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Hidden Profit Opportunities in Canadian Wildlife Silver Coins

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  • Silver 1-½ Canadian Wildlife Coins are among one of the rarest and successful coin series produced by the Royal Canadian Mint.
  • With a cap of 1 Million coins, the numismatic value of the 2013 Canadian Wildlife Polar Bear Coins are poised to skyrocket as Mint surcharges rise, placing a perpetually higher price floor on the coins, and as surcharges rise proportionally to the rise in silver spot prices.
  • This hidden profit potential is what gives Silver 1-½ Canadian Wildlife Coins and other sovereign coins an edge over other privately-minted numismatic coins.

Many precious metals investors assume that the rise in the value of their gold and silver coins is primarily driven by a rise in spot prices.

To a considerable extent, they are right. It’s a reasonable assumption and a valid expectation.

But it’s also a blind spot, for there are other factors at play that can add an additional level of profit to the mix.

Some of these factors are virtually guaranteed, but most investors aren’t aware of it.

Arctic Fox Silver

2014 Silver 1-1/2 Canadian Arctic Fox

Those who bought Silver 1-½ Canadian Wildlife Coins back in November 2014 only to sell them today might have noticed that GSI Exchange paid a price above the spot price.

The strange thing is that in November 2014, the spot price of silver ($15.43) was roughly the same as today’s spot price.

It should have been a breakeven transaction. But these investors came home with a profit.

How did that happen? The answer to that question is a little-known secret that only a few precious metals investors know, and they use it to their advantage.

It may have little to do with spot prices, little to do with a rise in numismatic value, and everything to do with the surcharge fees--known as “seigniorage”--that the Mint levies on their Authorized Purchasers.

Over time, spot prices will rise and fall. But seigniorage charges have only risen. And when spot prices rise, seigniorage charges--stated in percentages--rise proportionally with them, if not more.

The question you should ask yourself is how can you make this little-known fact work for you. Before we get into it, let’s get rooted on some basics.

The Hidden Mechanics of Silver Coin Pricing

2015 Silver 1-1/2 Canadian Polar Bear & Cub

If you’ve been investing in precious metals for some time, you’ve probably noticed that silver premiums--or the amount you pay above the spot price--have consistently risen.

This is particularly true of Silver 1-½ Canadian Wildlife Coins, more so than other privately minted coins.

Now, why is that? It has everything to do with the Royal Canadian Mint (and note that this factor plays across almost all sovereign coins issued by a country’s mint, as in the case of American Silver Eagles and the US Mint).

If you don’t already know this, here are the three fees that are layered into the pricing of sovereign bullion coins:

  1. The Mint levies a surcharge--known as seigniorage--on the coins to cover its production costs.
  2. The Authorized Purchaser (AP) adds a small markup to the coins it distributes to bullion dealers.
  3. The Dealer charges a small commission to coins sold to retail investors.

So when you buy a sovereign coin, such as the Silver 1-½ Canadian Wildlife Coin, these three layers of charges are included in the premium.

2016 Silver 1-1/2 Canadian Gyrfalcon

When the premiums rise, it may not be due to dealer markups, as it is the tendency for dealers to compete with one another by lowering rather than raising prices.

The main reason for the increase in sovereign coin premiums like the Silver 1-½ Canadian Wildlife Coin is that seigniorage costs charged by the Mint have risen.

The seigniorage for Canadian Wildlife Coins is substantially higher now than it was when the coins first started selling in 2013. In fact, it’s entirely possible that seigniorage costs may have risen up to 50%.

And that seigniorage increase eventually finds its way to the end customer, the retail investor.

But this price burden also provides the retail investor with a fixed advantage: the seigniorage increase sets a new price floor for the coins.

This, in turn, increases the price at which you can sell them back.

But there is a second layer of profit potential: the premium explosion that occurs when silver prices rise.

The Coming Premium Explosion in Silver 1-½ Canadian Wildlife Coins

As silver prices rise, so too do the seigniorage charges, and this is what can push the premiums of Silver 1-½ Canadian Wildlife Coins to the roof.

Let’s play out a few scenarios:

  • If spot silver prices reach $50 per oz, a premium increase of 18.7% would raise the premium per coin to $9.35 and premium per box to $4,675.

Your profit potential per box due solely to the premium increase would be $3,385 more than the current level of $1,290.

  • At the same spot price of $50 per oz, a premium increase of 21.25% would raise the premium per coin to $10.62 and premium per box to $5,310.

Your profit potential per box due solely to the premium increase would be $4,020 more than the current level of $1,290.

  • If spot silver prices reach $100 per oz, a premium increase of 25.5% would raise the premium per coin to $25.50 and premium per box to $12,750.

Your profit potential per box due solely to the premium increase would be $11,460 more than the current level of $1,290.

2017 Silver 1-1/2 Canadian Grizzly Bear

Note that the profit potential outlined in the scenarios above pertain to premium increases only.

It doesn’t take into account the additional returns of spot price appreciation which should raise the value of your coins even more.

But this additional profit potential, characteristic of Silver 1-½ Canadian Wildlife Coins, may not be present in other privately minted coins, making the Canadian Wildlife series more valuable as a numismatic investment.

Hence, you profit in two ways:

  1. The seigniorage cost that the Mint charges can exceed the amount you paid up front for the coins; and
  2. Higher spot silver prices will raise the dollar value of your coins.

In short, when you sell your Silver 1-½ Canadian Wildlife Coins, you will profit from both a higher price and a higher premium.

2018 Silver 1-1/2 Canadian Snowy Owl

The coming increase in rising silver demand, rising silver prices, and rising seigniorage costs will eventually mean big profits for you, particularly if you buy now.

As silver spot prices are still at discount levels, there may be no better time to profit from silver than to buy silver at the current floor-level prices.




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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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