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Investing in Silver: A Primer

Investing in Silver: A Primer

At a Glance

Private bullion is the least expensive way to buy silver in bulk. However, junk silver and government bullion have benefits that shouldn’t be ignored.

In coin collecting and investing, the term “junk silver” refers to silver coins that have no value to collectors aside from that of the silver they contain. Some examples of junk silver coins in the United States include dollars, half dollars, quarters and dimes minted in 1964 and earlier — which contain 90 percent silver — and half dollars minted from 1965 to 1970, which contain 40 percent silver. One dollar of any combination of 90 percent silver coins contains approximately three quarters of an ounce of silver, which is worth nearly $19.00 at a silver value of $25.00 per ounce. So, although junk silver coins aren’t prized for their rarity, they are worth many times their face value and are prized by investors and hoarders for this reason.

Bullion, on the other hand, includes gold and silver coins minted specifically for the purpose of investing and hoarding. Although bullion coins may have no face value, they are larger than junk silver coins and contain a guaranteed weight and purity of precious metal. The most common bullion coins contain one troy ounce of silver at 99.9 percent purity. The most popular bullion coin in the United States — the Silver Eagle — is minted by the government and has a face value of $1.00, although its intrinsic silver value is much higher.

Pictured at top: Four Ounce Junk Silver Lot

Because the value of silver always serves as a base price when buying junk silver and silver bullion for a coin shop, you generally can’t save a great deal of money by purchasing one or the other. If you’re trying to decide between bullion vs. junk silver, then, which should you choose? We hope this article will shed some light on the subject.

Junk Silver

In the 2000s, economic instability around the world spurred interest in precious metals. Silver — which had once been worth just over $3.00 per ounce — rocketed up to $25 per ounce and higher. Gold experienced a similar explosion, quickly becoming difficult for many people to buy in any amount. At $25 per ounce, however, many people can still afford to put some of their money into silver.

People often choose to invest in silver as a hedge against inflation or an economic depression. The value of silver is relatively assured even if the value of the dollar should collapse, making it a relatively safe way of storing one’s wealth. If you should ever need to use silver to barter for goods, junk silver has the benefit of being small, easily dividable and difficult to counterfeit. Most people living in the United States would know that dimes, quarters and half dollars minted in 1964 and before contained 90 percent silver and you should have no trouble spending junk silver even if the dollar were to become virtually worthless.

If your goal is to buy silver as a hedge against economic instability, junk silver is arguably the best way to do so for the reasons listed above along with the fact that it carries a very low premium per coin compared to silver bullion. Junk silver is of little interest to coin collectors, who would not expect it to appreciate in value unless the price of silver were to increase.

Silver Bullion

Silver bullion is available from two sources: government mints and private mints. Government bullion carries a face value — the United States Silver Eagle has a face value of $1.00, for example — while private bullion is not legal tender. Because government bullion coins have dates and are minted in limited quantities, they have the possibility of becoming valuable to coin collectors in the future. For this reason, new government bullion coins are typically sold at a premium of up to about $5.00 per coin over the value of the silver. A Silver Eagle from 1986, for example, can be worth up to $100 to coin collectors although it only contains about $25 worth of silver. So, government bullion can be a good choice if you want to invest in silver coins with the hope that their value to collectors will increase in the future. Should the economy collapse, however, government bullion would not be worth more than the silver it contains.

Private Bullion

Private bullion is minted by assayers who buy metal from miners, create coins and ingots and sell those products to the public. Of all the avenues for investing in silver, private bullion is generally the least expensive because unlike junk silver and government bullion, it has no face value. To sell it, the buyer would have to agree that it contains a specific weight and purity of precious metal. Some of the best known makers of private bullion include Engelhard, Johnson Matthey and Sunshine Mint. Although private bullion will not increase in value with coin collectors, its benefits include a very low premium per coin and the fact that it can be purchased in bulk to minimize the storage space needed for hoarding. Silver bars weighting 100 ounces and more can be purchased for less than $1.00 per ounce over the current price of silver.

Best Silver for Investment

If you want to invest in silver, you may be unsure of how to begin. Should you buy junk silver or silver bullion? First, ask yourself why you want to invest in silver. Are you looking for a long-term and inflation-proof method of storing your savings? Are you a coin collector enticed by the possibility of rarity driving the value of your collection up? Or, do you want to be certain you’ll still be able to buy food and other essentials if the economy goes horribly wrong?

If you aren’t sure, the best form of silver investment is probably a combination of junk silver and silver bullion. When you have extra money to invest, simply look for the most attractive deal available at that time. This helps to ensure that you will get the best return on your investment regardless of what happens to the coin collecting hobby or to the economy.

Junk silver is probably the best form of protection against economic collapse; the small coins make for fractional values and easy trading, and the purity and weight of United States coinage will not be disputed by those you barter with.

Private bullion, on the other hand, is the best form of silver investment if you simply want to buy as much silver as you can, as quickly as possible. Private bullion can be purchased in large bars that consume little storage space, and the premium per ounce is the lowest out of all forms of silver.

If you are a coin collector, consider investing in government bullion. Government bullion has a face value, ensuring your coins will be worth a minimum amount even if the value of silver drops. In addition, certain years and mintmarks may become rare and increase in numismatic value, eventually becoming significantly more valuable than the price of the silver.