This is a guest post by Mike W
Investing in silver can be an intimidating process to new buyers, but once you understand the basics, it is actually quite simple. The aim of this article is to educate beginner investors on the nuances of silver, as well as to explain the best ways to accumulate silver without overpaying or getting scammed.
I have broken the article into three portions: first I discuss the various forms of silver that are commonly purchased as investments, then I discuss the best ways to buy physical silver, and I close with the best methods for storing and protecting your silver.
Forms of Silver
There are four primarily traded forms of physical silver: silver bars, silver coins, silver rounds, and junk silver. I will explain the advantages of each form below:
Silver bars are rectangular shaped pieces of metal that are comprised of .999 fine silver. Bars regularly come in 1 oz, 5 oz, 10 oz, and 100 oz weights, and are produced by private as well as government mints.
Some of the most well-known producers of silver bars are Johnson Matthey, Engelhard, SilverTowne, NTR Metals, Highland, Northwestern Territorial Mint, and PAMP Suisse. Each manufacturer offers their own designs, and certain producers like Johnson Matthey or Engelhard often command higher premiums over spot than lesser-known companies like NTR or SilverTowne.
Advantages of Silver Bars
· Due to the fact that any private mint can produce silver bars, they typically carry lesser premiums over spot than silver coins, which can only be produced by government mints.
· Larger bars, such as 10 oz or 100 oz sizes, carry less of a manufacturing premium over spot than smaller bars or rounds, so they are often the cheapest way to purchase .999 fine physical silver.
· Silver bars of the same size and brand are easily stacked, making storage simple and efficient.
Silver coins are circular pieces of metal that are composed of .999 fine, or sometimes .9999 fine silver. Coins virtually always come in 1 oz weights, and are only produced by government mints. The majority of silver coins also carry a face value as currency in their country of production.
Two of the most popular silver coins in North American are the American Silver Eagle (.999 fine, 1 troy oz. $1 USD face value) and the Canadian Silver Maple Leaf (.9999 fine, 1 troy oz, $5 CAD face value). Both of these coins carry a higher premium over spot than identically sized silver bars or rounds, which is due to their additional value as collectibles/official government coins.
Silver coins can be purchased from dealers individually, in tubes, or in Monster Boxes. American Silver Eagles come in tubes of 20 coins or in Monster Boxes of 500 coins, while Canadian Silver Maple Leafs come in tubes of 25 coins or in Monster Boxes of 500 coins.
By purchasing sealed tubes or Monster Boxes from dealers, you can rest assured that your coins are in the exact same condition as when they left the US or Royal Canadian Mints. Most dealers also offer a price break when you buy in tube or Monster Box sized lots.
Advantages of Silver Coins
· Silver coins are extremely well-recognized and liquid, especially within the country in which they were produced.
· By purchasing sealed tubes or Monster Boxes, you receive brand new coins that are easily stored and maintained.
· Although silver coins carry a premium over bars, rounds, or junk silver, you can often recoup that premium in the resale market. For example, we sell 2012 American Silver Eagles as low as $2.45/oz over spot, and buy them back at $1.90/oz over spot.
Silver rounds appear almost the same as silver coins, with the main difference being that any private mint can produce silver rounds, while only government mints can produce silver coins. This distinction allows a lower fabrication premium for rounds than silver coins.
Companies including NTR Metals, Northwestern Territorial Mint, Sunshine Minting, Engelhard, and virtually any other private mint commonly produce silver rounds. Rounds typically come in sealed tubes of 20 pieces, and almost always weigh 1 troy ounce and are composed of .999 fine silver. Smaller and larger rounds are available, but the vast majority you will find will be of the 1 troy ounce size.
Advantages of Silver Rounds
· Just like silver bars, rounds often carry the lowest premiums over spot price for .999 fine bullion.
· Rounds come in sealed tubes of 20, making them very easy to store and protect.
· Buying large lots of 1 oz silver rounds will be nearly as cheap as buying larger 100 oz silver bars, while still offering the divisibility of smaller sized pieces.
Junk silver refers to pre-1965 US coins including nickels, dimes, quarters, half-dollars, and dollars, which are composed of either 90% or 40% silver. These coins are typically sold in bags with face values of $100, $250, $500, or $1,000.
Each coin’s face value is directly proportional to the coin’s silver content, so for example two 90% quarters would contain the exact same amount of silver as one 90% half-dollar or five 90% dimes. Because of this, most dealers offer mixed bags of 90% or 40% coins, which will contain a variety of coins totaling $1,000 in face value.
Unlike bars, coins, or rounds, junk silver is not stamped with a silver weight or purity, which does make it harder to understand/value for someone who isn’t “silver savvy”.
Advantages of Junk Silver
· Junk silver always offers the lowest premium over spot as compared to bars, rounds, or coins. This is due to the fact that junk silver is not classified as bullion due to its 90% or 40% silver content, as well as the fact that the dealers don’t have to melt or refine the coins to sell them.
· Junk silver is the easiest form of silver to “piece out”, as you will have thousands of individual pieces per $1,000 face value bag. This makes junk silver a useful bargaining tool in a “SHTF” situation.
Where to Buy
Now that we’ve covered the four common forms of physical silver, let’s discuss where to buy these products. When searching out physical silver, you have two primary options: buying online or buying in person.
Buying online is primarily accomplished by locating an online precious metals dealer and placing a buy order. Other methods do exist, such as buying via eBay or buying in person-to-person transactions via forums, but I would recommend dealing with a reputable company as opposed to an individual you found online.
When evaluating bullion dealers, there are a few key criteria you should consider:
· Reputation – in my opinion, this is most important. There is no benefit to finding an extremely low price on silver if the dealer takes forever to ship (or never even ships) your products. I would recommend doing independent research on the website by Googling terms like “(website) complaints” or “(website) reviews”. Evaluating other customers’ online feedback is the best way to get a feel for how the company conducts their business, and if the company is a complete scam you will find tons of negative reviews online immediately.
· Product Selection – some dealers boost their margins by only offering highly priced silver products such as Proof coins or brand name bars, which results in the customers paying an extremely high markup over spot. Make sure to shop around and never pay anything more than a few bucks over spot no matter what product you are buying.
· Pricing – the easiest way to compare pricing is to look at several online dealer’s sell prices for the exact same products. Pricing can vary quite a bit depending on brand, condition, etc, so make sure you are comparing the same exact products dealer vs. dealer. Another aspect of pricing is to evaluate final, out the door costs, which may include shipping, insurance, commission, etc. Many companies will list very low pricing, but by the time you pay all the other fees the deal isn’t so good.
· Read the Terms – always make sure to review a dealer’s terms and conditions before you make a purchase. Virtually every online dealer will have stiff cancellation fees as well as Market Loss fees, which you want to be aware of before placing an order. You should also be very clear on how long you have to remit payment, as late payments will almost always be refused. Also make sure the dealer ships insured and with Signature confirmation to assure that your product doesn’t end up in the wrong hands.
· Make a Call – I suggest placing your first order with any company over the phone as opposed to online. It always helps to have a personal contact at the company, and by dealing over the phone you can clarify any questions or concerns you may have.
How to Store
Once the silver is in your hands, you then need to store and protect it from theft or damage. Some investors choose to use safety deposit boxes at a bank, but the preferred method is to keep the silver on hand in case of emergency. When storing silver at home, there are two rules: discretion and protection.
As far as discretion goes, you shouldn’t tell anyone about the valuable metal you are storing at your house. It may be tempting to show off your shiny new purchases, but every person you tell becomes a liability not only to rob you, but also to tell others about your valuables.
For protection, I recommend purchasing a safe that is fireproof. Most consumer safes can be bolted to the floor or wall, which adds a further layer of protection against theft. By purchasing a decent safe, bolting it to the wall, and never telling anyone what you are holding, you put yourself in a safe position against theft or damage to your metals.
M.D. Adds: Also another useful resource is www.goldshark.com, it let’s you compare pricing on all sorts of silver products from different dealers. And www.buysilver.net – it is an informational site that covers a lot about buying physical silver.
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