Examining Various Methods for Investing in Silver

Silver has recently experienced some renewed interest as a precious metals investment. Earlier this year, the price of silver exceeded the $20 per ounce level. This marked a twenty seven year high, but was still short of its all time high above $50 per ounce reached in 1980. In recent months, the price of silver has declined below the $10 level, but that has only seemingly intensified investment interest in the metal. There are a variety of methods for making an investment in silver.

The most common method for investing in silver is through government issued bullion coins. The two most popular choices are the American Silver Eagle issued by the United States and the Silver Maple Leaf issued by Canada. These coins are issued by the governments and contain one ounce of silver and are distributed through a network of authorized dealers. The coins can be purchased for a set premium above the precious metals value. The premium generally covers the cost of manufacturing and distributing the coins plus government and dealer profit margins. Depending on the coins, there may also be a numismatic premium attached if the coins are considered to be collectible. Recently, premiums for Silver Eagles and Silver Maple Leafs have expanded as demand has grown.

A second, related method for investing in silver is through generic silver rounds. These are usually privately minted coins with various designs. In some cases, even custom designs can be ordered. Each round usually contains one ounce of silver. Silver rounds have much smaller premiums above precious metal cost as compared to Silver Eagles and Silver Maple Leafs.

Prior to 1964, the United States minted dollars, half dollars, quarter dollars, and dimes in 90% silver. After 1964, certain coins were minted in 40% silver. Some people choose to invest in silver by purchasing bulk lots of 90% or 40% silver coins. If the coins have little collectible value, they are referred to as junk silver. Junk silver is generally purchased in bags containing $1,000 face value of coins. For 90% silver coins this equates to 715 ounces of silver. There are some benefits of buying junk silver. First, although the coins supposedly have no collectible value, a thorough search through the coins may prove otherwise. Second, the coins are considered legal tender and have a floor value of the $1,000 face value.

A less common, but increasingly popular method for investing in silver is through 100 ounce or 1,000 ounce silver bars. In the past, this has been the way to purchase silver with the lowest premium above the precious metal value. This dynamic has changed in recent months, with 100 ounce bars sometimes carrying premiums of 40% above the market price of silver. Premiums for 1,000 ounce bars have also expanded, but not as dramatically.

A final method for investment can be accomplished through an electronically traded fund or ETF. The Silver ETF allows individuals to invest in the precious metal without physically purchasing and storing it using one of the methods explained above. Instead shares of the ETF can be purchased in a brokerage account. Each share of the ETF represents a predetermined amount of silver less annual custodial expenses. As shares of the ETF are issued or redeemed, silver is bought or sold from a trust. In theory, the price of the Silver ETF should track the price of the physical metal.

Seed Newsvine

Bookmark this article in your preferred program

Comments

Add Comment

Popular Articles in this cathegory

This article is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.