Wednesday, March 23, 2011
Silver Eagles vs. Silver Rounds!
A never-ending debate raging within the silver buying community revolves around the merits of owning American Silver Eagles (ASE's) vs. generic silver rounds. Despite the basic logic of one troy ounce of silver is one ounce silver is one ounce of silver, I believe the ASE's are clearly superior to rounds for trading for several market reasons.
Firstly, ASE's are minted by the US government. Silver rounds are minted by numerous private firms. Every American alive today has been raised with the notion that the only valid money is money minted or printed by the US government. Any privately minted items would be subject to inherent prejudice as counterfeits.
Secondly, the American Silver Eagles are uniform in design and weight since 1986. Americans are used to seeing the same basic pennies, nickels, dimes, quarters etc., for decades. Sure, the Mint will change the obverse portrait of Washington slightly and the reverse for the state issue quarters, but anyone can pick out US circulating coins fairly easily. Silver rounds, on the other hand, come in a bewildering number of designs from prospectors to easter bunnies, Santa Claus, and even a wizard (see above)!
Thirdly, the ASE's are one official US dollar. Some silver round proponents think that this assigned denomination will damage the ASE's buying power. However, based on historical hyperinflationary examples in Weimar Germany, Argentina and others, a silver dollar will trade for a lot more than the US paper ones.
Silver rounds will be more problematical because of the wide variety of pieces made. In addition, most companies go out of their way to describe their product as a round or medallion, not a dollar or a coin. The man behind the Liberty Dollar, Bernard Von Nothaus, didn't use the same care as other private manufacturers, and designed coins with recommended dollar denominations that appeared dangerously similar to US coins. As a result, he was recently found guilty of counterfeiting and faces fines, expropriation of millions of dollars of bullion, and 15 years in prison! At any rate, the non-denominational silver round will require a lot more selling and explaining by the prospective trader to convince the product vendor than an ASE holder will likely be required to do.
ASE's are selling for around a 10% premium currently, while rounds are averaging around 5% above the silver melt price. I guarantee that in a case of rampant hyperinflation you will not be sorry you spent the extra 5% over the generic rounds. Besides, I'd feel damn silly as a grown man trying to explain to some merchant why he should accept my coin with a wizard or a freaking Easter Bunny on it! That alone is worth an extra 5% in my book!
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