Silver bullion provides collector opportunities
By Paul Gilkes
Silver bullion is
bought and sold in various forms for a multitude
of reasons including investment, collecting,
diversifying assets or as a hedge against
Silver ingot for photography provided by Erik
Martin. Silver bullion can also be acquired in
bar and ingot form, from 100-ounce and
1,000-ounce bars down to 1-ounce .999 fine
silver rounds or ingots. Shown is a 5-ounce
silver ingot produced by the Northwest
Territorial Mint in Auburn, Wash.
American Eagle silver bullion coins are a very
popular form in which collectors and investors
acquire silver bullion. The U.S. Mint has
experienced unprecedented demand for the coins,
which have been rationed to the Mint's
authorized purchasers since April 21. The Mint
has also diverted blanks for Proofs to bullion
What form of silver bullion to buy is a common
question among those thinking about acquiring
quantities of the metal.
According to GoldPrice.org (online at
www.goldprice.org), silver bullion is marketed
as silver nuggets; bars, wafers and rounds; and
Silver is traded as a commodity, so its price
may change daily, based on supply and demand.
The demand for silver in its various forms has
increased dramatically during 2008, especially
for government-issued bullion coins, and in
particular, the American Eagle 1-ounce .999 fine
bullion coins. The U.S. Mint has rationed its
inventory to authorized buyers since April 21
because of its inability to acquire sufficient
blanks to strike coins to meet demand.
When collectors and investors have been unable
to acquire American Eagle bullion coins, they've
turned to the silver bullion coins of other
countries, as well as to other alternatives such
as wafers, rounds, ingots and bars, products
usually marked as to weight and silver fineness.
Nuggets are another option, but because weight
and fineness of silver nuggets varies, nugget
acquisition is the least likely avenue pursued
by those seeking silver bullion, according to
Collectors and investors seeking to buy silver
bullion often opt to acquire the products that
are .999 fine, and marked as such.
Wafers are usually found in sizes of less than 1
troy ounce. The smaller wafers are
proportionally more expensive than other silver
pieces due to markup and shipping costs. They
are usually sold for decorative or aesthetic
value, and even as jewelry.
Ingots are usually found in 1-, 5- and 10-ounce
sizes, although other sizes may exist.
Bars are usually found in 100- and 1,000-ounce
sizes, although there are also troy pound, kilo
and other odd sizes as well. Wafers, ingots and
bars should be stamped with their proper weight,
silver fineness and the hallmark of the
Bullion coins and rounds
Silver rounds and government-issued bullion
coins such as the American Eagle, Canadian Maple
Leaf and Australian Kookaburra are generally 1
ounce in size and composed of .999 fine silver.
Most of the rounds and all the coins bear
inscriptions of the weight and fineness.
The price to acquire any of the
government-issued bullion issues from secondary
market dealers is the spot price of the metal on
a given day on the commodities market, plus a
mark-up or premium.
The public cannot acquire government-issued
bullion coins directly from the mint that
produced them. The individual mints distribute
the coins through their own respective network
of authorized buyers, who in turn, may sell the
bullion coins to authorized dealers and the
The reason for the indirect selling is the need
to provide a two-way market. Government mints do
not generally have a mechanism in place to buy
the coins they sell. The mints require their
authorized buyers to buy back coins in order to
maintain a liquid market.
The authorized buyers acquire the coins from the
government mints for the spot price of the metal
plus an established premium. Premiums charged
may differ among the issuing governments. A
mark-up is added at each level from the time a
coin is sold to an authorized buyer until it
winds up in the hands of the end user, either a
collector or investor.
The price charged by a dealer will vary for each
bullion coin depending in part on the level at
which the dealer acquired the bullion coin in
the first place.
The level of supply may also affect premiums. In
recent weeks, as physical silver shortages
worsened, premiums for American Eagle silver
bullion coins rose. On Aug. 13 the average
premium charged by firms checked by Coin World
was 17.6 percent. On Sept. 25, the average
premium for the 1- ounce silver bullion coin was
27.7 percent and by Oct. 15 it stood at 44
percent, more than doubling in 63 days.
A number of Coin World advertisers offer bullion
coins and other bullion products. For bullion
coins, dealers may charge a higher per-coin
price for single pieces than they charge for
larger quantities of the same coins, thus making
it advantageous for a buyer to buy in bulk.
Private issuers or mints may also offer their
own bullion pieces at higher premiums above the
value of metal in them, especially if the rounds
are custom-designed pieces.
Silver coins, be they government-issued bullion
coins or regular-issue silver coins that once
saw circulation, are probably the most popular
way of purchasing and collecting silver bullion.
Both offer aesthetic appeal for their designs as
well as investment value.
For those who don't mind buying bullion of lower
fineness, circulated U.S. coins may be acquired
in $1,000 face value bags of .900 fine silver
dimes, quarter dollars and half dollars, either
in single-denomination bags or bags of mixed
denominations, sometimes separated by design
type. One can also purchase $1,000 face value
bags of Kennedy .400 fine silver half dollars.
The intrinsic or metallic value of the metal in
the bags of circulated coins is calculated based
on the total weight in pure silver. For the .900
fine silver coin bags, each bag contains roughly
715 troy ounces of pure silver. For the 40
percent silver Kennedy half dollar bags, the
total weight is about 295 full troy ounces of
Acquiring .900 fine U.S. coins in mixed
denominations and types in $1,000 face value
bags serves a two-fold purpose. The coins can be
retained in the bag in which they were sold, or
examined individually toward the possibility of
assembling sets of one or more U.S. coin series.
The .900 fine coins in the bags are likely
confined to dimes, quarter dollars and half
dollars from the beginning of the 20th century
through 1964, the last date on .900 fine U.S.
coins issued for circulation. Such bags will
likely include 1964 Kennedy half dollars, the
only date of that coin struck for circulation in
.900 fine silver.
The 90 percent silver bags may contain coins
strictly from one denomination or series, or be
a mixture of one or more denominations or
series. The 40 percent Kennedy half dollar bags
contain circulated coins dated between 1965 and
1969. The 1970-D Kennedy silver-copper clad half
dollar was only produced for Uncirculated Mint
sets and has considerable numismatic value over
its bullion value.
One firm's observations
David Hendrickson, president of SilverTowne in
Winchester, Ind., said Oct. 7 that the cheapest
way to buy silver is by acquiring 1,000-ounce
bars. At the time of Coin World's interview with
Hendrickson, the premium to buy the 1,000-ounce
bars was 30 to 40 cents per ounce over the daily
spot price, plus shipping.
The premiums are based strictly on supply and
demand, and do change, Hendrickson said.
Because of the sharp demand for silver and their
portability, Hendrickson said 100-ounce bars are
currently not available.
Any 1,000-ounce bars being sold to SilverTowne
are being melted and used to make 1-ounce rounds
or ingots or 10-ounce bars. The premium on all
three is $1 to $3 above the spot price of
Hendrickson said silver demand is so strong that
the firm is selling 100,000 rounds or ingots per
day; before the recent surge in demand for
silver, SilverTowne was selling that much silver
The Indiana firm both sells bullion items and
operates a refinery and mint to produce the
The SilverTowne Mint has added a second shift to
meet production demands, Hendrickson said.
Customers continue to place large orders
although delivery may not be made for between
five and six weeks in some instances, according
One recent customer submitted funds totalling $1
million to buy silver, preferably in large bars,
On Oct. 7, with silver trading at $11.55 per
ounce, the $1,000 face value bags containing
2,000 40 percent silver-clad Kennedy half
dollars, measuring 295 ounces of pure silver,
had a melt price of just more than $3,400.
SilverTowne was buying such bags in the $3,300
to $3,400 range and selling them at
approximately $3,700 per bag.
Although the $1,000 face value bags of 90
percent silver coins are supposed to contain
roughly 715 ounces of pure silver, the bags
could be light several ounces based on the heavy
circulation wear of the coins they contain,
At the same $11.55 an ounce spot price, the melt
price for $1,000 bags of 90 percent silver coins
was nearly $8,300, but SilverTowne was paying
$9,000 to acquire them for resale, Hendrickson
While bags of 90 percent silver coins are often
mixed by denomination, dealers that conduct
large transactions of bags of circulated silver
coins prefer to have the denominations separated
and not mixed, to allow for easier counting,
Bags containing silver dimes will contain Winged
Liberty Head dimes and Roosevelt dimes either
alone or mixed. Quarter dollar bags will contain
predominantly Washington quarter dollars.
The half dollar bags are offered individually as
Walking Liberty half dollars, Franklin half
dollars and 1964 Kennedy half dollars, or mixed
containing more than one series.
Smaller quantities of circulated 90 percent
silver coins can be acquired from dealers, but
the premiums will likely be higher than for the
$1,000 bags because of the smaller number of
coins requested, Hendrickson said.
American Eagle silver bullion coins are in short
supply, with investors opting for the silver
bullion coins of other countries, such as the
Canadian Maple Leaf, when available, he said.
Because collectors' and investors' current
appetite for silver is voracious, what form of
silver you're able to buy will depend on what
silver others have not already acquired.