Silver Coin Investment: Picking The Right Ones For Your Portfolio

Silver has been a valuable commodity for thousands of years, and its price is set to skyrocket. Silver is a good investment because it is a tangible asset, a store of value, free of counterparty risk, highly liquid, private and confidential, and it can't be hacked or erased. Silver coins are also a good investment because they are easily recognisable, can be sold anywhere in the world, and are guaranteed by a government. The best silver coins to invest in are those with a low premium over the silver spot price, such as sovereign bullion coins.

Silver bullion coins

Advantages of Silver Bullion Coins:

• Silver has been a valuable commodity and medium of exchange for thousands of years, even more so than gold.
• Silver bullion coins are highly liquid and can be easily sold almost anywhere globally due to their recognition and standardisation.
• They are a tangible and finite asset, which means they cannot be created out of thin air and are not subject to the same risks as digital or paper investments.
• Silver bullion coins are private and confidential, providing a degree of anonymity for investors.
• They are free of counterparty risk as their value is not dependent on another party fulfilling a contract or promise.
• Silver bullion coins are highly secure and cannot be hacked or erased, making them a safer choice than purely digital investments.
• Silver has a range of industrial applications, increasing its demand and potential for price appreciation.

Types of Silver Bullion Coins:

• Sovereign Coins: These are produced and guaranteed by a government mint, often referred to as "sovereign" coins. They have a face value, usually symbolic, and their purity and weight are standardised. Examples include the American Silver Eagle, Canadian Silver Maple Leaf, and the Silver Britannia Coin.
• Rounds: Rounds are produced by private mints and do not carry an official face value or government backing. However, they are still widely recognised and accepted, with purity levels typically exceeding 0.999%. Examples include the APMEX 1oz Fine Silver Rounds and the GoldSilver Pegasus rounds.

Factors to Consider:

When investing in silver bullion coins, it is essential to consider the premium over the spot price of silver. The premium represents the additional cost above the metal's market value and can vary significantly between different coins. Generally, sovereign bullion coins have lower premiums compared to rarer coins or those with limited mintages. It is also important to buy from reputable dealers to avoid counterfeits and ensure the quality and authenticity of your purchase.

Silver as an inflation hedge

Silver has been regarded as a good investment option, especially in the context of inflation. Here are some reasons why silver can be an effective hedge against inflation:

Industrial Demand

Silver has a wide range of industrial applications, including its use in electronics, solar energy, automotive manufacturing (electric vehicles), healthcare, and more. As industrial demand increases, the price of silver will likely increase. This was reflected in the Silver Institute's forecast for 2024, where global silver demand was expected to reach a near-record high due to industrial applications.

Supply Deficit

Silver is expected to be in a supply deficit for the fourth consecutive year in 2024, with a projected 17% increase in the deficit. This deficit occurs when demand outstrips supply, typically leading to rising prices.

Weakening US Dollar

The value of the US dollar has an inverse relationship with the price of silver. When the dollar weakens, the value of precious metals like silver tends to increase. This dynamic makes silver a good hedge against a weakening dollar, which is often a consequence of inflation.

Safe-Haven Asset

During periods of economic uncertainty and market volatility, investors often turn to safe-haven assets like precious metals. Silver, with its long-term use in the monetary system and industrial applications, becomes a desirable investment option. Its physical form as coins or bullion further adds to its appeal as a tangible asset.

Default Risk

Unlike many other investments, physical silver ownership carries no default risk. It is a hard asset that does not rely on contracts or promises from third parties. This feature makes it a reliable store of value, especially in uncertain economic times.

Long-Term Value Retention

Historically, silver has retained its purchasing power over long periods. For example, three dimes of silver from 1964 could buy a gallon of gas then, and their silver value still holds the same purchasing power today.

Green Energy Sector

Silver is heavily used in the booming solar energy sector, and its demand in this industry is expected to grow. As the world transitions to more sustainable energy sources, silver's role in green energy will likely contribute to its value and demand.

While silver can be a good hedge against inflation, it's important to remember that its price can be volatile, and other factors besides inflation can influence its value. Additionally, gold is often considered a better inflation hedge due to its more established reputation as a store of value and its stronger performance during inflationary periods. Nevertheless, silver's unique characteristics and industrial applications make it an attractive investment option, especially when paired with gold, to provide a well-rounded portfolio.

Silver for barter

Silver has been used as money for thousands of years and is likely to be one of the most acceptable forms of currency if the dollar were to collapse or experience hyperinflation. Silver coins are a great way to prepare for survival situations, such as runaway inflation, an economic crisis, or a social collapse.

The two main kinds of silver coins for survival are old "junk silver" coins and modern silver bullion coins. Junk silver refers to coins made before 1965 that were used as money in the past. They are often very worn down, but their composition is always 90% pure silver or lower. Examples of 90% silver coins from the United States Mint include Morgan silver dollars, Peace silver dollars, Franklin half dollars, Walking Liberty half dollars, Washington quarters minted before 1965, Mercury dimes, and Barber dimes. Junk silver coins are ideal for survivalist purposes as they are no longer used in today's banking systems but are worth much more than their face value due to their silver content.

Modern silver bullion coins, on the other hand, are made each year specifically for investors. These coins will be 99.9% pure (also called .999 fine silver) or higher. Popular modern bullion coins include American Silver Eagles, Canadian Silver Maple Leafs, Mexican Silver Libertads, Austrian Silver Philharmonics, and Chinese Silver Pandas. Modern bullion coins tend to be more expensive and may be a better investment if you intend to sell them in the future for a profit.

In addition to coins, silver also comes in other forms such as rounds and bars. Silver rounds are similar to coins but have no legal tender value, while silver bars are the large "bricks" of silver often seen in bank vaults. Coins are generally the most trusted type of silver in the marketplace and offer the most flexibility when negotiating a barter exchange. Rounds and bars are usually cheaper than coins of the same weight and can be useful for larger transactions.

When it comes to bartering with silver, it is important to know the value of the silver you are offering. A basic formula to calculate the value of silver coins is: Silver content (troy ounces) x Silver Spot Price = $$$ value of metal. For example, two pre-1965 quarters with a silver spot price of $30 would be worth $10.85, as each quarter contains 0.18084 troy ounces of silver.

In summary, silver coins, particularly junk silver coins, are a good investment for barter due to their recognizability, liquidity, and intrinsic value. They can be used to purchase everyday essentials, such as food, clothing, and water, or even luxury goods. Silver has been a valuable trading commodity for centuries and is likely to continue to be so in the future, making it a wise choice for those preparing for economic downturns or survival situations.

Silver as a store of value

Silver has been a store of value and a medium of exchange for thousands of years. Silver's price fluctuates, but due to its monetary value, it has never gone to zero in all that time.

Silver is a good investment for several reasons:

• It is a tangible asset. You can hold silver coins in your hand. They are not a paper product that can be created out of thin air and depreciated like paper or digital forms.
• It is a store of value. Silver is money, and it has been used as currency more often than gold throughout history.
• It is free of counterparty risk. If you hold physical silver, you don’t need another party to make good on a contract or promise. There is no default risk, unlike with stocks or bonds or almost any other investment.
• It is highly liquid. Silver coins can be sold virtually anywhere in the world. There are bullion dealers in most major cities, and in a crisis, silver coins will be in high demand. Other collectibles, like artwork, take longer to sell, have a smaller customer base, and will likely entail a big commission.
• It is private and confidential. Silver is an asset that is not easily traceable or hackable.
• It cannot be hacked or erased. In today's digital world, it is a good idea to keep some of your wealth in physical form.

Silver coins offer benefits beyond price appreciation. They are a real asset that has served as money for thousands of years.

There are several types of silver coins on the market, but they fall into five basic categories:

• Bullion coins are made almost exclusively from precious metal, in this case, silver. They are considered investment-grade silver and are the most popular form of bullion coins, especially those made by a government mint. They are referred to as "sovereign" coins and are guaranteed by the government that issues them. They also come with a face value, which is mostly symbolic since the silver content makes them worth more.
• Rounds are produced by a private mint and are usually of good quality with lower premiums than sovereign coins. They don’t have a face value or government backing.
• Numismatic coins are rare coins bought and sold by collectors. Their value is based on their rarity, condition, and demand, and their premiums can stretch into the thousands.
• Semi-numismatic coins are made to be collector coins but don’t yet have historical significance. They may be worth more in the future, but they are still part of the collector’s world, so the higher the price over the spot price, the more risk you assume.
• "Junk" silver refers to old quarters, dimes, Morgan dollars, and Franklin half dollars dated 1964 or earlier. These coins were made of 90% silver, whereas today's US coins are made of base metals. The advantage of junk silver is that it could be used in barter situations, but it will fetch a discount to the spot price since they are not pure silver.

The best silver coins to buy are common silver bullion (sovereign) coins. They are pure silver and the most popular, which means you’ll have high liquidity when it comes time to sell.

• 1 oz American Silver Eagle – Purity: .999, Face value: $1, Backed by: United States government.
• 1 oz Canadian Silver Maple Leaf – Purity: .9999, Face value: $5 Canadian, Backed by: Commonwealth of Canada.
• 1 oz Austrian Silver Philharmonic Coin – Purity: .999, Face value: $1.50 Euro, Backed by: Republic of Austria.
• 1 oz Australian Silver Kangaroo Coin – Purity: .9999, Face value: $1, Backed by: Legal tender under the Australian Currency Act of 1965.
• 1 oz Silver Britannia Coin – Purity: .999, Face value: £2, Backed by: British Government.
• 1 oz Mexican Silver Libertad Coin – Purity: .999, Face value: None, Backed by: Bank of Mexico.

Silver as an industrial product

Silver has been a valuable industrial product for thousands of years, serving as a currency and medium of exchange. It is also a highly demanded industrial product due to its element properties, which make it suitable for a wide range of applications.

Silver's price is influenced by supply and demand, and its value is expected to increase due to growing industrial applications. As a result, silver is a good investment option for those seeking to hedge against inflation and protect against financial and economic crises.

When investing in silver, individuals can choose to purchase physical silver bars or coins, or opt for a silver exchange-traded fund (ETF). Physical silver provides the advantage of tangibility and ease of storage, while ETFs offer a more accessible option for those seeking to trade or make quick profits.

Some popular options for physical silver coins include:

• Silver American Eagles: Backed by the U.S. government, these coins are easily recognizable and highly liquid.
• Silver Canadian Maple Leafs: Issued by the Canadian government, these coins are aesthetically appealing and among the purest government-issued silver coins.
• Austrian Silver Philharmonic Coins: These coins feature instruments from the Austrian Philharmonic Orchestra and the Golden Hall in Vienna. They are denominated in euros and highly valued by fans of Austrian economics.
• Silver Britannia Coins: Minted by the British Government, these coins are Capital Gains Tax exempt and offer a good balance between cost and flexibility.
• Silver Krugerrand: First introduced as a gold bullion coin, the South African Mint now offers a limited edition silver version that has gained popularity.

When investing in physical silver, it is important to consider the additional costs of shipping, storage, and insurance. Online dealers often offer better pricing than local coin shops, even after including shipping costs. It is also recommended to shop around and compare prices, reputation, and buyback policies before choosing a dealer.

Frequently asked questions