How to Buy Silver Without the 35% Dealer Premium

Silver may be trading near a five-year low, but that hasn't hurt demand. Quite the opposite, in fact.

Investors are buying silver coins at a robust pace.

As many as 5 million one-ounce American Silver Eagles go out the U.S. Mint's doors during a good month. But on Nov. 5 the Mint ran out of inventory. The Mint suspended sales after selling 2 million ounces in just two hours. 

October U.S. Mint sales were 5.79 million ounces, up 40% over the previous month, the highest level since January 2013.

With coin sales near record highs, supplies are drying up, and premiums are soaring. Buying Silver Eagles right now from a coin dealer will run you about $20.50 each... if you can find them.

A quick search of eBay, however, shows Silver Eagles selling at $22. With spot silver at $16.30, that's a $5.70 premium, or an astounding 35%.

Silver investors have turned elsewhere to find better deals. Both Canadian Silver Maple Leaf coins and Austrian Silver Vienna Philharmonics have lower premiums than American Silver Eagles - but they won't stay that way.

"The premiums of Silver Maple Leaf bullion are going to rise soon, because dealers cannot get their hands on the coins," said Scott Spitzer, chief operating officer at Manfra Tordella & Brookes, one of the largest U.S. coin wholesalers in New York.

But there's still another way to invest in silver without the costly premium. Read on to find out how to buy silver at a premium that's 95% less than the going market rate.

How to Buy Silver at the Best Price

Many investors have taken refuge from higher premiums in silver exchange-traded funds (ETFs).

In fact, retail investors have pushed the iShares Silver Trust (ETF)'s (NYSE Arca: SLV) holdings up to 345 million ounces, the most in more than three years, according to The Wall Street Journal. This is despite the fact that share prices are down 17% so far this year.
how to buy silver
But the turnoff here for many silver buyers is that ETFs don't offer physical silver ownership. These silver buyers want to hold coins and bars.

Here's the better option for silver buyers...

The Sprott Physical Silver Trust (NYSE Arca: PSLV) holds silver bullion that is fully allocated and stored at a secure third-party location in Canada, subject to periodic inspection and audits.

Right now, PSLV trades at a 3.71% premium to net asset value. That translates to about $16.90 per ounce of silver versus $22 for a Silver Eagle, providing a savings of $5.10 per ounce - a 95% reduction in premium.

Here are three more reasons why PSLV is better than other silver ETFs:

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  • No "Middle Man": Unlike most silver ETFs, no financial institution stands between investors and the physical silver. This means no risk of financial loss in the event of bankruptcy or nationalization of the financial institution.
  • Lower Taxes: U.S. investors who hold shares for at least a year pay capital gains tax at a rate of only 15% versus the 28% rate for most precious metals ETFs and physical silver coins.
  • Ability to Trade in Shares for Physical Silver: Investors who hold a required minimum amount can redeem shares for physical silver bullion on a monthly basis. Silver bars can be delivered almost anywhere in the world.

Given the astounding recent demand for silver, this is one way you'll be getting a lot more for your money, and getting it to work for you - instead of the other way around.

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