Intro to Buying Silver
For someone looking to make your first purchase, buying silver is not as simple & straight-forward as it appears. There are several questions you need ask yourself before you take the plunge:
- Why should I buy silver?
- What kind of silver should I buy?
- How do I buy silver?
- Where is the best place to buy silver?
Investing in silver in today’s economy is one of the most prudent action-steps you can take to preserve your wealth and hold true money. The guide below will hopefully answer the above questions and help make you a more informed investor …
Why should you buy silver?
If you are still on the fence on whether or not you should buy silver bullion, just take some time to read on the history of money. Here’s a short primer the history of silver used as money. As Winston Churchhill once said,
The farther back you can look, the farther forward you are likely to see
There is no shortage of signs on the uncertain future of the economy, the coming collapse of the dollar, and the recent moves into gold & silver. While we will save a complete list for the future, below are the top 5 reasons to be buying silver:
- Protect & preserve your wealth
- No counter-party risk with silver
- Silver has been used as money for 1,000s of years
- Silver is the second most consumed commodity, first is oil. Just read the post 101 uses of silver and you will see how versatile it is.
- Current Gold/Silver ratio is 1:60, historically it averages 1:16
What kind of silver should you buy?
I remember my first silver buy back in 2008, it was a mix of Peace Dollars and Morgan Dollars, mostly with a GOOD or VERY GOOD grade. Of course, I over paid for these coins, they were advertised on some radio program. You would call in and they would push you to buy silver coins with numismatic value.
Since then I’ve made all sorts of purchases of silver coins, bars, rounds, bullion, junk, even a handful of numismatics and paper silver! Yes, paper … I know that is an oxymoron.
Before we dive into the different kinds of silver, let’s first get some basic terms defined out of the way.
American Silver Eagle – (ASE) Official silver bullion coin of the US, 1986 – present.
Austrian Silver Vienna Philharmonic – Silver bullion coin of Austria since 2008.
Bullion – Gold or silver in the form of bars that is at least 99.5% pure.
Bullion coins – Coins struck with at least 90% silver purposed for investment.
Canadian Silver Maple Leaf – Silver bullion coin of Canada, from 1988 – present.
Chinese Silver Panda – Silver bullion coin of the China, from 1983 – present.
Coin Grading Service – Organization that grades numismatic coins. In coin collecting, PCGS & NGC are the top 2.
COMEX – Commodity Futures Exchange in NYC, where silver is traded in contracts (paper).
Face Value – The legal value stamped on the coin.
Fiat Money – Paper money that is legal by law or government force like the US Dollar. Not backed by gold or silver.
Fineness – The measurement of the purity of a precious metal in 1,000 parts. An American Silver Eagle is .999 Fineness while an 1885 Morgan Dollar is only .900 fineness or 90% silver and 10% copper.
Gram – Metric system unit of weight where 31.103 grams = 1 Troy oz.
Hallmark – Mark or series struck on precious metals to identify its purity or manufacturer.
Ingot – When precious metal is cast into a shape usually a bar.
Intrinsic Value – The true value of the metal content, as opposed to face value.
Numismatic coins – Collectors coins whose prices trade at a premium because of their rarity, age, & condition.
Premium – The amount that a coin sells for over its intrinsic value. If an ASE sells for $25 while silver price is at $21, the premium is $4.
Proof – Solely for collectors, these coins are minted with a mirror-like finish & sealed.
Silver Rounds – Coins issued by private mints with .999 silver content.
Spot Price – The price of silver traded over the exchange markets such as the COMEX.
Silver Bullion Coins
Bullion coins are fully backed by the host government and will always guarantee the weight and purity of the coins they produce. The most popular coin on the planet, the American Silver Eagle, comes straight from the US mint and is recognized worldwide as a silver bullion standard.
The premium on these coins are very high, and if you are just looking to amass ounces of silver, this may not be the best option. However, these are probably be the most liquid form of silver available, easy to sell and trade. Every silver investor knows the ASE, but not every silver investor will know the 1 ounce round you just bought from some private mint. Government mints from other some countries include:
- Perth Mint produces the Australian Silver Kangaroo & Kookaburra
- Royal Canadian Mint produces the popular Canadian Silver Maple Leaf
- Austrian Mint AG produces the Austrian Silver Vienna Philharmonic
- Mexican Mint produces the Mexican Silver Libertad
Minted bullion coins often come graded as Brilliant Uncirculated (BU) condition and are bought individually, in mint tubes (usually 10 or more) or in a big green monster box! Yes, it is called a monster box. These bad boys contain 500 coins which is equal to 500 ounces of silver. The come packaged in 25 mint tubes each holding 20 silver eagles each.
Buying silver coins individually you will be paying the most for a single silver coin, as a lot of labor & skill go into the making the coin from mining the metal to striking. Premiums are usually between $3 – $5 for 1 silver eagle. The more you buy in bulk the lower the premiums come.
For example, on APMEX, buying 1 American Silver Eagle has a premium of $3.99. However if you buy a monster box of 500 coins, the premium drops to only $2.49 a coin. So you could possibly ‘save’ $750 by buying 500 coins as opposed to 1.
Buying silver bars is one of the best ways to get silver. You will always get more bang for your buck when buying bars because the cost to make them is much cheaper than silver coins. The bigger bar you get the lower the premium over spot.
These bars are not backed by the government like coins, and are made by private mints. Because you can buy bulk silver in bars, there is a higher chance of counterfeits circulating in the market. Back in the 1980s when the price skyrocketed up to $49, lots of 100oz fake silver bars begin popping up, and there are still some in circulation today. What the fraudsters would do is drill several holes into the bars, and then fill them with lead/tin to get an equal weight and sometimes specific gravity of silver… very tricky. Here is a sample of one below courtesy of about.ag
1 oz silver bars, are a great way to get started with your silver stacking. Cheaper than silver coins, you can buy them for a reasonable amount over spot.
10 oz silver bars are another great entry product for the beginner silver investor. These are my absolute favorite silver bullion product as they are fun to hold and stack. You will definitely want to grab 1-2 to have in your collection!
100 oz silver bars are probably the most common form of silver bar on the market. Possibly a bit too pricey for a small-time investor, they can be a bit bulky. These are the best form of silver to buy if you are looking to increase your ounces.
1,000 oz silver bars. The granddaddy of silver bars! At 1,000 ounces they weigh a shocking 68.5 pounds. However, most of these bars are not exactly 1,000 ounces. If you are looking to buy cheap silver, this is it. Often times you can get them for just $.49 over spot! Not recommended if you have a bad back!
The most popular silver bars come from names such as Engelhard, Johnson Matthey, Sunshine Mint, OPM Metals, and Geiger.
Generic Silver Rounds
This type of silver is usually 99.9% pure and normally range from 1 to 10 ounces. To the right is the famous 1 oz Engelhard silver round “The American Prospector”. Although similar to coins, these are not backed by any government and are struck by private mints. While less expensive than bullion coins, they are still pricier than your silver bars. Some of the most popular private mints in the US that produce generic rounds are:
If you like coins but don’t want to pay the high premiums for bullion, generic rounds are a way to buy cheap silver. These are also a neat way to pick some cool looking coins if you are into design or art.
Silver rounds are also popular for commemorate coins and are widely used as gifts. For this reason coin collectors will also gravitate to buying silver rounds because of their uniqueness and wide variety. If you just want silver for silver, just stick to the more popular ones and you should be OK when you want to sell them back or trade.
Junk silver refers to US coins minted on 1964 or before that have no numismatic value above the silver content. Despite its name, junk silver can actually be a really great investment, that’s because there is very little premium on the coins since they have no numismatic value and are mostly in fair condition.
These coins will also always be legal tender no matter what happens to the price of silver, and are more recognizable than generic silver rounds from private mints. Almost all junk silver is 90% silver, with the exception of Kennedy half-dollars (40%) and Jefferson wartime nickels (35%).
Many survivalists and consider this essential on a preppers checklist & believe this is the best form of silver to own, as it would be very easy to barter with. You can get the current value of your coins, using our US Silver Coin Melt Value Calculator. In the US junk silver refers to: dollars, half dollars, quarters, and dimes minted in 1964 or before. Below is a list of silver that is considered ‘junk’ in the US:
Liberty Head: Minted 1892-1916 (90% silver)
Winged Liberty Head ‘Mercury’: Minted 1916-45 (90% silver)
Roosevelt: Minted 1946-64 (90% silver)
Liberty Head: Minted 1892-1916 (90% silver)
Standing Liberty: Minted 1916-30 (90% silver)
Washington: Minted 1934-64 (90% silver)
Liberty Head: Minted 1892-1915 (90% silver)
Walking Liberty: Minted 1916-47 (90% silver)
Franklin: Minted 1948-63 (90% silver)
Kennedy: Minted 1964 (90% silver)
Kennedy: Minted 1965-70 (40% silver)
Morgan Dollar: Minted 1878-1921 (90% silver)
Peace Dollar: Minted 1921-28,34,35 (90% silver)
This type of silver is often bought from dealers in bags with Face-Value of $1,000, $500, $100, and $50. Of course, you can always buy them individually as well.
$1,000 face-value of 90% junk silver weighs approximately 55 pounds and is equal to 715 ounces of silver. If you bought a bag of mercury dimes with a face value of $1,000, you would be buying 715 ounces of silver in the form of 90% mercury dimes.
$500 face-value of 90% junk silver weighs about 27 pounds and contains 357.5 ounces of silver. Now, keep in mind that this bag will not cost you $500 but (price of silver x 357.5 oz), which with a sample price of $20 an ounce will run you $7150!
$100 face-value of 90% junk silver weighs about 5.5 pounds and contains 71.5 ounces of silver. This bag will set you back $1430 if you assume a silver spot price of $20 an ounce.
$50 face-value of 90% junk silver weighs about 2.7 pounds and contains 35.75 ounces of silver. This is a great way to get your feet wet with this kind of silver. At $20 an ounce this will cost you $715.
Are you a stacker or a collector? If you’re not interested in the number of ounces you own you are most likely a collector or possible numismatist. Numismatics is the proper term for coin collecting.
Having grades such as MS 70, these coins can easily sell for 10 even 100’s of times the silver value of the coin. There are countless stories of individuals who got duped into buying these ‘investment coins’ only to find out later their true worth. Late night infomercials and radio advertisements are often used to lure people in. Once on the phone, high-pressure sales tactics will be used to steer people to buy.
While numismatic coins are a poor investment for the average silver stacker, they are a fun & interesting life-long hobby for others. The numismatic world has its own experts, grading services, coin shows, and even live bidding auctions. Take a look at some of the coins on sell at Heritage Auction. Just like fine art, if you don’t have experience and knowledge in this industry it’s best you stay away. You don’t want to be the ‘silver investor’ who paid $500 for just 1 silver oz coin.
Our buying silver guide wouldn’t be complete without including “paper silver”. By paper silver we are referring to any silver that is not real or physical such as pooled accounts, silver ETFs, stocks, or futures contracts. Don’t be deceived if you think you own silver if it is just on paper. As a silver investor you never want to hear these words: Sorry delivery is not possible.
Here is a interview with Bill Cramer who had 5,000 ounces of silver in a pooled account. When he asked to take delivery of his silver, he was told that is not possible:
The most common form of paper silver is a pooled account, popular at large banks and investment firms. Your investment in silver will be ‘pooled’ with others, and like deposits at a bank, there is usually just enough physical silver in storage to cover expected withdrawals and not 100%. Other popular ways to invest are silver ETF’s traded on the exchanges which track the silver price such as iShares SLV or ProShares Ultra Silver AGQ.
A word on private storage: Many private firms as well as reputable bullion dealers now offer private storage of precious metals in vaults for convenience and ease. While silver can be bulky, one of the most attractive things about buying silver is there is no counter-party risk. Allowing a private company to store your metal opens you up to such risk. These are just like any other business, mismanagement, fraud, lawsuits, greed etc, can always be a threat. If bankruptcy were to occur you will most likely never see your silver, so be responsible and take charge of your own wealth and money!
How to Buy Silver
Now that we’ve covered the different kinds of silver you to buy, let’s take a look at how to buy silver online or in person. Before you hand over any money, you will always want to be armed with the live spot price of silver to give you an idea how much premium you will be paying. You can get the live spot price at the top of this site on the sidebar.
Example if silver has a huge spike up or down intraday you could be paying more than you should be, or less for that matter. Take that smart phone with you if you’re out and about. If this is your first time to buy silver, we highly recommend sticking with either local coin shops or a reputable dealer. (If you need to sell your silver, take a look at the article Where to sell silver for cash.)
Local Coin Shops
If you’re looking for physical silver, we always suggest you first check your local coin shop and get to know the business owners behind them. Many times you can get a working relationship with them and they’ll be happy to notify you when particular silver products you are looking for come in. There is also something comfortable when doing business face-to-face and paying in cash.
Buying at a local shop was also save you on shipping costs as well. CoinSheet Links has a large directory of coin dealers and numismatic shops. You can also just go to google and search for ‘silver coins’ and it will most likely give you a list of the local coin shops in your area:
Apart from coin shops, a reputable dealer can be a quick and painless way to pick up some silver. You will probably be paying a slightly higher premium due to their customer support & shipping, but you can rest well knowing they will fully stand behind their product. While there are countless sites to buy silver online, we’d recommend the following three:
The nice thing about buying silver online is you can always compare prices and how much premium they are charging. Be sure to check our gold and silver dealer reviews. If you have experience with any of them please leave feedback, it will greatly benefit the precious metal community! Questions to consider when buying silver from dealers:
- Is it in stock and ready to ship?
- What is the estimated delivery time?
- Are they willing to buy back your silver?
- Do they have phone support?
- How much is the shipping cost?
- Are there fees for credit card, wires, checks?
- Are there price tiers for buying in bulk vs. buying 1?
- What condition will the coins/bars/bullion be in?
While mainly for the collector or numismatist, coins shows can also be a good way to buy silver. Many booths will have junk silver, silver bullion, and silver bars apart from all the numismatic coins. While it can be a little intimidating going to your first show, once you get talking to the owners, many are really friendly and quite helpful. To find coins shows in your city, just go to coin shows and click on your state, most charge a small entrance fee. Very simple.
Ebay or Craigslist
While it is not recommended to buy silver off of these sites, many people do successfully. If you are a first-time buyer you should stay away. But do know there are also some great deals to be had here. You will want to read my fake silver coins guide on how you can spot counterfeits before you do so. It has a section on ebay and craigslist.
Yes, we have to give a shout out to Reddit. They have a section r/Pmsforsale that’s become pretty popular for buying and selling silver. This is for active Redditors who understand the community, if you’re not then it maybe best to purchase another way. Just click on the Alien below to visit r/Pmsforsale:
Garage Sales / Flea Markets
You can really find some hidden gems if you’re willing to getup early and drive around town. Very few people have up-to-date prices on silver and many will sell their old coin collections or just junk silver passed down from their grandparents. Gsalr.com is an awesome resource to find the next sale, just enter your zip code and start your engines!
Mostly for junk silver, since these stores most likely don’t update their prices every day, you can usually find a deal or two if they carry any silver. If silver has had an awesome week, head to your local antique store. Peace and Morgan Dollars may abound!
Coin Roll Hunting
Ever since silver has rallied off its lows back in 2002, coin roll hunting has become more and more popular as a side hobby to find junk silver. The idea is simple, go to your local bank or credit union and ask for rolled dollars, half-dollars, quarters or dimes (many businesses need loose change). Then search through the rolls for pre-1964 coins and ka-ching you’ve found silver!
People will also do this for collectible coins as well hoping to find that rare mint error coin. Be warned this can be very tedious, buying $50 in dimes, and having not 1 silver coin in them can be frustrating. However, when you do find silver, it’s such a great feeling!
Whew! That was a long post, hopefully you can take something away from it. Please let us know what you think and comment below, we would love to hear from you!