Silver is TAKING OFF Around the World

Key Concepts

• Precious Metals: Gold and silver, valued for their rarity and historical use as currency and stores of value.
• Junk Silver: Silver coins with a significant silver content, often older and no longer in circulation as currency, valued primarily for their metal content rather than numismatic value.
• Bullion: Precious metals in a refined form, such as bars or coins, typically with a high purity.
• Spot Price: The current market price for immediate delivery of a commodity, such as gold or silver.
• Hedge Against Inflation: An investment intended to protect purchasing power against the erosion of value caused by inflation.
• VAT (Value Added Tax): A consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale.
• GST (Goods and Services Tax): A broad-based tax of 10% on most goods, services, and other items sold or consumed in Australia.
• Numismatic Value: The value of a coin beyond its intrinsic metal content, based on its rarity, condition, historical significance, and demand among collectors.
• Buy/Sell Spread: The difference between the price at which a dealer will buy a commodity and the price at which they will sell it.
• Proof Coin: A coin that has been struck using specially polished dies and planchets, resulting in a mirror-like finish and sharp details, often produced for collectors.
• Maritime Heritage: Items of historical or cultural significance recovered from shipwrecks, often subject to specific regulations regarding ownership and export.

Precious Metals Market in Australia: A Coin Shop Perspective

This summary details an interview with Andrew, the owner of Sterling and Currency, a coin shop in Fremantle, Australia, offering insights into the Australian precious metals market from a dealer's perspective. The discussion covers the types of precious metals popular with Australian buyers, current market conditions, pricing, taxation, and future outlook.

Australian Precious Metals Market Dynamics

• Acceptance of US Precious Metals: Andrew confirms that US Silver Eagles and Gold Eagles are highly liquid and would be readily bought in Australia, being considered "international money" or "real money."
• Customer Demand: Currently, the shop is experiencing a significant influx of new customers buying precious metals, rather than existing holders looking to sell. This suggests a growing interest in acquiring metals.
• Pricing: As of the interview, silver was priced around AUD $80 per ounce, and gold was at AUD $6,424 per ounce. These prices are noted as being near all-time highs and have been steadily increasing, with a recent surge after a brief pause.

Types of Precious Metals Popular in Australia

• Junk Silver:
  • Pre-decimal Australian Silver: Coins minted between 1910 and 1945 are 92.5% silver.
  • Post-decimal Australian Silver: Coins minted between 1946 and 1964 are 50% silver.
  • Australian 50 Cent Pieces (post-1966): These are 80% pure silver, with approximately 75.3 pieces making up a kilogram. These are considered the Australian equivalent to the US JFK half dollar.
  • Popularity: The round 50 cent pieces are the most popular form of junk silver, followed by pre-1946 silver and then post-decimal silver.
  • Barter Use: This type of silver is sought after for potential barter scenarios in the event of currency collapse, with buyers often seeking a mix of denominations for practical use.
• Bullion Coins:
  • Popularity: Buyers are generally agnostic about the specific type of bullion coin, readily purchasing Kangaroo Nuggets, Krugerrands, US Gold Eagles, Maple Leafs, and Austrian Philharmonics.
  • Perth Mint Kangaroo Nugget Series: A popular choice for gold bullion.
  • Gold Sovereigns: These are approximately the size of a US $5 gold coin and are valued at around AUD $14,500 each in metal value. Their long history in families contributes to buyer confidence.
• Collectible and Rare Items:
  • Mexican Reales from Shipwreck: A specific Mexican Reales coin recovered from the Rapid shipwreck (sank in 1811 off the coast of Western Australia) is highlighted. This coin, submerged from 1811 to 1978, is legally held by only about a thousand private individuals. It commands a significant premium over its spot value, estimated at AUD $1,000, due to its rarity and historical provenance. These are considered Australian maritime heritage and cannot be exported.
  • Roy Australian Mint Silver Dragon: A 1-ounce proof coin from the Royal Australian Mint, featuring a dragon design. Even in less-than-perfect condition, it was offered at a modest premium of AUD $5 over spot, demonstrating the appeal of unique designs.

Taxation on Precious Metals in Australia

• GST Exemption: Australia does not levy VAT on pure bullion-grade coins and bars. The Goods and Services Tax (GST) does not apply to items that are 99.99% pure gold or 99.9% pure silver.

Market Outlook and Future Projections

• Uncertainty but Positive Sentiment: Andrew expresses uncertainty about precise price movements but believes the underlying circumstances driving demand for precious metals are unlikely to change soon.
• "Not a Seller": He indicates he is not currently a seller, reflecting a belief in continued price appreciation or stability.
• Long-Term Perspective: Having been in the market since the 1990s, Andrew is somewhat cynical about short-term price predictions but sees no immediate signs of a downturn.
• Element vs. Stocks: He contrasts gold and silver with stocks, noting that as elements, their supply is not easily manipulated, making them resilient in a bull market.
• Public Awakening: The general public is perceived to be just beginning to understand the value and reasons for owning precious metals, suggesting that the market is not yet in a "mania phase." Evidence for this includes queues at major bullion dealers in Sydney, but the topic is not yet widely discussed in everyday conversations.

Transaction Details and Premiums

• Selling US Eagles: US Silver Eagles and Gold Eagles can be sold in Australia with no problem, at or around spot price. Premiums may be achievable for popular dates or when selling directly to other collectors.
• Buy/Sell Spread: The buy-sell spread in Australia might be wider than in the US due to a smaller market, but US Eagles are still easily sellable.
• Proof Coin Premium: The silver dragon proof coin was offered at a small premium over spot, indicating that even damaged proof coins can retain some collectible appeal.

Conclusion

The Australian precious metals market, as observed through the lens of Sterling and Currency, is characterized by strong demand, particularly from new buyers. While specific price predictions remain elusive, the underlying factors driving interest in gold and silver are seen as persistent. The market offers a diverse range of products, from historical junk silver to modern bullion coins and rare collectibles, with a favorable tax environment for pure bullion. The sentiment among dealers and buyers appears to be one of cautious optimism, with a belief that the public's understanding and adoption of precious metals as a store of value is still in its early stages.