|
![]()
US 90% silver
coins minted before 1965 are a popular way to invest in silver
bullion. A “bag,” ($1000 face) contains approximately 715 ounces of
silver and generally tracks the spot price of silver penny for
penny. If silver goes up ten cents, a bag of 90% rises $70 or so;
however, bag prices sometimes lag spot price changes.
Many people
buy circulated 90% coins for survival purposes. These people
fear the worst for the dollar, that it will be printed until it
becomes worthless. If this “worst case scenario” were to become
reality, then 90% silver coins would be used the purpose they were
originally minted: as money. If the dollar is repudiated, pre-’65
US coins—because of their silver content—could be exchanged for good
and services while paper dollars and copper-clad tokens would be
refused.
(Although
paper and copper are useful commodities, both are abundant. Silver,
on the other hand, is more than useful. Silver has been used as
money for time immemorial; and today, silver is essential to our
modern lifestyle, with demand growing and new uses being developed.
Yet, silver supplies are dwindling.)
CMI hopes that Americans never see the day that their once proud
dollar is debased to worthlessness. Yet, we are well aware that the
history of paper currencies is that they are printed until they
become worthless. (Actually, today we have to worry about the
Federal Reserve “creating” dollars electronically. If too many are
“created,” the results will be the same: the destruction of the
dollar’s purchasing power.) For a further discussion about
survival coins, click here:
Survival Coins.
Although
pre-’65 silver coins would be ideal for
survival purposes, as
a pure silver investment these coins (when they sell at premiums
approximating those on 100-oz bars and 1-oz silver rounds) hold
greater upside price potential than 999 fine bullion bars. At
times, and especially during rising precious metals markets,
circulated ’65 coins pick up premiums. On the other hand, 999 fine
bullion items (1,000-, 100-, and 10-oz bars and 1-oz rounds) can be
produced at any time; consequently, these items do not pickup
premiums. To support the position that bags of 90% coins hold
greater upside potential than 999 fine bullion items, a little
background on bag prices and silver prices is in order.
Over the last
three decades, when precious metals enjoyed bull markets, 90% bags
achieved premiums of $1.20/oz to $1.50/oz over spot, sometimes as
high at $2.50/oz. That is because many investors want silver in a
form that they know is silver, and pre-1965 U.S. 90% silver coins
certainly fit the bill.
In the 1980s,
following silver’s spike to $50/oz, industrial silver users
implemented efficiency moves that slowed the growth in industrial
demand for silver. Further, the rising prices of the 1970s had
spurred efforts to mine more silver and to increase the recovery of
silver in the secondary market. (Today, reclaimed silver is a major
source of this essential metal.)
Because of these
efforts, silver went into “surplus” in the 1980s, i.e., newly
refined silver exceeded industrial demand. This caused investors to
avoid silver in the ‘80s, except for a strong market in 1987. For
most of the 1980s, investors were net sellers of silver, which
resulted in huge quantities of silver bags being sent to refineries
where they were converted into 999 fine silver, which now may reside
on the contact points of your computer, the back of the mirrors of
your home, or in your mouth in the form of mercury/silver
amalgams. The Y2K scare caused another huge melting of circulated
90% silver coins.
Fearing
that many of the world’s computers would quit working on Januarys 1,
2000, many people began preparing for the end of the world as we
now know it. Respected economists issued warnings, books were
written, and newsletters were dedicated to teaching people how to
prepare. One of the recommendations was that circulated 90% silver
coins be stashed away so that they could be used as money when banks
and ATMs closed.
Fearing
calamity, many concerned people bought circulated 90% silver coins
at whatever prices; consequently, bags picked up premiums of 50%.
The Y2K scare showed just how quickly 90% coins can pick up big
premiums and that premiums on 90% bags can rise while the price of
silver remains stagnant. During 1999, the price of was essentially
unchanged.
On January 3,
2000, as soon it became evident that the world’s computers were not
going to fail, investors began selling, and they sold throughout the
year and into 2001, forcing down prices on 90% coins until they sold
at discounts (below the value of their silver content). Untold
quantities of bags ($1000 face value) were sent to smelters where
they were refined into 999 fine silver bullion.
Bags of pre-1965
U.S. silver coins are now in short supply. Before Y2K, an order for
100 bags could be filled with a phone call to any one of several
wholesalers. By the first half of 2002, an order for 20 bags may
have taken two or three phone calls. While bags held such huge
premiums during the Y2K buying frenzy, many CMI clients—at our
urging—swapped their 90% bags for 100-oz bars or 1-oz rounds and
increased their silver holdings by 35% go 45% without laying out
additional cash. After Y2K became a nonevent, the premiums on bags
of 90% fell to where they bags became cheaper than 100-oz silver
bullion bars and 1-oz silver rounds.
Although
bags are more cumbersome and difficult to handle and store, the
potential for 90% to pick up big premiums justifies the buying bags
by investors who can handle the bags’ weight and bulk. If bags
again achieve big premiums, they can be exchanged for other silver
bullion items such as 1000-, 100-, and 10-oz 999 fine silver bars or
1-oz silver rounds, resulting in those investors ending up with more
silver than they could have purchased originally.
More Information on Circulated Pre-1965
US
90% Silver Coins
When minted, a bag contained 723 ounces of silver, but because of
wear a smelted bag of dimes or quarters will net about 715 ounces.
A bag of half-dollars will net a little more, maybe 718-720 ounces
because half-dollars did not circulate as much as dimes and
quarters.
Investors can
expect to pay a little more for half-dollars than for dimes or
quarters because of the higher silver content and because
half-dollars are more popular. Also, fewer bags of half-dollars
were minted than were dimes and quarters.
When bags of
circulated 90% coins can be bought at about the same premium as
100-oz bars, or even at small premiums over 1-oz silver rounds, bags
should be the first choice for those investors who can handle the
bulk and weight of bags. |
