note: first appeared in July 2015
That was a question that was posed by a website visitor not long ago. Thank you John for asking that question, I appreciate it. John wrote that question as a “comment” on the website lately. His question was pointed and deserved more than just a casual reply. Hence, this dedicated article to the subject of “junk” silver.
Junk silver is a misleading term, although popular and used to identify a whole class of precious metals available to folks. In my opinion there is essentially three types of silver available to the average person; 1) silver bullion, 2) investment grade silver, 3) junk silver. I will give a brief description of each that is my opinion:
- Silver bullion is silver that has been mined, refined and poured into some shape, usually bars. The mine or refiner will stamp into the bar the weight and the assayed purity. You can also call this type of silver “bulk silver” because of its form. The purity for silver bullion is supposed to be .999 but there is no guarantee of that beyond the reputation of the seller.
- Investment grade silver. These are the silver rounds available from well-known, well-respected mints with extremely good reputations. I include the government mints from the US, Canada, Australia, etc. There are some excellent private mints as well. But for the purpose of discussing “investment grade” silver I will stick with those that I know and trust. This type of silver can be used to fund an IRA. Which means that there has to be a high degree of trust and confidence in the purity and value of the silver. Most of the investment grade silver comes in the form of one ounce silver rounds. An example is the US Mint Walking Liberty coin (a.k.a. American Eagle). These are widely regarded as the number one silver round in the world in relation to investment grade silver. The US Mint also makes quarter ounce Walking Liberty rounds as well.
- Junk silver. This covers a wide range of options spanning over 100 years of US coins. As I said earlier, junk silver is a misnomer. The coins I am referring to are coins minted by the US government to be used as currency. Prior to 1964 the US government actually made coins that had value to them, not just some vague fiat currency that is used today. The coins I am speaking of were made from 90% silver, the other 10% was cooper.
So let me explain what I think of each in terms of buying for emergencies, disasters and for “grid-down.” I won’t go into explaining why or how much, I already wrote an article on that called “Silver & Gold…..Really?” < click here to read the article >
First up, bullion. Don’t buy it. Yup, just that simple. In my opinion you have no idea what you are buying. How do I know? I bought some. Remember, I don’t write about anything I haven’t done, tested and have personal experience with. I want to speak from personal experience. Back to silver bullion…
So a few years ago I bought several “bars” of silver, a couple of 30+ ounce bars and a smaller 10 ounce bar. I liked them, they looked kinda cool, not perfect, a little rustic looking. They had cool imprints on them stating the purity and exact weight in Troy ounces. I liked them.
Then I started thinking about it, how did I know that they were actually what they were represented to be. The guy I bought them from had a good reputation and I trusted him. But how did I know who he got these bars from had a good reputation? In other words, I didn’t know what I didn’t know. So I sold the silver bullion off. The guy I bought it from had a money back guarantee from me. He is totally satisfied with the deal he got, and so am I.
So bullion bottom line…I don’t feel that I would truly know what I was buying. In the worst case scenario, grid-down, I try to barter/buy with by silver bullion and it turns out to be virtually worthless. How so? Well, there was a case not long ago (2012) where gold bars had been drilled out and back-filled with tungsten. Gold and tungsten have almost identical density/weight. It supposedly fooled a number of people.
There is such a thing as silver plate. That is a process where they fuse a coating of silver over another metal. It appears to be silver, coz it is on the outside, but the inside is another, less valuable, metal. I have no idea how I would be able to tell the difference. So the bottom line for me is…I just don’t and won’t buy silver bullion. Nor would I accept it in a barter situation during grid-down.
Next up, investment grade silver. I love this stuff! Yeah, I am a little obsessive about investment grade silver, I just love Walking Liberty rounds. They are beautiful to look at and have a certain “feel” to them that just lets you know that you are holding something of value. But beyond the feel, the Walking Liberty rounds are recognized around the world as the most trusted silver coin. So you know you have one Troy ounce of 99.9% pure silver…and that guarantee is backed by the US government. Come on…don’t snicker.
It is easy to spot these coins and if you ever held one, you can easily spot another. Yes, they could be forgeries, but would be hard to copy the quality, weight and workmanship. To me that means that you would know exactly what you have and have confidence in that fact. And I think it would be virtually impossible to create fakes once the grid fell.
Come time for grid-down and you were trying to barter one away you would know you have true value. That in turn would give you confidence in your position and give you a strong hand in the deal. If you were the one who would receive the coin you would have a high level of confidence that you were receiving a high-quality, verifiable value for the goods/services your were trading to the other person. But there is a drawback, not all is perfect with the one ounce round.
Suppose your deal didn’t come out exactly to the ounce? I mean that you were trading 1 pound of wheat for 1-1/4 ounces of silver. The person buying your wheat has US Mint Walking Liberties and you are willing to take that in trade. So you get one, one-ounce coin, but what about the 1/4 ounce?
The two of you decide to use a cold chisel to cut a round, removing ¼ of it to finish the payment. Do you get exactly a quarter of the coin?
So there is the problem…coming up with exact amounts that are less than one-ounce increments. But, don’t worry there are some solutions to that as well. There is also “quarters” and they are exactly what they sound like, ¼ ounce versions of the Walking Liberty one-ounce coin. They are not made by the US Mint. They are made by the Highland mint and recognized just as highly as their larger 1oz cousin.
A very astute trader during grid-down might know that the US Mint didn’t produce the quarter ounce coin but they will still know it is just as reputable. Now you have the ability to get your purchase/barter to within 1/4oz of silver. If you are wanting to get even closer…there is a solution for that as well.
Finally, junk silver. I kind of like the term “junk silver” but the term is misapplied. There is nothing junk about silver. But, I don’t control the English language, I don’t even speak/write it so well, so I just go with the flow. As I was saying earlier, prior to 1964 US coins had a high silver content, 90% more or less. And that gave the coins themselves actual meaningful value. When the value of the silver outpaced the coin’s currency value, the government began to lower the value of the silver. Eventually the government eliminated all of the silver from the coin. They just hated the idea that United States currency actually had value in and of itself. Besides, they realized they could mint a 1oz, $1silver coin and sell it for 50 times what its currency value was.
So what about all those 90% silver coins that are still out there? Well, they are still out there for the most part. And they are valuable.. Now, remember they aren’t .999 pure silver like the invest grade silver I was talking about earlier. The junk silver coins are .900 pure silver, the rest is copper. And since the silver content is lower, the value is lower. Here is a chart of how much silver each coin contains –
Silver Dollar (pre-1936) : .77 – .78 (troy ounces)
Silver Half-Dollar (1964 and earlier) : .3617 (troy ounces)
Silver Quarter (1964 and earlier) : .1808 (troy ounces)
Silver Dime (1964 and earlier) : .0723 (troy ounces)
But, it is still silver!! You, as John did, might ask, “Why buy ‘junk silver’ when you can buy good silver?”
Valid question and there are a couple of reasons:
- Junk silver coins are already broken down in dollar, half-dollar, quarter and dime denominations. That makes it really easy to identify sub-1oz amounts. When the value of your trade/barter/deal needs a specific value in silver, using coins (junk silver) makes it easy to identify that exact amount. I can imagine that post-apocalypse folks identifying values in “silver dimes” as a standard valuation.
- Investment grade silver usually carries a hefty premium over the spot price of silver. However, junk silver coins can be bought below spot if you are watchful. What I am referring to is eBay. Search for eBay auctions that are for junk silver coins. Look for two kinds of auctions; 1) auctions that end at weird times like 2am on a Weds, 2) odd combinations of coins like 2 quarters, 10 dimes and a half-dollar. These auctions are often time passed over by the folks trying to scoop up larger quantities and who are a little more professional in their approach to buying silver. The “odd time” eliminates a lot of the folks that want to bid right at the end to avoid driving the price up. And that should be a great hint for you as well; wait until the very last couple of seconds before submitting your bid. That avoids running up the bids. But make sure you submit your “maximum” amount the first time. eBay will only run it up to your maximum but also, only enough to win the auction. So you might get it well below your maximum bid. I would go with spot price as my maximum bid.
So there you have my case for buying junk silver. Now, remember that I have also bought investment grade silver as well. I think there is a time and place for each. The investment grade stuff is for protecting my retirement. It is the hedge against inflation or the dollar getting ruined. Yes, it will be very useful during grid-down and I explain all of that in the article “Silver & Gold…..Really?”
I hope that answers your questions and explains my philosophy on junk silver.
One interesting little side-note: if you look at silver dimes they are supposed to have a serrated edge to them. There was a time that some folks would scrape the serrated edges off the dimes and collect the silver from those scrapings. And then continue to spend the dime when they were used as coinage. In today’s world I think there are some folks who still think they can get away with it. So when buying silver coins look closely at the edges to make sure they are intact and no one is trying to sell you a less than full-weight, intact coin.
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