Are US Silver Eagles a Good Investment?

July 31, 2019

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Silver Eagles Are Part of a Recurring Dilemma for Silver Investors

We always ask ourselves how much of a premium over spot we should pay for any particular investment? Living in Canada and the United States, the Royal Canadian Mint's 1 oz Silver Maple and the US Mint's 1 oz Silver Eagle are legion. Earlier, we said that many Royal Canadian Mint coins are a bad investment compared to bullion. Now we want to go after a harder question. So are US Silver Eagles a good investment?

Are US Silver Eagles a Good Investment Because They Are Made Better Than Comparable Coins?

Since 1986, the United States Mint has been releasing the 1 oz silver eagle coin. The coin's precious metal content is backed by the full weight of the US Mint regardless of where it is produced. At the time of writing - and likely for the foreseeable future - the coin has only been struck at the Philadelphia Mint, San Francisco Mint, and West Point Mint (New York).

As the de facto US Silver coin, it is made to highly exacting standards using 99.9% of higher purity silver. Despite being struck in the United States, it is not even guaranteed to be North American-mined silver. Moreover, despite meeting all COMEX and LBMA Good Delivery rules, it's .999 fine silver content is on the low end. That is to say, compared to the Royal Canadian Mint's 99.99% or higher 1 oz Silver Maple, it falls behind. Furthermore, the Silver Eagle lacks some of the security features other coins have recently developed.

Does it matter? For discerning silver investors, this really doesn't matter too much. But then, it does. If you want to buy a 1 oz US Silver Eagle, you are going to pay around 25% more of a premium over spot than a 1 oz Canadian Silver Maple. What about the face value of the coin? To be frank, the USD $1.00 face value falls behind the CAD $5.00 that the Silver Maple holds. Moreover, even the Austrian Mint's 1 oz Silver Philharmonic holds a higher value at EUR 1.00.

Are US Silver Eagles a Good Investment on Other Grounds?

Getting to the bottom of are us silver eagles a good investment really means looking at silver itself. Demand for silver comes from a variety of sources. From industry to jewellery manufacturing, and investments. Silver's scarcity combined with the lack of other elements sharing its natural properties and psychological appeal makes silver as valuable as it is.

While not as scarce as gold, silver is often seen as a more strategic play. Principally, that's because its value per ounce has so much room to grow. At the time of writing, an unusually high gold-silver ratio prevails and could lead to at least a 150% long-term increase. Many investors find that in focusing on the long-term, you can take advantage of short-term volatility among investor. Nevertheless, in spite of  volatility, the long-term value of precious metals has risen pretty steadily. A key measure has been their ability to stay extremely liquid while protecting against inflation. Many people attribute this to precious metals' function as "real money."

So are US Silver Eagles a Good Investment? Yes. As a Hedge Against Inflation and Market Crashes.

Especially for US investors looking for an easy way to liquidate small amounts of silver at a time, US Silver Eagles can be a great investment. The main principle behind this is that by virtue of their national recognition, you can easily sell US Silver Eagles at close to spot anytime. Here's the catch: you could do the same or better with Silver Maples from the Royal Canadian Mint.

Most silver is sold in bar, coin or "round" form. The truth of the matter is that most committed silver investors prefer to go for Good Delivery silver bullion at the cheapest possible premiums over spot. And that usually means buying silver bars. That's doubly true if they are hoping to make impressive short-term gains by timing the market, i.e. buying low and selling high. You just can't ignore the reality that little costs add up and eat at your returns. Over time, small cost-saving make a huge difference because of the power of compounded returns.

Have you recently spent time wondering if you're prepared for a market crash? Precious metals act like insurance and US Silver Eagles are a great insurance policy. The only thing is you are paying more than you really need to. While reliable and easy to transport, these coins are some of the more widely faked silver bullion. So for just about every pro there is a corresponding con.

What Makes US Mint Silver Eagles so Popular and When Should You Buy One?

The US Mint's Silver Eagle is by far the most popular silver coin in the United States. In 2016, for instance, just over 37.7 million ounces were sold. In-fact, investors across the world subscribe to buy the famous Silver Eagle. Often, this may be because local bullion coins are doubted in purity or command skepticism at the marketplace for a lack of demand. Silver Eagles are the only official investment-grade silver coins in the United States. As such, they’re likely to be accepted by major accounts across the globe.

While they can also be used to fund Individual Retirement Accounts (IRAs), as well as similar accounts in several countries, this in itself is not enough to constitute their success. I would argue, rather, that a market premium is added for sentimental reasons. These coins are just seen as better even when they are not. Collectors even pay top-dollar for several rare editions that sell at a high premium to these coins' metal value.

According to some guides, for example, a 1996 coin could sell for $655 when silver prices are between $15-$20 an ounce. Other popular varieties are the 2008 & 2011-S burnished finish.

Despite All This, I Wouldn't Buy Too Many US Mint Silver Eagles Without Major Discount to Retail Premiums

Moreover, because silver prices are so volatile, keep a close eye on the spot price when buying these coins. You can make a decent short-term return by buying at a low price. However, if you buy poorly, your returns will take much longer to add up. That is not to say you should time the market, just keep your eyes open to what's going on.

If you’re not comfortable with the volatile nature of the silver market, consider gold as a more conventional hedge against inflation. Traditionally less volatile,  it is easy to transport and store, often at much cheaper rates than silver. The reason being that you’ll get less coin for your dollar. Nevertheless, be sure to never commit funds you can't afford to lose.



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