Taking a shine to silver: The rise of bullion coins around the world

Silver disappeared from circulation, but in a few decades it came back in bullion coins
By , Coin World
Published : 06/17/16
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Bullion coins are minted by government and private mints for a variety of countries. Most are considered legal tender in the country whose name they carry. Although primarily purchased as investments, their attractive designs and sometimes rarity mean they are also often prized by collectors. 

One important characteristic of bullion coins that sets them apart from collector coins is the way they are sold. Most mints do not offer the bullion coins directly to collectors and dealers because mints are not geared to the business of maintaining the two-way market that the bullion marketplace requires. A two-way market means a seller will also buy a bullion coin back, at prevailing rates. (Mints sell collector coins and sets directly to customers, both collectors and dealers, and similarly don’t buy the coins back. The collector coins trade in the secondary market.) 

At the front end of the market, the government mint that produces the coins usually sells them to a few large distributors. The two-way market begins with these distributors, who then sell the bullion coins to a wider network of wholesalers, from whom retailers purchase the coins for sale to bullion coin investors and collectors. 

Because the government is not an investment firm, the government does not buy the coins back from distributors. The tiered distribution system’s most important function is to provide the buy-back market that allows investors to perceive a market value for the pieces. However, while large distributors will buy back bullion coins, smaller distributors may be less able to do so, particularly in a rapidly shifting market. 

Producers (mints) price the coins based on the value of the metal in the coins at the time of sale. The pricing also includes manufacture, storage, delivery and other costs, but is much closer to a coin’s actual cost than pricing for most collector coins. 

World mints charge a premium of a varying percentage above these costs to generate a profit. The percentage of the premium is higher on smaller-sized coins because, per ounce, associated costs are higher. Making and packaging, for example, 10 tenth-ounce coins will cost more than the same for one 1-ounce coin. 

Bullion coins are often sold in high finenesses, or with guaranteed silver content at 1-ounce or multiples or fractions of ounces, making the calculation of silver value a matter of simple mathematics. The coins are therefore easy to trade or liquidate, as owners merely need to multiply a “spot” price by a coin’s precious metal weight to arrive at its value at the time of a transaction. 

The value of the measure of silver in historic U.S. coins sometimes bought and sold at prices related to their precious metal value is not as simply calculated. For example, one such piece, an average circulated Morgan silver dollar, contains .86 ounce of silver, not a nice round number.

The first world bullion coin

While the concept of silver bullion coins has been developed and expanded over the past 30 years, the idea of a silver bullion coin really originated with the Maria Theresa taler. The .8333 fine silver taler, measuring 39.5 millimeters in diameter, weighing 28.067 grams and carrying her portrait, was issued by more than a dozen mints before her death in 1780. The coin was so famous that restrikes are still struck today by the Austrian Mint with the 1780 date. 

“The taler coin long has been accepted internationally, not only in Europe, but in areas of the world where a firm local coinage did not or does not exist,” according to the Coin World Almanac, 8th edition. “It is not the only coin that enjoyed wide acceptance, but it is by far the best known.” 

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