Buying and Selling Silver Bullion the Smart Way
Tired of hearing other people talk about buying and selling silver bullion and not having a clue about what they are talking about? Now is your chance to get started in the world of silver investing. Silver, like gold, has been a medium of exchange and a store of value for at least 6,000 years. Not a bad track record! It's not that complicated, you just need a bit of information and a willingness to learn and give it a try. In this article I take some of the mystery out of the world of silver bullion investing and help you get started.
U.S. Silver Coins
Before silver bars and rounds became popular in the late 1970s, silver traders bought and sold United States 90 percent silver coins. These are dimes, quarters, halves, and dollars issued before 1965. In this section I go over some of the common types of U.S. silver coins that you would run into when buying and selling silver. If you are very lucky, you just might find one of these coins in your change.
Silver Content of U.S. Coins
Before you get serious about buying and selling silver coins you really need to know just how much silver is in each type of silver coin. Table 1 lists the actual silver content of each type of coin. As a coin wears, the silver is removed and actual silver weight of the coin slightly decreases. The silver content in Table 1 is for a freshly minted coin; however, the silver contents listed below are still useful for buying and selling.
Table 1 - Silver Content of US Coins
Ounces of Silver
Dimes (pre 1965-1965
As an example to illustrate how to use Table 1, suppose you are buying a roll (40 coins) of silver Washington quarters. Here is how to calculate the silver value of the roll. If silver is a $30.00 dollars per ounce on the SPOT market near the time of the auction close, then the roll is worth 40*0.18084*$30.00 = $217.00. This is the melt value of the roll when silver is at $30.00 per Troy ounce. You will probably have to pay more than $217.00 for the roll. Normally the premium would be $10 to $20 over the melt value. If you are selling the roll to a dealer expect get $10 to $20 less than the melt value of the roll. The difference between the buy and sell price for the dealer is his/her profit.
American Silver Eagles
American Silver Eagles
The American Silver Eagle is one of the world’s most popular silver bullion coins. The U.S. Mint started production of this coin back in 1986 and minting continues today. Silver collectors and investors actively seek this coin for their collections. The coin features lady Liberty walking in the sunset on the obverse (front) of the coin and has an eagle on the back. The coin contains one Troy ounce of 999 fine silver. Normally, the Eagles sell for $3.00 to $4.00 over their melt value. Dealers normally pay their melt value or a $1.00 over melt to purchase the coins from the public.
Not all the dates of American Silver Eagles sell for around their bullion value. The 1996 is the low mintage date for the uncirculated bullion Eagles with just over 3.6 million minted. The 1996 Eagles sell for a $30.00 to $40.00 premium over their melt value. There are several other dates such as the 1986, 1994, 1995, 2006-W, and 2007-W Eagles that command a significant premium over melt. As a general rule, if you are buying American Silver Eagles for their bullion content you will be getting mainly coins minted within the last 10 years.
Morgan and Peace Silver Dollar
Morgan and Peace Silver Dollars
The Morgan Dollar was minted from 1878 until 1921 and in lower grades they can trade near their bullion value. These coins are very popular with collectors and high grade uncirculated coins sell for many thousands of dollars. The Morgan dollars that trade near their bullion value are called “culls”. A cull dollar will heave heavy wear (partial rims, partial date or legends), some damage (dings, scratches, …), and/or corrosion (turning funny colors). Due to the popularity of these dollars even the cull dollars trade for well over their bullion value. If you are sell cull Morgan dollars the dealer should at least give you the melt value. If silver is $30.00 per Troy ounce then the melt value of the Morgan dollar is 0.7734*$30 = $23.20. If you are buying cull Morgan dollars from a dealer expect to pay $2 to $3 over their melt value.
In 1921 the design of the Morgan Dollar was changed to commemorate the end of World War I. The new type of dollar was called the Peace Dollar. The Peace dollar contains the same amount of silver as the Morgan dollar and the cull dollars trade for about the same price as the cull Morgan dollars. See the above paragraph for the discussion on buying and selling cull dollars. When you come across Peace dollars you normally see the dates 1922, 1923, and 1924. These are high mintage dates and represent the bulk of the total mintage of the coinage for this series. Dates from 1927 to 1935 are less common and typically don’t trade near their bullion value unless they are damaged or have heavy wear.
999 Fine Silver Bullion Bars and Rounds
Silver Bars and Rounds
Another form of silver that is commonly traded is in the form of 999 fine silver bars and rounds. Privately minted silver bars and rounds come in a variety of sizes, everything from a tenth of an ounce to over 100 ounces of silver. Whether you are buy a small quantity or large you want to make sure that the round or bar is marked "999 Fine Silver" and "One Troy Ounce" or some equivalent statement. The "999 Fine Silver" refers to the purity of the silver, which means, it is 99.9 percent pure silver. Sometimes you will see the abbreviation "F.S" for fine silver. The "One Troy Ounce" lets you know that the bar or round weights at least 31.1 grams, which is a Troy ounce. On any piece of bullion you buy it must be stated the weight and purity. Avoid bullion that is marked "100 mils", this refers to the thickness of the silver plating. The bar or round is most likely copper with a thin plating. If the word "plating" appears on the bullion try to determine if it is silver over copper or gold over silver, or whatever. The best advice is to buy from a reputable dealer that will buy the silver back at their buy price.
The general rule on pricing privately minted silver is the small the unit of weight the larger the premium over the silver melt value. For example, a one Troy ounce 999 fine silver round usually sells for $1.00 to $2.00 over the melt value and a 100 ounce bar may sell as cheap as $1.00 per ounce over the melt value. I usually have my customers purchase bars that are less than 20 ounces in total weight. When you go to sell you 999 fine silver bullion expect to receive around $1.00 below the melt value to $0.50 over melt value per Troy ounce. If the dealer is offering you less than this then you need to check with another dealer. Due to many factors, dealers all seem to have a slightly different buy/sell spread on their bullion pricing.
World Silver Bullion Coins
World Silver Bullion Coins
If you like silver bullion and like coins from interesting parts of the world then collecting these coins is the way to go. The Canadian Maple Leaf one ounce 9999 fine silver coin is probably the most popular bullion related coin that is traded. Other commonly seen one ounce bullion coins are the Austria Philharmonic and the Mexico Libertad. These coins typically sell for $3.00 to $4.00 over their melt value and dealers normally pay around their melt value for these coins.
Australia makes some very attractive one ounce silver coins with a Kookaburra and Koala on the obverse of the coin. These coins normally sell for $5.00 to $10.00 over their bullion value. The older Kookaburras and Koala can sell for a large premium over their bullion value. These would not be good coins to purchase for their bullion value due to the high premium. These coins may appreciate nicely in value over time to their relative scarcity and the intrinsic value of the silver.