Junk silver is the name given to US coins minted before 1965 in the United States which contain 90% silver by weight.
While certain coins minted within this time frame and kept in uncirculated condition may have a value that exceeds their metal content, (numismatic value) most “junk” coins have been circulated, collected and are eventually sold as investment bullion. The value of the currency is eclipsed by the value of the metal in it.
Though supply and demand affects the price of premium forms of silver to a degree, junk silver is less susceptible to market conditions than pure silver bullion (US Silver Eagles or Canadian Silver Maple Leafs). When silver is rising, bullion becomes expensive and the premiums can quickly reach 10% or more. For instance, when a one ounce silver coin costs $36, during high demand periods, you can pay as much as 4 dollars over spot. Investors can avoid this premium by investing in junk silver which, while providing a hedge against inflation and portfolio diversity (as all precious metals do) does not suffer from the same degree of supply and demand fluctuation.
In our offices, we’re currently selling Silver Eagles for 4.20 over spot, a 10% premium, driven completely by huge demand. But junk silver is at spot or 2% above. This is not the case at every store. It is simply a reflection of local supply and demand. Most people want shiny, new silver. Old, formerly circulated silver is less desired and consequently is available for less. But it’s still a valuable metal. But it’s just less shiny.
But here’s the big secret. The guy getting the shiny Silver Eagle is going to pay an additional 6-10% during purchase…and because he’ll probably sell when everyone else is selling (since that’s when most people sell) he’ll lose several percent when he sells because EVERYONE will be selling and he won’t be able to recover his 6-10% premium. So now he’s as much as perhaps 12% behind…
Suddenly the bright shiny Silver Eagle that he paid 6-10% more for, and then sold at a 2-5% loss (versus spot) becomes a 8-12% cost to the owner. This is the price to be paid for working with the highly desired and much in demand US Silver Eagle.
And here is something else to remember. If you get to the point where you’re using your silver in a time of crisis to buy goods or services, do you think you’re going to get a couple extra bales of hay, or a few more gallons of drinking water because you have the new “shiny” coins?
Put another way, if there are two dollars on the table, one is a crumpled old dollar and one is a crisp, freshly minted dollar bill – which one buys more? Neither. They’re both worth the same.
Lastly junk silver offers the holder more precision in purchase power than a 1oz silver piece. If you want to buy bread and milk rice in a time of crisis, I don’t think you’ll be happy to pay $40 for it and get no change. But if all you have is silver eagles , you’ll be doing just that.
Don’t get drawn into the hype. US coins are a strong investment, in whatever form. A strong case can be made for the practical investor to spend his money more wisely by investing in junk silver, where the premium is low because the demand is low. Remember – same metal, different form, 12% less cost. And who doesn’t mind saving money?
Article Source: http://www.articlesbase.com/wealth-building-articles/why-junk-silver-is-a-better-buy-than-silver-eagles-4679069.html
About the Author
Brian Jowaisas is the owner of Houston Gold Merchants, a full service precious metals dealer in Houston, TX providing liquidation services for scrap gold and silver and investment grade silver and gold bullion to its clients.