Letter Re: 1/20th Ounce Canadian Maple Leaf Gold Coins

I know your a fan of silver, but I noted that Canada is producing 1/20 oz gold bullion coins and it seems to be in .999 fine along with all their other Maple Leaf production this year. These are smaller than a US Dime, the 1/10 oz is about the same size as the US Dime.
I do business (buy and sell) with these guys but also occasionally buy form a place for cash in the Financial District of SF for cash of course with no paper trail, they give me pretty good price over spot. Cordially, – Tim

JWR Replies: The Maple Leafs are pretty coins, and they are indeed .999 fine, which make them desirable for re-use (industrial or jewelry making.) Just ask anyone from India what coins they buy to take home for wedding gifts. They almost universally prefer the Maple Leaf.

Unfortunately, all gold bullion coins come with a premium over the value of their bullion content, and sadly the steepest premium is on the smallest coins. The lowest premium that I have found on 1/20 ounce Maple Leafs is around $5 per coin. If you multiply a $5 per coin premium by 20, then you can see that you are paying $100 per ounce premium for each ounce of gold that you buy. (Presently, that works out to about a 16% premium over spot.) Ouch! In contrast, silver coinage can often be purchased with a premium as low as 3% over spot.

I would much rather buy circulated pre-1965 U.S. silver dimes, quarters, and half dollars. These are 90% silver. Not only is the premium lower, but they will be much more readily recognizable to whomever is on the other side of the barter table from you. If you hand them any gold coin, the first words from their lips will be: “How do I know this is genuine?” But if you hand them pre-1965 silver coins they will accept them with just a passing glance at their rims. (Post-1964 “clad” dimes and quarters show a copper layer at their rims.)