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Toshunya86

Thoughts on building a silver stack

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Hi all ,

I have some gold already and my strategy set up . I know that i have to add silver to my entire stack (20% max) but I have a big doubt about what to do.

A lot of the "junk" silver ( in my case , european , french etc) seems to have a rather big premium compared to their counterparts of gold (20 f napoleon , vreneli , sovereign etc) so I am a bit reluctant.

Pros : They will never get milk spots 

Cons : Too high premiums at buying , and many coins from different countries are not recognized as liquid in other countries and will end up being sold at spot only

 

The modern bullions are close to spot but it seems that plenty will get milk spot and it s a bit of a lottery ticket. I am not even sure people will take it back for spot on the secondary market and I am not a big fan of buying hundreds of times the same coins to have some of them damaged by milk spots. I for instance bought 1 maple leaf only and a few years later it has spots. I ve deleted them with a rubber delicately but it keeps coming back. 

 

Pro : Very low premiums , especially in bulk

Cons : Scared about milk spots and "losing" the whole investment 

 

Should I go 50/50 in both ? or am I seeing things in the wrong way ? 

 

All these issues are irrelevant for gold. But silver is capricious and I better know what all the silverbugs think as I have the goldbug only :)

Thanks

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I've got lots of silver coins and only a very few show milk spots.
If you are paying near spot price for silver then you will be able to sell near spot price even with milk spots.
The bullion metal has intrinsic value and isn't priced by its cosmetic appearance.
Look at poured bars ( small bricks ) that don't have any sex appeal whatsoever - they are priced by weight and who made it.
If you are paying a premium for specific blemish free silver coins and hope to sell at a profit then a spot later may kill that plan.
What you need to decide for yourself, with the historical high gold / silver ratio, is which metal has the most upside potential in the future.

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I have about 50-50 myself. Some junk silver carries more premium than others, like US (in Europe), Swiss, German etc. From bullion I get a mix of low premium and some coins with moderate one and potential to rise. There is the risk of milk spots everywhere but mainly the ones will the premium will be affected. 

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work out what role the silver will play as part of your

stack and then choose which type of silver best fits.

 

premium silver is required to be maintained in a

premium condition to get the best returns. where as

for junk silver, condition is not really important. both

play a different role when within a stack.

 

HH

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@Gildeon @HawkHybrid

Silver will be a way for me to diversify and not depend entirely on gold as i have 98% of my stack in gold (let's say). I want to reduce it to 80%.

So should gold crash completely then silver might remain stable. This is the goal.

 

As per the modern coins , i am aiming mostly to complete two collections ( Chiwoo & Panda over the time). Just the normal 1oz , nothing fancy or proof.

The rest of silver is undecided between the modern possible milk-spotted coins and the old - high premium junk silver , hence my question

 

 

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I never lost so much money with anything else than buying silver maples in 2012 because I believed that silver is rare and all that stuff. Now I collect coins. Rare Gold  and Silvercoins. Most of them do well but you have to invest time in that hobby. Who tells you that silver will not fall under 10 $ when recession is coming around the world after the US selections 2020 ?

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Noone can predict the future. Even the best analyst.

I just think that I have more chances to keep my relative wealth if i have several metals , gold and silver being the two very liquid ones. I invest a lot of time on that hobby already and with pleasure.

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38 minutes ago, Melon said:

You're not going to lose your investment due to milk spotting on bullion coins. The value is in the material, not the design. 

You'll only lose on bullion if you sell when the silver market goes below what it was when you bought. I've been there, done that, and it hurts. 

But it seems to me that buying physical silver simply to flip it for gains, that that's not the best way to invest. I'm not at all an investment expert (like, not at all), but I think gold is better for that. But even then, I'm thinking there are better short term investment vehicles besides PMs.

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16 minutes ago, Toshunya86 said:

Thank you @Melon

Are you saying that it would harm possibilities to sell on the secondary market but dealers would still take it back even with some milk spots ?

A silver object has value in two parts - the value of the material (i.e. the silver) and the value of the premium (e.g. a desirable coin). Milk spotting will reduce any premium on the object, but it doesn't change the value of the material itself. 

So if you're buying bullion coins as close to the spot price as possible (i.e. the silver value), milk spotting is really not much of an issue as these items don't command a premium. It's purely cosmetic. 

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14 minutes ago, RacerCool said:

You'll only lose on bullion if you sell when the silver market goes below what it was when you bought. I've been there, done that, and it hurts. 

But it seems to me that buying physical silver simply to flip it for gains, that that's not the best way to invest. I'm not at all an investment expert (like, not at all), but I think gold is better for that. But even then, I'm thinking there are better short term investment vehicles besides PMs.

Agreed. Particularly for those of us in the UK. 

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Thank you @Melon again for your input.

But considering dealers can buy the same thing ( let's say a tube of Noah s ark ; maple leafs ; silver eagle ; philarmonics etc ) directly from mints at a cheaper price why would they bother with a customer selling them some milky coins ; even recognized ? 

Then he has to sell them to other customers and these customers won't buy the milk spots.

 

 

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1 minute ago, Toshunya86 said:

Thank you @Melon again for your input.

But considering dealers can buy the same thing ( let's say a tube of Noah s ark ; maple leafs ; silver eagle ; philarmonics etc ) directly from mints at a cheaper price why would they bother with a customer selling them some milky coins ; even recognized ? 

Then he has to sell them to other customers and these customers won't buy the milk spots.

 

 

Dealers won't sell you coins at spot price. Dealers will pay the mint a premium on the spot value of silver to buy them. They'll then add additional premium to the coins when they sell them to you. Depending on where you're buying from, the premium may be larger due to taxes etc. 

So assume the dealer buys close to spot, and you buy a bit further from spot, so everyone's made some money along the way. 

When you come to sell your goods, don't expect that premium back regardless of the condition. That was the cost of doing business. 

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2 minutes ago, Toshunya86 said:

Thank you @Melon again for your input.

But considering dealers can buy the same thing ( let's say a tube of Noah s ark ; maple leafs ; silver eagle ; philarmonics etc ) directly from mints at a cheaper price why would they bother with a customer selling them some milky coins ; even recognized ? 

Then he has to sell them to other customers and these customers won't buy the milk spots.

 

 

Unless they sell that stuff to foundries, who melt it down and use it for other things? I really don't know how the dealer market works; I'm just guessing. 

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4 hours ago, Toshunya86 said:

Silver will be a way for me to diversify and not depend entirely on gold as i have 98% of my stack in gold (let's say).

 

adding silver will not diversify your gold holdings

as silver is >60% correlated to gold.

(you might need to rethink, work on this a bit

more. people buy silver as leveraged gold. higher

risk but higher potential gain.)

 

if you are planning to sell to dealers(maybe as a

last resort) then you need to do some research

on what % of spot dealers are actually paying.

(and whether or not it changes with coin

condition)

 

HH

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@HawkHybrid

This is my exit strategy :

-Usually the close-to-spot bullions have low spread so to s ok for me to sell to dealers . If the rate goes up I can sell to someone . It if goes down I'm ok to sell for a small loss as it would mean the collectible market is vivid 

-Junk has higher spread since it s less liquid  so I would prefer to sell to local people via internet or meeting face to face ( example french junk is sold more in France ; us junk more in the USA etc ) where you can liquidate stuff at spot or below the cheapest dealer who will sell with a rather big premium 

Collectibles and series is a bit of a gamble . If I pick the right ones I will make big profit - if I pick a coin which will fail then I will sell for spot in any case .

 

About silver being  60% correlated to gold I am not sure ; I have to work more on this. I just believe that in case one of the two goes big I can play on the ratio and "exchange " some gold Vs silver or vice versa . But as said earlier I want to cap silver at 20% of my PM portfolio ( only gold and silver ) 

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2 hours ago, Melon said:

Dealers won't sell you coins at spot price. Dealers will pay the mint a premium on the spot value of silver to buy them. They'll then add additional premium to the coins when they sell them to you. Depending on where you're buying from, the premium may be larger due to taxes etc. 

So assume the dealer buys close to spot, and you buy a bit further from spot, so everyone's made some money along the way. 

When you come to sell your goods, don't expect that premium back regardless of the condition. That was the cost of doing business. 

Thank you . So let's say that they buy in bulk at 0.2% and sell at 2%

But they would take it for -1%.

Something like that ?( Fictionally talking about a close to spot bullion )

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6 minutes ago, Toshunya86 said:

Thank you . So let's say that they buy in bulk at 0.2% and sell at 2%

But they would take it for -1%.

Something like that ?( Fictionally talking about a close to spot bullion )

Yup that's exactly the idea. %'s will differ depending on the metal, product, dealer, demand etc, but that's certainly the idea. 

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1 minute ago, Pipers said:

Some peoples value isn't value though sixgun.  

I would say buy bullion as close to spot as possible, buy gov mint coins though sometimes other coins can be had to. 

When you watch what is selling and what the prices are you get to know what value is. Is this a good price - could i sell it again - right now and at least break even? If you could make a bit then you have found value. It is an objective measure.

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Hi Toshunya86, I bought bullion silver coins near spot in 2012. Got no profit. Not one cent- bought for 30 bugs and can sell now for 18 bugs. Who is telling you that the price for a maple with a mintage of some millions is in one or two years not at 8 bugs ? So I buye collectibles for investment and not for speculation reason and I don`t care about milkspots on a coin, that nobody else offers for sale.

 

You can compare this thoughts with shares or pictures. You can buye an ETF with all shares or you buye the winner. You can buye Salvator Mundi from Leonardo or you can buye some stuff of an artist who will be famous in 20 years. When you can look in the future it is no problem to get it. What do you think people will buye and collect  in maybe 10 years when there is no more  interest to get on the finanzmarkets wordwide ? Don`t think that people buye your oldtimer or an Davinci but maybe some rare precious metal coins. When my thoughts go wrong. No problem. I always get the spot price.    

Edited by platinreloaded

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As others have said milk spotting is fine, 1oz of silver will always be worth 1oz of silver. The premium is to do with collectability and thats a secondary market.

Just choose yor strategy correctly...if you believe in silver long term simply buy the lowest premium bullion and you then can sell it for spot. Australian Kangaroos for example...notorius milk spotters but for someone planning to sell at spot in 15 years because they think it will be significantly higher then at the time of purchase it doesnt matter. Low premium bullion with this view is a fairly safe way to invest in physical silver. UK based be aware of CGT of course as Brittannias are CGT free...which can be worth the premium for many.

Now if you plan on flipping coins to collectors in the short term then of course milk spotting does matter. You can earn more in the intermediate but then also this can take more time, effort and risk. Remember coins come in and out of fashion and you can easily lose the extra 20% premium you pay if you get it wrong or silver tanks for a year or two after you bought the coins and then the coin is no longer in vogue when the prices rise.

The best way is to ask yourself why am I buying this silver, as in, what am I expecting to happen to make it worth my money and then what is my timescale for this investment. Looking at your idea id suggest NOT buying silver if its to diversify from gold, as @HawkHybrid said they are highly correlated and historically often move in tandem during periods of inflation which is when the money metals do best...occasionally one leading the other along with Platinum given people flood into hard assets like the metals to protect from inflation savaging their wealth. To diversify from gold therefore you really need another asset class with a far lower correlation.

Edited by Goldenbear

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