United States 90% silver coins were minted to be used as money, were used as money, and could be used as money again. Minted before 1965, they are called junk silver coins because they have no collector or numismatic value. The coins are bought and sold for the value of their silver content.
When minted, a bag of 90% junk silver coins contained 723 ounces of silver, but because of wear a smelted 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, and, therefore, did not suffer as much wear.
Because a “bag” ($1000 face) contains approximately 715 ounces of silver, it tracks the spot price of silver. If silver goes up ten cents, a bag of US silver coins rises $70 or so; however, when junk silver coins are in short supply their premiums can increase.
Why Buy US 90% Silver Coins?
Although many investors buy junk silver coins as bullion investments, other investors buy junk US silver coins for “survival purposes.” These buyers fear the worst for the dollar, that it will be printed until it becomes worthless. If this “worst-case scenario” were to become reality, US silver coins would be used for the purpose they were originally minted: as money.
CMIGS hopes that Americans never see the day that their once proud dollar becomes worthless. Yet, we are aware that the history of paper currencies is that they are printed until they become worthless. (Actually, today 98% of the US money supply, dollars in circulation and available to be spent, are not “printed” dollars but are digital or electronic dollars.)
Junk Silver Coins or Bullion Bars?
Although pre-’65 silver coins would be ideal for survival purposes, when junk silver coins sell at premiums near the premiums on 100-oz silver bars and 1-oz silver rounds, junk silver coins hold greater upside price potential than .999 fine silver bullion products because at times, and especially during rising precious metals markets, circulated 90% US junk silver coins pick up huge premiums as the supply of junk silver coins is limited.
On the other hand, .999 fine bullion items (1,000-, 100-, and 10-oz bars and 1-oz rounds) can be produced at any time; consequently, there are limits as to how high premiums on .999 fine silver bullion items climb. To support the assertion that bags of US silver coins hold greater upside potential than .999 fine bullion items, a little background on junk silver coin prices and silver prices is in order.
Over the last four decades, when precious metals enjoyed bull markets, junk US silver coins often achieved premiums of 20% to 30% over spot. During the Y2K scare (discussed below), junk silver coins carried a 50% premium over bullion products.
In the 1980s, following silver’s spike to 50/oz, industrial silver users implemented efficiency moves that slowed industrial demand for silver. Further, the rising prices of the 1970s had spurred efforts to mine more silver and to increase the recovery of silver in the secondary market. (Today, reclaimed silver remains a major source of this essential metal.)
Because of these efforts, silver went into “surplus” in the 1980s, i.e., newly refined silver exceeded industrial demand. This caused investors to avoid silver in the ’80s, except for a strong market in 1987. For most of the 1980s, investors were net sellers of silver, which resulted in huge quantities of junk silver coins being refined and converted into .999 fine silver. The Y2K scare caused another huge melting of circulated 90% silver coins.
Y2K Buying Spurs Junk Silver Coin Buyers
Fearing that the world’s computers would quit working January 1, 2000, many people began preparing for the worst. Their fears were exacerbated as respected economists issued warnings and wrote books. Newsletters were dedicated to teaching people how to prepare. One recommendation was that junk US silver coins be stashed away so that they could be used as money when banks closed and ATMs no longer spewed $20 bills.
Consequently, in 1998 and 1999 people fearing Y2K bought junk silver coins at whatever prices, and bags picked up 50% premiums. The Y2K scare showed just how quickly US silver coins can pick up big premiums and that premiums on 90% silver coins can rise while the price of silver remains stagnant. During 1999, the price of silver was essentially unchanged.
Silver Eagles, Silver Maple Leafs as alternatives
Other popular alternatives to junk silver coins during the Y2K buying were the US Mint’s Silver Eagles. Silver Maple Leafs, which are Canadian silver coins minted by the Royal Canadian Mint, were popular with Y2K buyers who lived along the Canadian border. In the US, Silver Eagles were much more popular and remain more popular today than Silver Maple Leafs.
Y2K Buyers Start to Sell
On January 3, 2000, as soon it became evident that the world’s computers were not going to fail, investors began selling, and they sold throughout the year and into 2001, forcing down prices on US silver coins until they sold at discounts (below the value of their silver content). Untold quantities of bags were refined into .999 fine silver bullion, and now bags of pre-1965 US silver coins are in short supply.
Before Y2K, an order for 100 bags of junk silver coins could be filled with a phone call to any one of many wholesalers. Now, an order for 20 bags often takes two or three phone calls.
While junk US silver coins held huge premiums during the Y2K buying frenzy, many CMIGS clients–at our urging–traded their junk silver coins 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 US silver coins fell to where junk silver coins became cheaper than 100-oz silver bullion bars. Still, the potential for 90% silver bags to pick up big premiums justifies the buying of bags US silver coins by investors who can handle the bags’ weight and bulk.
A Little More Information About Junk Silver Coins
Buyers 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. Also, fewer half-dollars were minted than were dimes and quarters.
When bags of circulated US silver coins can be bought at about the same premium as 100-oz bars, or even at small premiums over 1-oz silver rounds, bags should be the first choice for those investors who can handle the bags’ bulk and weight.
CMIGS ships from Phoenix all bags of junk silver coins it sells. We do not drop ship 90% US silver coins. (In fact, CMIGS rarely drop ships any orders.) A drop shipment occurs when the selling dealer has another dealer ship to the buyer. This saves the selling firm the cost of shipping..
CMIGS does not drop ship junk silver coins because we go though all 90% US silver coins before shipping and replace any excessively worn or otherwise damaged silver coins. Furthermore, we do not ship in $1,000 bags because they are heavy and burdensome. When a client buys $1,000 face US silver coins, CMIGS ships in two new $500 bags.
Buying Junk Silver Coins at CMI Gold & Silver Inc.
If you would like more information on junk silver coins or would like to discuss any aspect of investing in silver (or gold), call us at 800-528-1380. We take calls 7:00 am to 5:00 pm MST, Mondays through Thursdays, Fridays 7:00am to 3:00 pm.
For more details about buying, selling and trading precious metals at CMIGS, see Doing Business with CMI Gold & Silver Inc.