Observations from a newbie

[firestacker]

I've been in this space about a month, maybe 2 and as a newbie to the space I have a few observations. Some of which need some clarity on whilst others are just raised for discussion 🙂

Premiums:
You guys are willing to pay pretty crazy premiums above spot price. Why?

For example, cheap silver coins will be about £16? Spot mid price is currently £12.25. That's a 30.61% premium and that's considered cheap?

Fractionals by some strange logic also have higher premiums. Not sure why!

My guess is because we have a lot of collectors here that perhaps don't care so much about their silver being close to spot price? Entering a trade and being down ~30% immediately would be out of the question when it comes to standard investing.

I think there are two things going on here. This stuff appeals to both collectors and investors which is perhaps blurring the lines between the two giving investors a bit of a hard time as collectors care less about the spot price? The other is of course the dreaded VAT distorting the real price of items and of course the people that bought with VAT on top naturally want to get their money back. Am I wrong?

I'd love to see a poll in this forum comparing the number of collectors vs stackers in this forum.

Coin sizes:
Before I entered this space I didn't even know you could get legal tender coins so big! Like 10oz and 1 kilo coins sizes. I think they look a bit silly considering the impracticalities of trying to fit one in your pocket let alone a wallet but I admit some are slowly growing on me simply because of the design. To an outsider it's pretty strange!

The unexpected:
- Long pings these metals give out when doing the ping test. Oh so satisfying but I hate the risk of scratches!

- Rectangle coin bars!
e.g. Perth mint dragon bars. From someone that likes bars more but know the advantages that come with legal tender coins this to me seems like the best of both worlds. I'd love to see the royal mint do something similar.

- Coins by the royal mint are aparently free from capital gains tax. Woo

Shipping costs:
It can add up! Doesn't help that most couriers standard delivery insurance won't cover precious metals so you have to opt for the more expensive option or take the risk.

Payment options:
Seems the standard way of paying for things online is by bank transfer. It's like throwing cash through a black hole hoping it reaches the right destination on the other side and because we're usually buying expensive stuff here I get nervous until I get a payment confirmation which can take days. I keep thinking what if it was accidently sent to someones random bank account? No immediate verification doesn't help with the nerves.

Legal tender denominations:
For gold, this is about 10%. For silver 6%. For platinum 16%. Why so low denominations relative to the metal price??

VAT:
Gold gets a free ride. It's a shame about all other precious metals. This really needs to change! I see some americans willing to pay VAT buying this stuff in the UK. I can't imagine why! It seems like they have a much better market over there. I won't rant too much about this.

 

[KDave]

A lot of people I think start as stackers and become collectors. There are a lot of bad influences on the forum which doesn't help 

You can collect at bullion prices with certain coins and sets if you buy at the right time, on release with bullion, long after release with certain collectable coins, they often fall in value. Some never do hence why folk will pay silly money for a coin that has comparatively low material value. Many different markets within this one space is what keeps it interesting. I'm a stacker really, but I like to see the beautiful but expensive coins people pick up that I would never dream of buying even if I had the brass. 

Legal tender values were added to protect bullion as an investment from various taxes, long term thinking by the people behind reintroducing gold into the private space back in the day. The denominations are low because they also did not want metals competing with circulating fiat currency. Two birds with one stone. Gold and fiat work side by side in the same system, for now. That is my understanding. 

[sixgun]

1 hour ago, firestacker said:

Premiums:
You guys are willing to pay pretty crazy premiums above spot price. Why?

For example, cheap silver coins will be about £16? Spot mid price is currently £12.25. That's a 30.61% premium and that's considered cheap?

Fractionals by some strange logic also have higher premiums. Not sure why!

My guess is because we have a lot of collectors here that perhaps don't care so much about their silver being close to spot price? Entering a trade and being down ~30% immediately would be out of the question when it comes to standard investing.

I think there are two things going on here. This stuff appeals to both collectors and investors which is perhaps blurring the lines between the two giving investors a bit of a hard time as collectors care less about the spot price? The other is of course the dreaded VAT distorting the real price of items and of course the people that bought with VAT on top naturally want to get their money back. Am I wrong?

I'd love to see a poll in this forum comparing the number of collectors vs stackers in this forum.

Most here are numistackers. i have basic bullion - Philharmonics, Maples, even a few Kangaroos (which i dislike). i also have much more expensive - multiples of the 30% premium you mention.

You can pick up 1oz coins at a bit over 16€ from goldsilver.be if you want the basic stacking silver. A coin at £16 is nothing special.

Spot silver is in reality an imaginary price - even if you buy a 5000oz bar you cannot actually get your hands on it for spot. Now make that into planchettes and mint them and transport them to dealers. Then factor in a profit for the mint and a profit for the dealer which will have VAT irrespective of where it is in the EU.

Getting a coin in your hand costs more than spot. The costs for doing that in gold are about the same as silver so the impact on the selling price of a silver coin is significant.

If you are interested in stacking metal and you can get your metal for spot, then get it. Buying cheap silver does not always pay off. A coin has a metal value + a coin value (premium). A basic bullion coin has a lower premium which will not appreciate, it has no collector value.

The people here are in the main switched on - they are looking for value - they are looking for good coins that will appreciate and ideally coins they can also appreciate.

Fractionals are obviously going to be more expensive. 10 x 1/10oz gold coins are going to be more than a 1oz coin. There are 10x the minting costs for starters.

[AppleZippoandMetronome]

With regards to premiums you will pay those regardless where you are. For example if I wanted to buy a tube of 25 2019 standard 1oz Silver Maple Leafs they would cost me:

In Canada from a main dealer (Canadian PMX) - CAD$618.75 equals £360.96 at current rates

From the European Mint - €403.50 equals £350.26 at current rates

From Apmex - US$462 equals £354.13 at current rates

You can see of the current options at the current exchange rates the European Mint works out cheapest and you can place that order right now. The only downside is you will have to pay shipping. The point though is that the premiums are pretty standard and more or less equal regardless where in the world you are. Premiums on fractionals appear higher because of the lower value of the metal content in fractional coins. Creating that fractional coin has costs just like creating the standard 1oz coins. The less metal value you have the more you notice what it costs to create the coins.

The 20% VAT you have to pay from UK dealers renders them not worth using IMO which is why I haven't included them here. If we are unable to order from the EU dealers post Brexit that will end my personal investment in silver as it simply isn't worth being 20% down right out the gates.

 

 

[lightjaw]

33 minutes ago, firestacker said:

I've been in this space about a month, maybe 2 and as a newbie to the space I have a few observations. Some of which need some clarity on whilst others are just raised for discussion 🙂

Premiums:
You guys are willing to pay pretty crazy premiums above spot price. Why?

For example, cheap silver coins will be about £16? Spot mid price is currently £12.25. That's a 30.61% premium and that's considered cheap?

Fractionals by some strange logic also have higher premiums. Not sure why!

My guess is because we have a lot of collectors here that perhaps don't care so much about their silver being close to spot price? Entering a trade and being down ~30% immediately would be out of the question when it comes to standard investing.

I think there are two things going on here. This stuff appeals to both collectors and investors which is perhaps blurring the lines between the two giving investors a bit of a hard time as collectors care less about the spot price? The other is of course the dreaded VAT distorting the real price of items and of course the people that bought with VAT on top naturally want to get their money back. Am I wrong?

I'd love to see a poll in this forum comparing the number of collectors vs stackers in this forum.

Coin sizes:
Before I entered this space I didn't even know you could get legal tender coins so big! Like 10oz coins sizes. I think they look a bit silly considering the impracticalities of trying to fit one in your pocket let alone a wallet but I admit some are slowly growing on me simply because of the design. To an outsider it's pretty strange!

The unexpected:
- Long pings these metals give out when doing the ping test. Oh so satisfying but I hate the risk of scratches!

- Rectangle coin bars!
e.g. Perth mint dragon bars. From someone that likes bars more but know the advantages that come with legal tender coins this to me seems like the best of both worlds. I'd love to see the royal mint do something similar.

- Coins by the royal mint are aparently free from capital gains tax. Woo

Shipping costs:
It can add up! Doesn't help that most couriers standard delivery insurance won't cover precious metals so you have to opt for the more expensive option or take the risk.

Payment options:
Seems the standard way of paying for things online is by bank transfer. It's like throwing cash through a black hole hoping it reaches the right destination on the side and because we're usually buying expensive stuff here I get nervous until I get a payment confirmation which can take days. I keep thinking what if it was accidently sent to someones random bank account? No immediate verification doesn't help with the nerves.

Legal tender denominations:
For gold, this is about 10%. For silver 6%. For platinum 16%. Why so low denominations relative to the metal price??

VAT:
Gold gets a free ride. It's a shame about all other precious metals. This really needs to change! I see some americans willing to pay VAT buying this stuff in the UK. I can't imagine why! It seems like they have a much better market over there. I won't rant too much about this.

 

Right I will bite.

Premiums 

Yes some its carry a premium above spot price so let's think a out some of the people who take a cut of the value of a gold or silver coin before you get it.

1) miner 

2) refiner

3) mint

4) dealer

All of the above are taking a cut before you get your hands on the finished product. Without them however no product would exist. Unless you personally are willing to buy a mine, operate it yourself and do the refining and minting you wont get the coin at spot.

You mention trading. For many but not all collecting bullion is to store wealth, not to trade. If you wanted to trade open an etf I believe they are called, or buy mining shares.

Fractionals may be harder to mint due to the size. Also like in most things the more you buy the cheaper it is. I am sure I could get an awesome deal if I wanted 10 sofas from dfs but I doubt I would get any discount if I just want 1 cushion.

More thoughts incoming...at a noisy party

[sixgun]

35 minutes ago, firestacker said:

Coin sizes:

 

Before I entered this space I didn't even know you could get legal tender coins so big! Like 10oz coins sizes. I think they look a bit silly considering the impracticalities of trying to fit one in your pocket let alone a wallet but I admit some are slowly growing on me simply because of the design. To an outsider it's pretty strange!

 

All coins are by definition legal tender or at least were legal tender at one point in time. If they aren't they are rounds or medallions.

All coins are not intended for circulation. Clearly 10oz are not intended for circulation. There is a 1 tonne Perth Mint gold coin - obviously not meant for circulation. Being a coin is a legal definition and can have tax implications. Rounds are taxed throughout the EU but coins may get a lower VAT rate or no VAT for example in Estonia.

38 minutes ago, firestacker said:

The unexpected:

 

- Rectangle coin bars!
e.g. Perth mint dragon bars. From someone that likes bars more but know the advantages that come with legal tender coins this to me seems like the best of both worlds. I'd love to see the royal mint do something similar.

 

Being a coin is a legal definition nothing to do with being a disc.

40 minutes ago, firestacker said:

Shipping costs:

 

It can add up! Doesn't help that most couriers standard delivery insurance won't cover precious metals so you have to opt for the more expensive option or take the risk.

Yes it can add up - moving metal around is expensive, one of the reasons you will struggle to get a coin for spot.

41 minutes ago, firestacker said:

Legal tender denominations:

 

For gold, this is about 10%. For silver 6%. For platinum 16%. Why so low denominations relative to the metal price??

Because the mints don't like to let us know gold and silver is worth a lot more than the fake money governments put out. A sovereign is £1 - it was a £1 circulating coin up to WWI - shows how much fake money devalues over the years.

43 minutes ago, firestacker said:

VAT:
Gold gets a free ride. It's a shame about all other precious metals. This really needs to change! I see some americans willing to pay VAT buying this stuff in the UK. I can't imagine why! It seems like they have a much better market over there. I won't rant too much about this.

i doubt the governments will pass up on the chance to tax the people, so don't hold your breath.

[lightjaw]

Coins by the royal mint are aparently free from capital gains tax. Woo 

Dont get me started on this. Do you plan to buy hundreds of thousands of pounds worth of metal, and sell it all in one go? If this is the case there might be a case for cgt free coins. But do you have no family? No friends? Would you need to cash it all in one go? Could you not, oh I dont know "gift" 20000 worth to your partner to cash in? Or perhaps another relative? The dog? Do you plan to cash it all in with a high street dealer or would not some be private sales? And would you use the same dealer each time till you hit your cgt threshold? I guess if you were extremely conscientious or have a huge amount to cash in and need it in a hurry then cgt could be payable....but come on....

Cgt free my arse

[Abyss]

@firestacker interesting chosen Queen Beast 1 oz Gold Coin as your avatar I have just today sold spare one I had for £1300 and spot trading £1017 premium 28% on gold. I initially go into PMs because wanted wealth preservation with added insurance that physical PMs can provide above any fiat currency. The more researched on what to buy I understood that buying close to spot as possible was not always the most sensible investment decision and potential premium appreciation could help offset any negative moves in spot price.

I only have to look at the 1 oz Gold Santa Maria Gold coin at the time of release I thought to myself no way on earth I am paying 40% above gold spot for that and those individuals have purchased are crazy. I believe on the secondary market 1 oz Gold Santa Maria coin now selling many multiples over spot.

[firestacker]

8 minutes ago, lightjaw said:

Coins by the royal mint are aparently free from capital gains tax. Woo 

Dont get me started on this. Do you plan to buy hundreds of thousands of pounds worth of metal, and sell it all in one go? If this is the case there might be a case for cgt free coins. But do you have no family? No friends? Would you need to cash it all in one go? Could you not, oh I dont know "gift" 20000 worth to your partner to cash in? Or perhaps another relative? The dog? Do you plan to cash it all in with a high street dealer or would not some be private sales? And would you use the same dealer each time till you hit your cgt threshold? I guess if you were extremely conscientious or have a huge amount to cash in and need it in a hurry then cgt could be payable....but come on....

Cgt free my arse

Better for it to be CGT free than not to be but I do see your point. For something like gold it's going to take a long time for any profit to be above the £11k allowance but I'd imagine for something like royal mint platinum coins, something more volatile it may take less time. Also it's possible I've used my CGT allowance on something else like selling a boat load of Bitcoin for the year. It seems some people around here do have a serious stack.

[lightjaw]

3 minutes ago, firestacker said:

Better for it to be CGT free than not to be but I do see your point. For something like gold it's going to take a long time for any profit to be above the £11k allowance but I'd imagine for something like royal mint platinum coins, something more volatile it may take less time. Also it's possible I've used my CGT allowance on something else like selling a bad load of Bitcoin for the year. It seems some people around here do have a serious stack.

Indeed and I dont mean to sound like an arse it's just my personal bug bear.

Done correctly I dont see how you would have to pay cgt with even a pretty large stack. On another forum they used to joke about a "boating accident" where all their silver and gold would accidentally be lost except for a nominal 10k but luckily their wife would have 10k worth of metals as would each of their parents, their children, their mate Bob from the pub etc etc. I hope you get my point

[firestacker]

12 minutes ago, Abyss said:

@firestacker interesting chosen Queen Beast 1 oz Gold Coin as your avatar I have just today sold spare one I had for £1300 and spot trading £1017 premium 28% on gold.

I love the design but I don't like the premiums as a buyer ha Seems like a popular one around here too. I've considered switching the avatar to the dragon as I have the platinum dragon which is pretty cool!

Quote

I only have to look at the 1 oz Gold Santa Maria Gold coin at the time of release I thought to myself no way on earth I am paying 40% above gold spot for that and those individuals have purchased are crazy. I believe on the secondary market 1 oz Gold Santa Maria coin now selling many multiples over spot.

Seems like a bit of a dice roll though don't you think? A great resource for this space I think would be historical premiums charted on popular coins. That way you could at least determine a trend of sorts.

[Abyss]

19 minutes ago, firestacker said:

Seems like a bit of a dice roll though don't you think? A great resource for this space I think would be historical premiums charted on popular coins. That way you could at least determine a trend of sorts.

Only found out on Backyard bullion you tube video Santa Maria gold coins had very low mintage (in the hundreds) then the massive premium appreciation made sense because limited supply coupled amazing design on the coin and next release added to the series and appreciation premium.

PM like everything else ruled by the laws of supply and demand in the market place.

[Lr103]

2 hours ago, firestacker said:

VAT:
Gold gets a free ride. It's a shame about all other precious metals. This really needs to change! I see some americans willing to pay VAT buying this stuff in the UK. I can't imagine why! It seems like they have a much better market over there. I won't rant too much about this.

 

To clarify, US based buyers are not charged VAT. If I log into the Royal Mint website for example, the prices of items which include VAT are reduced to account for the removal of VAT.  

[KDave]

There is a kind of fashion too that drives the premium through supply and demand. What is hot what is not. That is part of the nature of collectables. Some ancient coins are extrodinarily rare and beautiful yet comparatively cheap and low premium over spot compared to modern coins. I struggle with paying so much for any of them as i see the metal content first, and I probably spend more time looking at pictures of coins than actual coins I own. Perhaps if I had more collectable coins that would be different? 

Ownership as a position in the investment I get, but collectables are notoriously fickle and unpredictable, bullion has measurable and somewhat predictable volatility over time. As a hobby collectables are fair enough. As investment it's a different game, constantly trying to time an apparent sentiment curve in all these little markets, this I'm not very good at so I stay away. 

There is a sweet spot, paying that little bit for a coin in a series that has good chance to appreciate in premium as much or more than gold price. Then there is paying 3 ounces worth for one ounce of gold with a nice design. Which way to look at it? 

[Kman]

 

12 hours ago, firestacker said:

I think there are two things going on here. This stuff appeals to both collectors and investors which is perhaps blurring the lines between the two giving investors a bit of a hard time as collectors care less about the spot price? Th

yeah PM's aren't just PM's when made into collectable designs, you enter a whole new market where spot price becomes mostly unimportant

12 hours ago, firestacker said:

I'd love to see a poll in this forum comparing the number of collectors vs stackers in this forum.

I think most do a bit of both, strictly stackers are rare

People who like the idea of having PMs quickly like the idea of having nice designs and rare numismatic pieces; PM's are rare, but rare PM coins are rarer and rarity vs demand is value

Flipping premium coins is also a good way to add on the oz's if you're stacking

They just work hand in hand well together 

 

[Michal]

About CGT it is crucial for people who save for their retirement or very long term. If you are planning to live of your savings ie from stock market, renting properties and gold sold, it might be huge difference having CGT tax break. Imagine you bought 100oz in 10 years then something happened like in 2007-2010 and you have great opportunity to buy, you have gold value 2x in term of fiat money and properties discounted by 70% you sale gold and bang 14% of your sale price goes to tax man.

If you try highlight point that other people can sell it for you, please put out huge poster in front of your home "I got A LOT of gold" in the middle of recession, don't forget to buy life insurance your family will need it. Let's be reasonable when you have 10k fiat in your pocket a lot of people on the street would chop your head for it.

[ilovesilverireallydo]

On 23/02/2019 at 22:06, firestacker said:

For example, cheap silver coins will be about £16? Spot mid price is currently £12.25. That's a 30.61% premium and that's considered cheap?

It depends who you are and your connections. I for example will often pick up stacking material at 3-8% over spot. This includes pure silver coins, bars and junk silver. That’s cause I have contacts at refiners. 

I will however also buy a fair volume of premium stuff from £15-30 an ounce if my experience dictates that I will either retain that premium or make a profit on resale. 

I have often turned enough value in some to drop my average buy price to below current spot.

[Serendipity]

On 23/02/2019 at 22:31, KDave said:

A lot of people I think start as stackers and become collectors. There are a lot of bad influences on the forum which doesn't help 

You can collect at bullion prices with certain coins and sets if you buy at the right time, on release with bullion, long after release with certain collectable coins, they often fall in value. Some never do hence why folk will pay silly money for a coin that has comparatively low material value. Many different markets within this one space is what keeps it interesting. I'm a stacker really, but I like to see the beautiful but expensive coins people pick up that I would never dream of buying even if I had the brass. 

Legal tender values were added to protect bullion as an investment from various taxes, long term thinking by the people behind reintroducing gold into the private space back in the day. The denominations are low because they also did not want metals competing with circulating fiat currency. Two birds with one stone. Gold and fiat work side by side in the same system, for now. That is my understanding. 

Much of what you say applies to me. I started out as a stacker and still consider myself as a stacker that indulges in collecting now and again. I know I’ll  be a fool to buy the Van Gogh, Marilyn Monroe, Apollo 11 coins, etc., which catch my attention. I avoid buying colorised coins and proofs as a general rule but sometimes pay extra premiums for collectible sovereigns. Life was much more uncomplicated when I was stacking standard bullion coins. It’s the job of the mints, of course, to throw temptation your way.

[KDave]

In my opinion. If you like a coin but don't think it will do well, it needs to be hobby money you are throwing away, don't fall into the trap of confusing investment and hobby. 

If you think a coin will do well and are happy taking a punt, make sure you understand the risk before jumping into collectables coins. 

Bullion is volatile but not as risky as a punt on a premium or expected appreciation, and there is plenty of information that can help predict returns to a degree, history and the historical price charts mainly. Some well traded and long standing collectable coins are more like bullion, some newly minted are more a lottery ticket. Buyer beware and all that. All imo, how I see it, others see differently rightly or wrongly. 

[vand]

I think silver's relatively low price does it a disservice and makes people more price insensitive. 

In the same way that many people will expect and be happy to pay a 30% spread when buying penny shares, they are happy to buy silver at spot+30% because it is only the difference between a £14 coin and and £15 coin.

Of course, this is illogical thinking. Over a few thousand oz that extra premium adds up to a lot of additional ounces. But you don't seen that in the short term.

Similarly people will buy £200's worth of silver and then pay 10% to have it immediately shipped over. Good choices are often intrinsically linked with being able to delay gratification, and in any space there are those who behave profligately. 

 

[vand]

The CGT rules probably need their own thread, because it's an interesting discussion.

What stack size do you have to start considering CGT rules under various liquidating scenarios? 

I agree with @Michal that there could be very good opportunities to swap out of PMs and into another asset at huge discount, and under such a scenario you want to escape as much CGT as possible. As such, a good idea to hold at least a sizeable portion of your stack in CGT-exempt coins. The premium on Brits and QBs isn't rock bottom by pure stacker standard, but it's far from extortionate.

 

[KDave]

There was a guy on YouTube with 5 grand in silver but only 3 grand of silver value I think after he worked it out, that is a lot of money invested in premiums but it's not necessarily a bad investment, time will tell. If people understand what they are doing and not being pied pipered so to speak, I see no problem with it.