The Basics of Silver Coins & Bullion For New Investors

Bullion Basics

It can be difficult to get started investing in physical silver. Visit any coin shop, bullion dealer website, or search on e-bay for silver and you’ll find that there is an overwhelming variety of products. Choosing the right bullion can be a tough decision. This post will provide an overview of the most popular silver bullion products, as well as pros and cons for each option.

Watch Out For Numismatics

Before we get started, here is a quick warning. While shopping for bullion you will come across graded numismatic coins, valued by collectors for their rarity and condition. Numismatic coins are sold for a much greater price than the value of the precious metals they contain, and as such they do not make a suitable bullion investment. Collecting numismatic coins is fine, but understand that you are investing in their collectible value, rather than the intrinsic value of any precious metals they contain.

That being said, lets talk stacking physical silver bullion.

Constitutional or “Junk” Silver

The first category of silver we will take a look at is United States 90% silver coins minted in 1964 and earlier. These coins go by many names, including: “junk silver”, “constitutional silver”, and “U.S. 90% silver”. They are simply circulated dimes, quarters, half dollars, and silver dollar coins minted in the U.S. prior to 1965. These coins contain 90% silver and 10% copper. Copper was added to increase the coins durability, allowing them to survive in circulation longer.

Junk Silver is widely available from coin dealers and it is easily recognizable, so if you ever want to sell, finding a buyer should be relatively straightforward. The premium for these coins is typically low, although it has crept up in recent years. For the preppers out there, these 90% silver coins are the perfect choice for a unit of exchange in an SHTF scenario. Silver dimes are small enough to be used for day to day transactions. Their ubiquitious nature also makes them ideal for this role, as trading partners will be familiar with these coins and readily accept them as payment.

Constitutional silver may also hold an appeal for the speculative investor, one that I don’t hear mentioned a lot. Although millions of these coins were produced over the years, they haven’t been minted in over half a century. Many of them have been melted down and scrapped over the years. No one knows how much constitutional silver is still out there. The supply can only shrink over time as coins are lost, melted, or horded by investors. With a fixed supply, any increase in demand could cause the traditionally low premium for these coins to spike. This potential scarcity could create significant upside for the smart stacker who takes advantage of today’s low prices.

One final note about US junk silver is that it is uncommon to encounter counterfeit coins of this type. Although some knockoffs have been imported from china, the majority of these are copies of rare date coins that are sold for prices far above the value of their silver content. Common date 90% silver coins are just too small and too difficult to produce compelling counterfeits of that you can feel quite safe buying coins of this type.

Government Coins

The next category we’ll take a look at is silver bullion products which are currently produced by government mints such as the American Silver Eagle, the Canadian maple leaf, and the Austrian philharmonic. The majority of these are 1 ounce coins of .999 fineness or higher, meaning they are pure silver. Large numbers of these bullion grade coins are produced each year by government mints and made available to the public. It’s normal to see a markup of $2-$4 over spot for coins of this type, but the premium comes with some benefits.

The first, and perhaps most notable benefit, is how recognizable these coins are. Many of these coins have been produced for decades by their respective government mints, and there are millions of them out there. There will always be a ready buyer for these coins, making them an extremely liquid investment. In addition, you may be able to get back some if not all of the premium when you sell. There are also some tax reporting benefits if you sell these coins to a dealer, I won’t get into the specifics of this but JM Bullion has an excellent infographic explaining tax reporting laws and the sale of bullion. If you’re buying this year’s coins these from a big dealer, it’s likely that they received the coins directly from the mint. This eliminates the possibility of receiving counterfeit coins, although if you purchase these on the secondary market you should keep a sharp lookout as counterfeits are out there.

Low Premium Generic Bullion

For stackers who simply want to get the most silver for their money, generic rounds and bars are a great way to get your hands on some bullion with a very low premium. You may be wondering what the difference between a “round” and a “coin” is. The difference is simply who mints the bullion. Coins are only produced by the mints of national governments, any bullion minted in the shape of a coin by a private mint is referred to as a round.

Today, silver rounds and bars are available in a huge variety of shapes and sizes. From beautiful art rounds, commemorative products with special signifigance, to large stackable 100 ounce bars there is something for every stacker out there. As a general rule, the larger the bar or round, the lower the premium over spot. It is less costly for a mint to produce a big 100 ounce bar than to make 1000 1/10th ounce rounds, the markup they charge reflects this.

One potential downfall of generic bullion is that it may not be as recognizable as coins from government mints. When you go to sell your silver, the buyer may be skeptical of generic products they haven’t seen before. To offset this concern many mints offer products with security features such as serial numbers and markings that are only visible through a special lens.

That covers the broad categories of silver bullion a new stacker will encounter. If I’ve left anything out, or you have anything to add let me know in the comments!  If you're looking to buy some physical metal, follow me on twitter @stacksmarter or search for hashtag #stackeralert for any sales or specials I've found and shared for you

(This is an updated version of a post originally published on a previous version of this blog on 09/30/2017.)