Junk silver coins are usually considered a cheap way of getting into precious metals. But are they the best way to buy silver cheap? This article is going to delve into how to buy silver cheap and what you can do to avoid high premiums. Let's start with a practical point; you should almost never buy silver or precious metals from the post office.
Perhaps you have been paying attention to the standard gold/silver ratio between the two precious metals has usually been close to 15:1. However, as Leland Wilkins points out, you may have noticed the price ratio has exploded above 75:1. You could argue that this means the price of silver is bound to go up sooner or later, in relation to gold. On the other hand, perhaps you are interested in pursuing your existing investments in a more cost-efficient manner.
No matter why you are asking, learning how to buy silver cheap is an invaluable tool to better buying. Now, knowing how to buy silver cheap is not the same as being able to buy silver under spot. My job in this article is not to speculate about market developments. Rather, I want to show you how to buy silver better and cheaper. What does that mean, though? Well, you may know that Silver has a wide variety of industrial uses.
The majority of use is in electronics, followed closely by coins and metals. Perhaps surprising to some of us is the preponderance of silver is in the solar industry. Given the recent surge of popularity in solar panels (in Canada and the United States), this may even positively affect the price of silver... I digress. The point is that this article is meant to help collectors and investors buying, holding, and even trading fine Silver or other assets for their intrinsic silver value.
Coins can be one of the most expensive or cheapest ways to buy silver. For example, if you go after collectible coins straight from the Mint [read: any mint], you are going to pay an arm and a leg of the spot price of the metal. Why? Well, it costs money to design, manufacture, and package (and there's usually A LOT of packaging) those coins.
That's before you add in the costs of shipping and insurance. The real issue is that these coins are generally made in production runs too small to make the coins cheap. Moreover, the amount of marketing dollars behind them are terrific.
Coins are part of figuring out how to buy silver cheap for two reasons. You can either go to the other side of what Mints produce, i.e. circulating coinage, or you buy Silver coins. The former is an example of effectively buying up junk silver. In Canada, junk silver is essentially comprised of coins made before 1967 by the Canadian Government, with some 1968s included, and generally ranking around 80% pure.
In the USA, a good "pre-1964" example is the 1963 Silver Franklin half dollar, worth over 1000% of its 50-cent face value. The coin is comprised of 90% silver and approximately 10% copper. Some real- deal collectors look past these coins because they are too far from the 99.9%+ fine grade ascribed to bullion by the LBMA.
There are two things to do when you can't find old coins cheap. First, you can look for scrap silver - another kind of "junk" - and try to buy that well below the spot value. Unstylish, broken, or just unwanted silver jewellery can be a great resource. So much jewelry has been made over the years that no most of it has little sentimental value. Just think of all those rings, bracelets, and earrings found at home and at vintage shops and markets.
Many avid silver collectors go around to these stores and find whatever silver items they can. Some keep them as is, while other refine them down to solid silver, and then have the fine-ness calculated or tested.
The next best thing to is to understand how to buy silver cheap is buying bullion.
How so? Well, if you go to the most cost-effective bullion, you'll find that the premiums can be very low over spot. At this point it is important to leave coins behind. While you can buy silver coins cheap, you can buy silver round cheaper. The only thing much cheaper than rounds would be kilogram bars and larger, i.e. 100 oz silver bars. While the difference between 1 oz of rounds/bars vs 1 oz of coins may not seem like a lot (i.e. a dollar) - you have to consider the long term. Most believers of silver and bullion "stackers" intend to do so for many years - so a dollar here and there, over the course of years and thousands of ounces really does make a huge difference.
Some example of cheaper silver bullion products would be anything 10 oz or greater - as this size is when the premiums tend to start decreasing.
If you wish to stick with a Canadian brand and a world renowned piece of silver - you can stick with the 10 oz Royal Canadian Mint Silver Bar or even the 100 oz Silver Bar from the Royal Canadian Mint (which both sport a fineness of .9999). Be careful though, because there are still higher premium 10 oz products, like the Royal Canadian Mint 10 oz Magnificent Maple- which is a coin.
If you're not picky about the mint and your focus is more on buying as close to the spot price as possible (which is what we recommend), you can look into other large options such as a 1 kilogram silver bar from PAMP suisse or 100 oz bars from any reputable mint, such as PAMP, Jonhson Matthey or Asahi.
So far, we've talked about buying coin and jewellery "junk," and buying larger products, i.e. bulk/volume but why all the focus on cheap? A fundamental premise of good investing is buying well. If you are buying junk, you need to make sure to buy it extra cheap. If you are buying higher quality products, it can be okay to pay a fair price.
Focus on buying heap for two reasons. First, the cheaper you buy, the greater your margin of safety against price movements in relation to purchase price. Second, you need to buy cheap because that's how you can really add to your returns. I am going to finish where I started. If you are buying something for silver value, don't waste your time (and money) on novelty features with little or no cash value.