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When looking across the broad spectrum of precious metals and the people who appreciate them, there have traditionally been two main groups of collectors. First, there were the “Stackers;” people who seek to accumulate as much weight in metal as possible at the lowest average cost possible. Second, there were “modern coin collectors” who seek the most unique, most unusual, or scarcest issues to build their collections.
The buying habits of these two groups of collectors have led to the evolution of a third group – a group of people who like bullion and will pay a premium to get the pieces they want. People in this category are known as “bullion issue collectors,” and while their collections may be predominantly alluring to one or the other of the aforementioned groups, their holdings have a unique characteristic that separates them from the purists on either end of the spectrum. Bullion issue collections contain both bullion items with no numismatic value and precious metals items considered to be collectible.
On the fringes of the bullion collecting movement for decades, bullion issue collectors have today come into their own with the drastically increased availability of specialized products available. There are two main types of these highly popular products: 1) coins that have been minted as bullion and are then graded by a professional service; and 2) collectible bullion issues, which share their design with bullion but were minted as special collector issues with different surface treatment, special privy marks, or other minor features that make them stand apart from their bullion relatives.
The traditional broad definition of bullion encompasses bars, rounds, and other non-denominational pieces poured or minted into recognizable and consistently controlled shapes at specific purities and weights. As a rule of thumb, bullion items have a premium of less than ten percent over the metal content value. For many years the definition of bullion has also included monetary coins made of precious metal whose numismatic value as collectibles does not exceed their value as metal when weighed. An example of this would be basal state (very worn) silver dollars.
More recently, the definition of bullion has grown to include monetary issues by government mints that were made to be traded as metal. The ‘face value’ of these issues is merely a guarantee of a minimum ‘cash value’ of the piece, such as the one-dollar denomination for the one-ounce Silver Eagles. This denomination was never really intended to be the spent-as amount for the piece in actual commerce. Although these coins are legal tender as one-dollar, it would be very highly unlikely to see someone actually spend them for that face-value amount.
Any time a bullion coin issue’s market value exceeds the value of the precious metal in the coin (plus the nominal premium usually associated with the series) it becomes a collectible bullion issue. One good example is the 1996 Silver Eagle.
When issued, 1996 Silver Eagles were sold at near-melt value through U.S. Mint distributors to dealers and collectors, some of whom sent the coins to professional grading services to be certified and graded. Because the coins’ mintage was lower than some other bullion issue Silver Eagles, and because a small percentage of those sent in for grading achieved a grade of Mint State 69 or higher, such pieces commonly trade for more than $100 in the marketplace today, even though they contain one troy ounce – about $20 worth – of silver.
Any bullion coin issue can become a collectible bullion issue if market conditions and timing are right. Forecasting which of the bullion issues will gain such value and attempting to capitalize on their forecast is the driving force for some speculator/collectors, and some of them do this very well.
While the 1996 Silver Eagles gained collectability through an unforeseen series of conditions, other coins are specifically created to be collectible.
Proof coins have traditionally been issued as a special collector’s strike bearing designs that are very similar to their counterpart common business strike, or uncirculated issue. Proof sets in the United States date back to the early 1800s and contains one of each of the different coins issued in commerce that year. The coins in these sets differ from their uncirculated counterparts in that the surface of the dies that strike them are specially treated, and they are struck using more pressure in an effort to strike-up the details more crisply. The overall design of the coin, however, remains the same as its counterpart uncirculated issue. These proof coins are minted with the intention of being sold in special box sets or as singles to collectors who could then enjoy the beauty of the design on a keepsake-quality piece.
Silver Eagles are no exception to this practice. Proof Silver Eagles have been minted since the beginning of the program in 1986 in addition to the uncirculated strike coins minted as bullion. Their mintage has generally not exceeded one-tenth that of their bullion counterparts, but one issue – the 1995-W Silver Eagle – is an exception even to proof coins.
That year, proof Silver Eagles were minted in Philadelphia, as had been the case since 1993. From all indications there was nothing special about them. However, in 1995 as a special tribute to the 10th Anniversary of the American Eagle coin program, the West Point mint struck a special five-coin set including a proof Silver Eagle and proof examples of each of the four different Gold Eagle denominations. The sleeper was in the fact that the Silver Eagle issued in this set was minted with a ‘W’ mint mark (instead of the usual ‘P’ mint mark).
Being that this set contained nearly two ounces of gold, its issue price was above budget for most Silver Eagle collectors. Because these sets were minted to demand, only 30,102 of the sets were struck. It did not take long for the market to pick up on the fact that these 1995-W proof Silver Eagles were destined to be the scarcest regular issue Silver Eagles for a long time to come. Where the market stands today with this issue is a far cry from the value of the metal in the coin – which, if I might remind you is barely over $20. In today’s market, a 1995-W NGC graded Proof 69 Ultra Cameo Silver Eagle retails at $3,150. In the rare cases where this issue has graded Proof 70 Ultra Cameo, retail value is $17,500. While this case is rather extreme, other examples of sleepers in bullion coin series do exist.
Many other examples exist of coins issued as collector coins related to bullion coins with similar designs. Canada frequently issues silver Maple Leaf coins with special privy marks and surface finishes. The United States has issued special ‘Vapor Blasted’ collector issue 5 ounce silver America the Beautiful coins alongside their bullion issue of the same weight and fineness. Australia and China have been known to strike special limited mintage pieces of their popular bullion designs to commemorate trade shows and other events. What sets these issues apart is the fact that they are sold directly to collectors, usually in nice packaging, and for a much higher premium than the bullion coins they resemble.
Many bullion issues do not have a special collectors’ edition counterpart but are still collected for the beauty of their design. Although considered very attractive, usually the examples collected (at a higher price) are those that are graded by a professional grading service.
One such series is the ‘Canadian Wildlife’ one ounce silver series issued by Canada. These coins have striking designs that depict the grandeur of Canada’s nature. Initially they sell as bullion, with some modest premium because of popularity. But once they reach collectors, they become collectible as any other coin, displayed often as topical works of art.
Another reason bullion coins become collectibles is that some issues started out as low-mintage issues without a lot of popularity, then an explosion in popularity causes the value of the earlier pieces in a series to soar in value.
China’s gold Panda coin is a great example of a coin that was originally minted as a bullion coin and has since become very popular with collectors. With initial prices close to that of their weight in gold, the first-year-issue 1982 one-ounce gold Chinese Pandas (in original packaging) have skyrocketed. Today the retail value of these coins exceeds $3,000.
Sometimes unexpected value increases can happen years after a coin is issued. Even though Silver Panda coins from China had enjoyed a steadily increasing popularity since their first issue in 1983, the secondary market for these coins saw a heavy increase in the mid-2000s when the Chinese Government allowed their citizens to purchase precious metals privately. Those who owned earlier examples when this value increase occurred saw huge profits. For example, a 1983 Silver Panda graded NGC Proof 69 Ultra Cameo sold on eBay for $3,350. On the same day a 1983 Silver Panda graded NGC Proof 68 Ultra Cameo sold for $2,400.
Another of these series is the Kookaburra silver coins of Australia. Minted since 1990, a huge following has developed around this series. Over the decades since they first hit the market, the value for early Kookaburras in top grade have skyrocketed to multiples of their initial issue prices. All of this can be attributed to their low mintage, the fact that it is difficult to find top-grade examples, and the fact that their lasting endurance as an every-year series has made them very popular. Recently a 1990 Silver Kookaburra graded NGC MS69 sold on eBay for $430.
It stands to reason that someone who is investing in silver as a precious metal is unlikely to pay $100 for an ounce of silver if the market value for silver is $20 per ounce. It is equally unlikely that someone who collects only beautiful coins with subjects of their liking would want to buy a plain bar of silver displaying nothing more than the weight and fineness of the metal contained therein.
Market demand has proven that not only do these extremes exist in the precious metals market, but also there is a large and growing cross between them. World mints have gone out of their way to create new and exciting issues that surpass the typical vision of what would be considered bullion to satisfy a demand for good looking coins that serve a dual purpose as precious metals and as collectible bullion coins.
This article was written by MCM for publication in Hard Assets magazine.
Andrew Salzberg is the Chief Operating Officer of ModernCoinMart (MCM), and heads the in-office sales team and customer care department. He responds to the queries of hundreds of customers per week, and has a firm grasp on the behavior of collecting modern coins and precious metals. Visit MCM on the web at https://www.moderncoinmart.com.
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