A Beginner's Guide to Buying Physical Silver

    Text size
Author Image for William Patalon III

We get deluged with questions here at Private Briefing. And it's no surprise to me that the bulk of them are excellent queries. We answer them in different ways ... some by writing back to the subscriber ... and some as secondary topics in the daily column.

Many of your questions - like the dozens of requests we recently received about graphene - lead to actual recommendations or even special reports. Other queries will form the basis of "roundup-style" Q&As with our band of experts.

Every once in a while, however, we'll get a question that's so good, or that's so representative of other queries that we're getting, that it deserves a standalone answer.

And that's precisely the kind of question that we recently received about buying physical silver from Andy F.  It was on a topic so popular I decided to share it with our Money Morning readers as well.

Andy F. writes:

    "Bill, I know this is a very basic question, but you have me interested in silver. My question is ... what kind of silver? I like the 999.9% rounds and bars, but is it better to purchase coins with 40% to 90% content?

    Then, if I go that route, do I buy cull, junk or do I need to learn collector values?

    I really like the simplicity of the 999.9%, as I have little interest in collecting unless the value difference is there. I also like the liquidity and simplicity of selling when I am ready. I am enjoying your work, thanks!" - Andy F.

Although it is a basic question Andy, it's also a very good one that we believe a lot of our other subscribers will be interested in.

I also turned to our resident mining, natural-resources and commodities expert Peter Krauth, editor of the highly successful Real Asset Returns advisory service, and here’s what he had to say... 

"Bill, for investors looking to buy physical silver as an asset-protection-and-investment strategy, there are definitely some things to consider," Peter began. "First, I'd recommend staying away from collector's silver. That's a much more complex market, and you need to know it well to ensure you don't overpay for something. That takes a lot of research and time, and I don't think it's a necessary way to participate in the silver market."

That brings us to bars, coins or "junk" silver. And Peter says that your choice there will be determined by how much money you're actually looking to commit to your silver holdings.

"If you are only buying a small amount, I'd recommend silver coins or junk silver," he said. "Junk silver is typically sold in bags of at least $100 (USD) face value, which contain about 71.5 ounces of silver. The most commonly collected junk-silver U.S. coins were minted before 1965."

Those coins include:

  • Morgan and Peace dollars.
  • Liberty Head "Barber," Walking Liberty, Franklin and Kennedy half-dollar coins.
  • Liberty Head "Barber," Standing Liberty and Washington quarters.
  • Liberty Head "Barber," Winged Liberty Head "Mercury" and Roosevelt dimes.
  • And Jefferson "Wartime" nickels.

"As you can see from this list, the small denominations are part of what's so intriguing," Peter said. "If you believe that your coins may be used to pay for things in the future, junk silver would be perfect for that.  The $100 Face Value Bags currently sell for about $2,500, but the premium over the silver price is pretty low."

If that's too large an outlay for one item, Peter suggests you consider silver coins. Here you can buy as little as one coin for about $33 right now.  Some of the most recognized are the American Eagle Silver coins and the Canadian Maple Leaf silver coins.

But, as Peter mentioned, there's an intriguing twist here.

"The Eagles, however, are 99.9% pure and often cost a little more than the Maple Leafs, which are 99.99% pure," Peter said. "So each Maple Leaf actually gives you a little more silver for an often lower price."

If you want to buy silver at the lowest possible premium to the spot price, then have a look at silver bars.  You can typically find them in the following sizes: one ounce, 10 ounces, 50 ounces and 100 ounces.

"What you have to remember here is that, the larger the bar, the lower the fabrication-cost per contained ounce - and therefore the smaller the premium over the spot price of silver," Peter said.

Some dealers to take a look at include the American Precious Metals Exchange (APMEX), or Asset Strategies International (ASI). ASI is located in Rockville, Maryland, right down the road from our offices here in Baltimore. I've included some of their comments and advice in earlier Private Briefing columns, and have dealt with them on this basis often enough through the years to know that they're pretty nice folks.

Thanks for the great question, Andy.

We urge all of you to keep the questions coming. We welcome them. And, as you can see from this column and from the recent report on graphene, we do read and respond to what you send us.

And if you would like learn more about Private Briefing and receive a free two-week trial that includes our new report "The Seven Investments You Have to Make in 2013," click here.

Related Articles and News:

About the Author

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish… and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.

... Read full bio