Buying Silver Coins Overview
In the silver bullion industry the words silver coins are often used to refer to US 90% silver dimes, quarters and half-dollars minted before 1965. With the exception of 1942-1945 nickels, commonly called war nickels, no silver was put in US five-cent pieces.
Pre-1965 US 90% coins are an alloy of 90% silver and 10% copper. While these coins are often called junk silver coins because they have no numismatic (collector) value, they are hardly junk because they contain silver, which, along with gold, has been valued in all civilizations.
Bags of silver coins
A quantity of $1,000 face value US silver coins is called "a bag" because when the US Mint ships dimes, quarters and half-dollars to banks, it ships $1,000 face value in one bag. Today, however, most silver dealers ship two $500 bags of silver coins instead of one $1,000 bag because two bags of silver coins are easier to handle than one bag of $1,000 face value.
A bag of silver coins ($1,000 face value) weighs right at 54-1/2 pounds on a bathroom scale. A bag of dimes contains 10,000 dimes; a bag of quarters contains 4,000 quarters; and a bag of half-dollars contains 2,000 half-dollars.
Silver coins silver content
When minted, a bag of pre-'65 US silver coins contained 723 troy ounces of silver, which means that each $1 face value contained .723 ounce of silver. Ten dimes contained .723 ounce of silver; four quarters contained .723 ounce of silver; and two half-dollars contained .723 ounce of silver.
However, because of wear, a $1,000 bag of pre-'65 US silver coins will yield approximately 715 ounces of silver if refined, which means that $1 face value of pre-1965 US junk silver coins contains, on average, .715 ounce of silver.
When refined, a bag of half-dollars will yield a little more silver than a bag of dimes or a bag of quarters because half-dollars were not circulated as much as dimes and quarters. Even today, half-dollars simply do not circulate as much as dimes and quarters do. If you are due fifty cents in change, you are more likely to get two quarters than one half-dollar.
Buy silver coins
US silver coins are priced relative to spot. "Spot" is the price at which large commercial quantities of silver changes hands for 48-hour settlement. However, bags of silver coins are quoted times face value, whereas most over .999 silver products are quoted as markups over spot. Some examples are in order.
If you ask for a quote on a bag of silver coins, you will be told something like "11.3 times face or $11,300." To determine the cost per ounce, simply divide $11,300 by 715 for a per ounce cost of $15.80. At CMI Gold & Silver Inc., our brokers will readily offer the cost per ounce when they give quotes.
By comparison, 100-oz silver bars are quoted as markups over stop. Ask for a quote on ten 100-oz silver bars and the answer will be something like "$15.80 per ounce, eighty cents over spot."
The strange pricing convention for silver coins can be confusing for investor new to the silver market. But, that is the way silver coins have been quoted since the US Mint stopped putting silver in our coins. Silver coins are likely to continue to be quoted that way for a long time to come.
The demand for silver coins
The buy price of silver coins relative to spot depends on supply and demand. During the 1990s, there were times when bags of silver coins could be bought at twenty cents per ounce below spot. However, during the Financial Crisis of 2008, demand was so high and supply so short, that the premium climbed to $4.00/oz over spot. At times during the Financial Crisis of 2008, silver coins could not be found at any price.
Brilliant uncirculated silver coins
Brilliant uncirculated US silver coins are US silver coins that were never circulated. Normally, they are as bright and shiny as the day they left the Mint. However, sometimes a bag of brilliant uncirculated silver coins will contain some coins that are tarnished because of exposure to chemicals in the air and because of the type of containers they were stored in.
Brilliant uncirculated silver coins have been dubbed "BU silver coins." They sell at higher premiums than junk silver coins. BU silver coins are generally hard to find but are sometimes available.
Old US silver dollars are 90% silver/10% copper as are junk silver coins. However, there is a difference in the silver content.
When minted, silver dollars contained .77 ounce of silver, whereas $1 face value in US silver coins .723 ounce of silver. Therefore, $1,000 face value in silver dollars (1,000 coins) contained 770 ounces of silver. As noted above, $1000 face value in either dimes, quarters or half-dollars contained 723 ounces of silver.
On a per ounce basis, silver dollars sell at high premiums than junk silver coins not because of the higher silver content, which is a factor, but because silver dollars are the most widely collected coins in the world.
40% clad half-dollars
Kennedy half-dollars dated 1965-1969 were minted with an alloy of 40% silver and 60% copper, and are commonly called clad half-dollars. Generally, 40% clad half-dollars show very little wear because the public withdrew them from circulation as fast as the Mint could turn them out. 40% clad half-dollars most always sell at smaller premiums than 90% silver coins.
Buying silver coins
If you would like to discuss buying silver coins or would like to discuss any aspect of investing in silver, call CMI Gold & Silver Inc. at 800-528-1380. We take calls 7:00 am to 5:00 pm MST, Mondays through Fridays.