Investors, on the other hand…

By Guest Columnist Joshua McMorrow-Hernandez for CoinWeek.com ……



If you’re seeing small, white spots on your American Silver Eagles and wonder what those unsightly imperfections are–and why they’re there–you’re not alone.

The numismatic community first took note of so-called “milk spots” several years ago and is still trying to determine both the cause and the cure. In many cases, reports of milk spotting are on raw, bullion-quality silver coins. However, what really causes collective aggravation is the persistent presence of milk spots on numismatically-significant, slabbed Silver Eagles. Many of these blighted Silver Eagles are MS-68, MS-69, or MS-70 coins that started developing the dreaded spots after encapsulation.

Coin forums are loaded with theories from seasoned experts in the field. Many trace the cause of these tiny white spots to a wash the U.S. Mint is using. Specifically, the culprit appears to be detergent residue that isn’t rinsed off before the .999-silver planchets hit the annealing furnace. As the cleaned silver planchets get heated to scorching temperatures exceeding 1,000°F, any leftover detergent solution is inadvertently baked into the surface of the coin. The woeful chemical reaction between the baked-in detergent and the coin’s metal may take weeks, months or even years to surface.

When or if it does, it’s usually to the disappointed, even angry, reactions of coin collectors.

Noted coin expert Anthony Swiatek says high-grade American Silver Eagles are “plagued” by milks spots. Many high-grade Silver Eagles don’t begin presenting them until long after they’ve been inserted in sonically-sealed plastic, leaving some to wonder if the encapsulation process itself hastens spot formation.

Inevitably, the milk spot issue landed in the laps of experts at third-party coin grading companies years ago, when coin collectors first took notice of the spotty situation. At the Professional Coin Grading Service (PCGS), the standards used for evaluating the condition of an American Silver Eagle changed almost a decade ago.

According to a 2007 statement from PCGS, the company was once “reluctant to grade any Silver Eagles MS-70 because of the significant possibility of future milk-spotting on the surfaces of the metal, which often seem to appear after the coins are minted and even after they have been graded.”[1] That year, PCGS began grading American Silver Eagles from 2006 and 2007 based on the condition of the coins at the time they were graded, without regard for the potential of future milk spotting.

As for awarding a coin the prestigious MS-70, PCGS asserts the standard remains “flawless surfaces under 5x magnification.”

Miguel Murillo, a customer service representative at PCGS, further outlines the company’s policy today.

“We’re doing what we call a modern spot review,” he told me over the phone. “For a fee of $5, plus shipping and handling, we will evaluate your coin, remove the spots, and then return your piece.”

He says the service is applicable to all American Silver Eagles dating back to 1986. The policy does not apply to older coins, which he said would be treated as restorations and are handled on a different fee structure.

As PCGS points out, milk spots indeed trace their origin back to manufacturing issues at the U.S. Mint. As much was affirmed by U.S. Mint Quality Division Chief Stacy Kelley-Scherer, who, in 2012, remarked that the white spots on American Silver Eagles are attributed to minting procedures. Unfortunately, Kelly-Scherer went on the record as saying that the U.S. Mint has not been able to find a panacea for preventing milk spots.

Part of the problem the Mint and others in the numismatic community see is that milk spotting isn’t a black and white issue with a tried-and-true solution. As PCGS succinctly stated in a 2012 policy update, “there seems to be no rhyme or reason as to why some coins spot and others don’t.”[2]

Anthony Swiatek

Milk spots appear on bullion, proof, and uncirculated Silver Eagles from all minting facilities, and may appear as a single spot or in large, blotchy patches across fields and devices. They’re even turning up on U.S. silver commemoratives and other modern coins.

And these troubling white spots aren’t just a U.S. coin phenomenon–they’re running amok on modern silver coins from Canada, China and Australia.

The Royal Canadian Mint (RCM) owes the milk spots on its coins to the planchet cleaning and preparation process. They’re taking a more laissez-faire approach, however. The RCM says their one-ounce silver bullion maple leaf coins are just that – bullion coins intended for metals investors, not collectors. The powers that be at the Mint in the Great White North also state that the problem has persisted on their silver bullion coins since Maple Leaf silver coins first debuted in 1988.

In short, RCM officials say they can’t do anything about the spots. At this point, it seems there isn’t much hope that the RCM will be putting white-coated scientists on the scene to remedy the problem anytime soon.

As mint officials on both sides of the northern United States border and overseas grapple with milk spot dissension, coin collectors the world over are scratching their heads and hitting the Internet for answers–and elixirs. “Remove white spots Silver Eagles” is a search term that yields more than 100,000 results on Google, and the cringe-worthy solutions found online run the gamut, from hairline-inducing jewelry wipes to the utterly abrasive baking soda and toothpaste. Ever-popular silver dipping agents are also frequently mentioned as a potential fix.

Swiatek, ever the numismatic expert, has some savvy advice on milk spot removal. Acetone, as many coin collectors know, is commonly used as a safe method for removing PVC residue and other foreign matter from coin surfaces.

“Chemically pure acetone may work in removing the spots,” Swiatek advises. Of course, if you decide to go the acetone route, be sure to hit the hardware store. Most of the acetone-based nail polish removers you find in the beauty supply aisle of your local grocer aren’t pure acetone and often contain additives that could damage your coin.

Milk spots are bad enough, right?

Before crossing your fingers and dropping acetone on your milk-bespotted silver coins, be sure to take the proper safety precautions. Only use acetone in a properly ventilated area, wear gloves, and keep the flammable chemical away from sparks and flames.

Milk-spotted Silver Eagles–and those that were abrasively cleaned–are causing some coin dealers to reconsider the pricing methodology behind these popular silver coins.

Swiatek says coin dealers absolutely should price their slabbed Silver Eagles respective to the present quality of the coin inside the plastic, not the grade on the holder.

“Of course, from the bullion standpoint, lower-grade Silver Eagles with spotting aren’t a big matter in terms of price,” he observes, speaking to the fact that most bullion-quality Silver Eagles under MS-67 are only worth close to their intrinsic value anyway. “The issue I’ve seen is that many of the spotted pieces are slabbed in the high grades, and this is a major problem for coins that have a MS-69 or MS-70 grade,” Swiatek observes.

In situations where a slabbed, milk-spotted MS-69- or MS-70-graded American Silver Eagle (or PF-69 or -70, for that matter) comes to market, haggling and negotiations between a coin buyer and coin dealer may arise.

“Coin dealers need to be fair,” Swiatek cautions.

At APMEX, one of the leading distributors of American Silver Eagles and other bullion coins, there is little mention of white spots. There is, however, an offering of off-quality American Silver Eagles. With silver prices at $18.00 an ounce as of this writing, these cull, damaged, and spotted Silver Eagles are individually selling for around $22.10 if under 20 are purchased at one time and $20.62 per in bulk orders of 500 or more–lower than any other Silver Eagle offering on the company’s site.

While this doesn’t necessarily address the pricing policy of, say, a slabbed (and milk-spotted) MS-69 American Silver Eagle, what remains perfectly clear is this: bullion investors who don’t care about the appearance of their American Silver Eagles have plenty of cheap, government-issued bullion coins to stash away in their portfolios.

Diehard numismatists, on the other hand, may be in the painfully tedious position of having to evaluate the buy and sell prices of American Silver Eagle coins–or any other spotted coins–on a case-by-case basis.

Browsing the bourse for Silver Eagle steals may have gotten easier, as coin dealers like Swiatek and others rightfully address the fact that milk-spotted Silver Eagles shouldn’t necessarily sell for the same price as similarly-graded but spotless pieces.

Coin buyers, meanwhile, must weigh the risks of buying high-grade American Silver Eagles that look flawless now but, in time, may reveal pernicious white spotting.

Perhaps 50 or 100 years from now, American Silver Eagles from the 1980s and ‘90s that somehow remained flawlessly untouched by milk spots may be as scarce and desirable as Full Head Standing Liberty quarters or Full Bell Line Franklin halves.

Imagine that!

Indeed, the day may come when numismatists willingly pony up hundreds of dollars for choice, spotless specimens of an otherwise common American Silver Eagle. Surely, heated debates will ensue in numismatic circles about deciphering “doctored” versus “original” American Silver Eagles, much like some Lincoln cent enthusiasts scrutinize decades-old “red” Lincolns for any sign of past dipping.

Whatever the milk spot quandary holds for the present (and future) of American Silver Eagles, coin collectors, coin dealers, and third-party coin authentication professionals can remind themselves of this: milk spots aren’t the first coin grading fiasco the numismatic world has experienced, and it won’t be the last.

Sources:

[1] http://www.pcgs.com/News/Pcgs-Guidance-For-Ms-70-Silver-American-Eagles

[2] http://www.pcgs.com/silver-coins-spot-policy/

