins still had a little tarnish on them. Someone will get some surprisingly nice coins from JM Bullion in a couple of weeks.
When I phoned in my sell order, I had to identify all of the different coins. There were a lot of different coins and different years. One troublesome area was the British coins where I had some Britannias (their standard silver bullion coin), then some lunar coins that are very similar, but have a Chinese New Year character design on the back, and finally some special Britannias where they inscribed a lunar character along the edge of the coin. On the phone, despite my description, they identified the lunar coins as the ones with the character on the edge, but the one with the character on the edge as a regular Britannia. There wasn’t much price difference and they were they ones assigning categories over the phone, so I just went with it. On some of the obscure ones, he had to ask his manager and they ended up assigning those as “random coins, varied condition” for barely over the spot price of silver and coded as “culls”.
They received the package on Friday and then on Monday I got an email saying there were some incorrectly identified coins, but the new quote worked in my favor and I was getting more money. More money! I didn’t look any closer and said okay and they said they would continue to check everything in. Usually the money shows up in my bank account a couple of days later, but on Wednesday I got a standard email saying they had received my package and would let me know when payment was released, which seemed weird since I know they were unpacking it on Monday.
Then on Saturday, never seeing a payment, another person writes and said there was an error in the revised quote and I would be getting less than the original quote. Ugh. Meanwhile the price of silver has gone up, so they are ahead on all of this since I locked in at the lower price when I phone it in. I looked over what they had done and they threw in the Austrian coins as random coins, any condition, for less money. And they added 16 coins to random coins but didn’t zero out the 16 turtle coins that matched with that. And all of the British lunar coins were also now random coins. That wasn’t quite fair because they had a buyback price for some of the lunar coins on their website, so I said that if they are going to re-categorize coins, they should be able to re-categorize the lunars in my favor. I didn’t hear back that day.
Then today (silver was up again) they said the 4 Austrian coins had milk spots (white tarnish, usually because of bad manufacturing; I had bought these from the same company six years earlier and they got the spots pretty quickly, despite putting them in capsules, putting those in tubes, and putting the tubes in airtight containers with silica gel and anti-tarnish strips). A few of the lunars had weird darker tarnish spots too, but most of them looked pretty nice. I’m not sure how many old bullion coins don’t have tarnish, but at least they gave me a reason for the Austrian coins. Very surprisingly they said they would give me the lunar price on all of they coins they had decided were random ($1 over spot price), which was better than what I was asking for (they are selling the lunars for $11 over spot, so they are making a killing on those). So in the end, I am getting maybe a little more than where I started out.
The lesson learned is that any blemishes will count against you and to make sure they understand on the phone exactly what you are giving them because that quote is meaningless if there is no match when they receive the coins. I know they are super busy and have probably hired a bunch of temporary workers to handle the volume, so it delays and glitches and can be expected. I am glad I am not trying to buy coins when they are going for $11 over spot. I have watched eBay and I don’t see auctions going for that kind of price, but there are some sorry looking coins from private sellers too. A lot of serious silver buyers don’t seem to mind tarnish since it is so hard to avoid.