Should I buy Silver Eagles or Generic Rounds?
A lot of beginning investors ask whether they should start buying generic rounds or American Silver Eagle coins. Most people will answer by telling the person to buy generic rounds because they are cheaper and can be bought closer to spot price. While this may at first seem like sound advice, it is more likely to be bad advice.
When considering whether to buy Silver Eagles or generic rounds one needs to consider the “round trip” cost of buying and selling.
Imagine the scenario where spot price is $16.65. Buying random year ASEs might cost $19.00 ($2.35 premium), a generic rounds might cost $17.65 ($1.00 premium).
A dealer is going to buy back ASEs at a higher price than generic rounds. For example, it is fairly common throughout the US that local coin stores will buyback Silver Eagles for around $1.00 over spot. However, most will usually pay $1.00 or so under spot for generic rounds.
If I sold (1) Silver Eagle and (1) generic round back to the dealer when spot was again $16.65. the dealer might buy the Silver Eagle for $17.65. The same dealer might only buy the generic round for $15.65.
The ASE actually “cost” me less when selling. In this case, I lost $1.35 premium I paid for the ASE, but I lost $2.00 on the generic round.
When considering the cost of buying and selling silver it may seem reasonable to buy generic rounds because they can be bought closer to spot. However, factoring in the cost of selling the same bullion, whether Silver Eagles or generic rounds, the cost of selling is less.
