The advertisement could not be ignored – and not only because the striking newspaper display filled half the page. The lead line: “How Can a Silver Coin be Over 60 Times Rarer than a Gold Coin? Just Released: The Silver Krugerrand.” The accompanying picture, over four inches in diameter, shows a replica of a gold Krugerrand, with an added inscription “Fine Silver 1 oz.”
For those of you unfamiliar with precious metals, the South African gold Krugerrand, first minted in 1967, has an actual weight of 1.0909 troy ounces and contains a gold alloy 91.67% pure, so its actual gold content is exactly one ounce. As it’s among the most widely traded coins used in the marketing of the metal, you can understand why this newly created silver Krugerrand, just released by the South African government, is promoted in a way to mimic its gold progenitor. In the marketing of any product, celebrity status sells.
Before we delve further into precious metals investment, you may find it instructive to learn whether the terms being offered by the marketing agent of this silver Krugerrand make it attractive to a knowledgeable buyer. The hyperbole is impressive: “Krugerrands have never been struck in silver before – making this first-ever release a once-in-a-lifetime opportunity you won’t want to miss! This silver coin bears the classic original design: former South African President, Paul Kruger on one side, and the symbolic South African Springbok antelope on the other. In addition, each one-ounce silver coin features a special 50th anniversary mint mark.”
However, let’s take a closer look at the ad. We can easily calculate how this stacks up as a bullion investment. On the date of the ad, 5/4/17, the world price of silver closed at $16.43 per ounce, so the one ounce contained in the coin is worth just that. At the “special introductory price of $59.95,” a buyer is paying $43.52 more than actual value … a 264.88% premium. In addition, as free shipping is offered only on orders over $149, the buyer of a single coin may expect to fork over some additional amount for shipping. I don’t know how much; it didn’t seem worth the effort to inquire and find out. In any event, this is not the way to invest in silver bullion.
As an afterthought, you might note silver values pop up and down on an irregular basis. Back in February 1980, the price of an ounce topped out at $106.74. Fast forward a couple of decades to July 2001, you could only get $5.64 for the same ounce. As recently as March 2011, that ounce had risen to $40.18. Today it’s less than half that value. Where it will be heading over the next few years … who knows?
It’s clear some precious metals marketers are combing the bushes in search of gullible shoppers. Will they find enough of them to keep the charade going? To paraphrase that incomparable iconoclast H. L. Mencken: “No one ever went broke underestimating the naïveté of the American public.”