90% Circulated Silver Coins
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 coinsÂ—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.
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.