Silver coins dealers and coin collectors of contemporary United States silver coins received some welcome news from the US Mint in January 2012. The Mint announced a substantial ten percent reduction in the price of some of its most popular numismatic coins, including the American Eagle Silver Dollar. The official explanation for this price cur quoted falling silver prices as a reason, although an improvement in the minting process was also given due credit. The good sales figures for silver eagles in 2011 suggest that a lack of coin collector demand was not a factor behind the Mint’s decision.

Silver coin dealers and collectors are both buyers and sellers
While this hot coin news item from the US Mint was sure to please the coin collector looking for silver coins for sale, how about the coin collectors interested in selling silver coins from their collections? It is easy to forget that it is common for a coin collector to be a seller as well as a buyer, for instance, selling duplicate coins and using the money raised to fill in gaps in their collection. Silver coin dealers are also often coin collectors and so rising prices are not an unmixed blessing. When viewed from these different perspectives satisfaction with price changes might depend on whether the coin collector is wearing their buyer or seller hat that day. Nonetheless, when it comes to the decision whether to buy or sell collector coins now or later the dealer or collector is certainly influenced by what they think is happening on the market. Does it make sense to take this lowering of silver coin as a sign that we have entered a buyer’s market?

The difficulty of predicting short-term silver price changes
Silver is well known as a precious metal prone to larger variations in value than gold. A number of factors contribute to this instability. The industrial uses of silver provide an important additional source of demand for the metal beyond the better-known demands from the jewelry trade and the minting of silver numismatic coins. There are also serious doubts about whether the silver supplies available today can meet existing and anticipated demand levels. This makes it all the more difficult to understand the approximate 40% decline in silver values from the high reached in April 2011.

Although silver lacks the reputation of gold as a safe investment in times when the business and financial sectors appear to be carrying high risks, prices are definitely influenced by wider economic factors. Silver prices share with gold bullion prices a susceptibility to changes in foreign exchange rates and interest rates, and signs of economic recovery. For example, the strengthening of the US dollar in the second half of 2011 is likely to have contributed to the decline in silver prices but it is hard to determine to what extent.

There is also a significant body of opinion in the coin collector community that believes the price of silver is seriously undervalued at the moment and the imbalance between supply and demand are likely to lead to a major silver price increase. The decline in silver prices in 2011 is blamed on speculators or government policies rather than being a reflection of the true state of supply and demand for silver bullion.

Sound advice for the silver coin collector
With many different factors influencing silver bullion prices it is not sensible to base coin purchasing or selling decisions on a firm conviction that prices are following a long-term trend. The coin collector who spends a fortune at silver coin dealers with the hope of making a good profit from a quick resell is likely to be disappointed. In contrast, the coin collector who buys silver coins to complete their collection, or because they are attracted by a numismatic coin’s design or historical significance, is not going to be disturbed by short-term silver price changes. If they plan on keeping their American Eagle Silver Dollars (or other silver coins) for a number of years they stand an excellent chance of making good gains on this investment.