Buying Silver

Let’s take a look at silver bullion:

On the whole, silver bullion, whether in 1oz., 100oz. or 1000oz. bars is pretty much directly tied to current silver prices. This means if the spot price for silver drops some 15% as it did over a 2 day period in April, 2013, the value of your silver drops as well. It doesn’t much matter if your bar has the basic hallmarks for purity and actual weight or if your bars were made by a mint or a private firm, silver bullion is only going to be worth what the silver market says it is. If you’re looking at silver from a very strict investment standpoint, this could well be the answer you’re looking for as the buy-in is relatively inexpensive and storage and transport is fairly straightforward.

However, when you take a look at silver coinage, especially coins that were not designed to be a “replacement” for silver bullion, the investment angle takes on a whole new perspective. When you take a look at coins such as the Morgan silver dollars and half dollars, Mercury dimes, Canadian silver coins and a variety of other silver coins from other countries, the investment angle shifts from a strict silver value to the age of the coin, the rarity of the coin and the condition of the coin.

As an example, the current melt value for a common Morgan silver dollar in poor to fair condition is running right at $17 (give or take a few cents). This is based on current silver prices and the fact that a Morgan dollar is actually 90% silver. However, as a coin, a quick scan of eBay shows you’re not going to get one in pretty much any condition for less than $25. To complicate that even further, when you start looking at the rarity of the coin, especially when you’re trying to track down those with a CC (Carson City) mint mark, the price jumps dramatically with some coins in “perfect” condition running over $800 each.

Overall Bullion Vs. Coins

Granted, the buy-in for coins will be higher than purchasing straight bullion bars. However, since coins are valued by far more factors that strictly spot silver market prices, your money is actually somewhat safer since coin prices do not fluctuate nearly as significantly as metal prices. This not only gives you a safer investment but, as most trends show, coin prices rarely drop. As a matter of fact, with the exception of price spikes during the mid-1980s, the price for a MS65 Morgan silver dollar has remained pretty much in the $100-150 range, especially over the last decade. If you’re looking for a great way to conserve capital while keeping a solid investment portfolio, silver coinage definitely has a much more solid platform than bullion.

Silver Bullion

Silver Bullion Options

When it comes to buying silver bullion, you have a few options available to you. While some involve actual physical ownership of silver in one format or another, a couple involve paper investments instead.

Here is a quick overview of the basic silver bullion options you have available

• Bars – Silver bullion bars are available in several different types and sizes. The most popular bar for collectors are the custom minted bars made by everyone from government mints to small private firms. Most often, these are 1 ounce bars and are a very inexpensive way to start investing in silver bullion. Also, bars that weigh 100 ounces and even 1000 ounces are available. Most of these usually only have a hallmark denoting purity and weight.
• Bullion Coins – Many government mints and private firms also produce silver coins designed to be used as an alternative to bar stock. In values from $1 to $50, these coins not only have a direct tie to spot silver bullion pricing but, in some cases as with commemorative coins, actually have value as coinage as well which improves the return on your investment. While not as compact as bar stock, coins have a bit more “back story” which gives coins a bit more value than straight bullion.
• Silver Options – This is a contract that gives the holder the right to purchase a certain amount of silver at a fixed price in the future. The holder can opt not to purchase the silver if the price of silver doesn’t move the right way, conserving capital and only losing the value of the transaction fees and contract fees.
• Silver Futures – While similar to an options contract, this does obligate the trader to purchase silver within the timeframe of the futures contract. While this can work well if the price of silver has dropped and is trending higher, this can lock a trader into a high price if silver has moved higher.
• Silver ETF – This is a special type of stock which gives you ownership of silver without having to deal with the inconvenience of storing and handling silver bars or bar stock. Valuation for an ETF is strictly tied to spot prices and the overall idea is to give you the ability to own silver without any of the inconveniences.

Silver is a great way to enter the metals investment markets. However, as with any investment, there is a distinct possibility for loss, just as there is with actually earning a decent ROI. Unless you simply plan to buy in now and keep your investment for an extended period of time, you’ll want to pay close attention to the current silver market to ensure you do have positive gains.