Investing in silver bullion
The silver investment market offers a variety of silver bullion products. This overview provides brief discussions of the advantages and disadvantages of buying the most popular silver bullion and silver coin investments.
For detailed discussions of specific silver bullion products and silver coins, follow the links or check the list of popular silver investments to the right. Before investing in silver, readers should read this page and follow the links to the pages that discuss specific products.
Silver investing, .999 silver bullion
Silver bars have emerged as popular ways of investing in silver because they are uniform in size, making them easy to handle and convenient to store. Additionally, silver bars are compact, which enables investors to secure a great deal of wealth in relative small storage areas. Silver bars with recognized hallmarks are readily accepted for resale, making them easy to convert to cash.
The standard purity for silver bars for decades has been .999 fine (99.9% pure). Most 100-oz silver bars, 10-oz silver bars and 1-oz silver rounds are market .999 fine, including the US Mint’s 1-oz Silver Eagles. However, in recent years the Royal Canadian Mint has produced 100-oz silver bars of .9999 purity. In the industry, they are called “four 9s” silver bars. Johnson Matthey, one of the world’s best known and most respected refineries still stamp their bars .999 fine.
1-oz silver bars (rectangles) are available but not nearly as popular as 1-oz rounds. 1,000-oz silver bars are recommended only for IRA silver investments. At 70 pounds–and sometimes heavier–1,000-oz silver bars are difficult to handle. At times, though, large RCM silver bars with weights between 800 ounces and 900 ounces are available and carry smaller premiums than the 100-oz silver bars.
100-oz silver bars dominate the silver investing market. Investors who buy 100-oz silver bars generally ignore the survival aspect (Learn about Survival Coins) of owning silver, which comes with owning pre-1965 US 90% silver coins and 1-oz silver rounds. 10-oz silver bars provide features of both silver investment bars and of survival forms (junk 90% coins and 1-oz rounds).
Investing in silver coins
Although not bullion, circulated pre-’65 US 90% silver coins, (commonly referred to as junk silver coins because they have no collector value, essentially are bullion silver investments because $1,000 face (a “bag”) yields right at 715 ounces of pure silver when refined. When minted, a bag of 90% contained 723 ounces of silver. Because of wear, however, a bag of dimes or quarters will net about 715 ounces.
A bag of half dollars will net a little more, maybe 718-720 ounces because half-dollars did not circulate as much as dimes and quarters. Investors can expect to pay a little more for half-dollars than for dimes or quarters because of the higher silver content and because half-dollars are more popular. And, fewer half-dollars were minted than were dimes and quarters.
When investing in silver coins, buyers basically have three choices of 90% silver half-dollars: 1964-dated Kennedy half-dollars, Ben Franklin half-dollars, and Walking Liberty half-dollars. As a rule, circulated Kennedy half dollars and Franklin half dollars carry small premiums over dimes and quarters. However, Walking Liberty half dollars sell at higher premiums.
Premiums on bags of silver coins rise and fall depending on whether the public is investing in silver or is a silver seller on balance. Therefore, at times bags of silver coins carry higher premiums than 100-oz silver bars, but sometimes lower, and sometimes about the same.
Investors who can handle the added bulk and weight of bags of 90% silver coins should make them their first silver investing choice because 90% coins pick up premiums in markets where the public is investing in silver heavily. In past precious metals bull markets, bags have tacked on premiums of $2.50 to $3.50 per ounce. At times, premiums can rise to ridiculously high levels.
Y2K silver investing
For example, in 1999 Y2K silver buyers put 50% premiums on bags of silver coins. While bags held such huge premiums during the Y2K buying frenzy, many CMIGS clients–at our urging–swapped their 90% bags for 100-oz bars or 1-oz rounds and increased their silver holdings by 35% to 45% without laying out additional cash. After Y2K became a nonevent, the premiums on bags of 90% collapsed.
Further, in the Y2K aftermath, the selling of bags of 90% overwhelmed buyers, and thousands of bags were melted, which means there are fewer bags of 90% available than when they sold at 50% premiums. Although CMIGS recognizes that bags are more cumbersome, we believe that the potential for 90% silver coins to again pick up big premiums justifies investing in bags.
Silver Investing, 1,000-oz silver bars
Newly refined silver bullion is poured into 1,000-oz bars, which are the standard forms of delivery for futures contracts traded on the Comex. Rarely do 1,000oz silver bars weigh exactly 1,000 ounces. Most 1,000-oz bars contain somewhere between 960 oz. and 1,030 oz. After newly-poured 1,000-oz silver bars cool, their weights, hallmarks, and serial numbers are stamped on them.
CMIGS recommends investors go with 100-oz silver bars when investing in .999 fine silver bullion. However, IRA plan holders investing in silver should consider 1,000-oz bars when their accounts are large enough to do so.
Putting Silver (and Gold) in IRAs
In 1997, Congress changed the laws so that silver investments were allowed in IRA plans. Although Silver Eagles also are allowed in IRAs, 1,000-oz and 100-oz bars are the better silver investments for IRAs because bullion bars sell at significantly lower premiums than do Silver Eagles. For more information about putting silver in IRAs, visit Putting Precious Metals in Your IRA. For more information about specific silver bars, use the links to the right on this page.
Why Invest In Silver or Gold?
Investors often ask, “Why should I invest in gold and silver?” and “Should I buy the physical metals or stocks?” For answers to these questions, read “Why should I buy gold and silver?”, which is found on the IRA page.
Is Silver a Better Investment than Gold?
Precious metals investors often ask, “Should I invest in silver or gold?” CMIGS says silver, for many reasons.
First, silver has always produced a greater percentage increase during precious metals bull markets. In some precious metals bull markets, silver has tripled in price while gold has doubled. In some moves, silver rose four times while gold doubled in price. Additionally, silver has more industrial applications than gold does, with more uses being developed.
Industrial uses provide an underpinning to the price of silver. So great is the industrial demand for silver that mine production and secondary recovery have fallen short of industrial demand since 1990. According to CPM Group, a New York metals consultancy, between 1990 and 2003 new production and secondary recovery fell 1,899.9 million ounces short of meeting industrial demand. Add in the silver used for coinage, and the 1990-2003 overall deficit swells to 2,214 million ounces.
Not only has production and secondary recovery failed to meet demand each year of the last fifteen years, but aboveground supplies are critically short. Some analysts say that supply will fall far short of meeting demand over the next decade, and that much higher silver prices will be the result. According to accepted statistics, more gold rests in the vaults of the world’s central banks than there is aboveground silver.
The drop in reported silver holdings around the world shows just how much the production deficit has eaten into aboveground supplies. In 1995, Comex stocks stood at 260 million ounces; today Comex stocks are struggling to stay above 100 million ounces. In 1991, estimated silver inventories in London and Zurich were 350 million ounces; today that number is closer to 50 million ounces. In 1980, world governmental silver stockpiles totaled some 325 million ounces; today, few governments hold any silver.
Finally, many people think first of gold when the subject of “hard money” arises. Yet, more people have used silver for money than have used gold. In something like fourteen languages, the words for silver and money are the same. In the United States, gold coins ceased to circulate as money with Roosevelt’s 1933 call-in. However, the U.S. Mint continued to turn out silver coins until 1965.
CMIGS recommends silver investing for those investors who can handle silver’s bulk and weight. Those who cannot should invest in gold. If you would like to discuss any aspect of investing in silver, call us at 1-800-528-1380. We take calls 7:00 a.m. to 5:00 p.m., MST, Mondays through Fridays.