First off let me explain the term “junk” in regard to silver rounds and ingots. The word “junk” in this context is to denote the difference between actual minted coins of a nation that are legal tender versus silver “rounds” and ingots that are investment vehicles. Junk means the silver IS NOT a minted coin from any nation and has no monetary value on its face like a US Silver Dollar has.
Silver “rounds & ingots” are minted by private, for profit “mints” like the Franklin Mint and hundreds of others for whom we’ve seen commercials for years on TV. The “coins” they mint are for the purposes of collecting them. They will have some monetary value as both a collectible as well as for the sheer weight of silver in the coin, but they are not real national currency. I am of the opinion any “collectible” value beyond the weight of the silver in them is too dangerous to count on as a sound investment except in stable economic times and as we’ve sen and are now enjoying, soundness is variable and fleeting depending on many other factors.
“Rounds” are non-monetary silver “coins” that are about the size of a US Silver Dollar and weigh one Troy ounce (31.1 grams as opposed to a “regular” measure ounce at 28.3 grams). They are attractive because they stack in tubes of 20 or 25 and are easily stored in that configuration. Ingots are merely rectangle shaped bars of one Troy ounce of silver. They are half again larger than a “Andes Thin Mint” candy and the same shape and they weigh exactly one Troy ounce guaranteed when struck by a reliable private mint. They often were struck as cheap mementos of conventions, gifts for graduation and such as that. Remember, until 2004 one Troy ounce of silver was valued at about $5.00. There is no real difference in ingots or rounds so long as both are guaranteed “.999 fine silver,” and the round or ingot will have that engraved on the piece of silver.
For example, if the commemorative “9/11” silver coins were to suddenly no longer be something folks wanted to collect their only value would remain in the content of silver in them. A “junk” one ounce “round” of silver is valued at whatever silver is trading for on the open market, whereas a commemorative coin also has some level of “collectible” value that may or may not always remain valid. If no one wants a collectible commemorative coin any longer any value the coin has would decrease, again except for its weight in silver. I stay strictly away from “collectible” silver for that very reason.
The flip side are coins minted by nations and used as legal tender in their nations…US coins for example. Some people prefer to collect real minted legal tender due to two reasons…the first is because, for the sake of argument, a silver coin minted in Canada and being Canadian legal tender has the backing of its national government. That means no matter what unless Canada goes belly up the coin will always be worth it’s face value. When a Canadian quarter was worth .30 cents that was fine but when silver is selling for $43 dollars the tiny face value is of no import for me. Most collect these in what in my opinion is a false sense of security. After all, the very reason these things are so high in value is their content and weight in silver and NOT their face value.
To buy genuine legal tender from any nation one will pay the “spot” (the current amount the raw silver by the ounce is worth at that moment in time) plus a higher commission. For example, a US Silver Eagle one ounce $1.00 coin goes for the spot price of silver plus a rather large commission of up to about 30%. That means at Friday’s close price of silver one would pay $43 for the value of one ounce of silver plus whatever the added value was because it is a real US coin that is legal tender with a $1.00 face value.
I can buy silver “junk” rounds or ingots that weight exactly one Troy ounce guaranteed, at spot plus 3% from the dealer I use here in town. I go to his shop and do face to face transactions. To buy from a retailer off the Internet one will pay a huge a commission plus shipping and insurance. Personally I buy “junk” rounds and ingots for their weight in .999 fine silver and not for any collectible value that is fleeting at best. If our money collapsed or inflation hit hard any collectible value would be gone and only the weight of the coin would determine its value.
In my mind why should I pay $43 (the silver spot close on Friday evening) for one ounce of silver plus say another $5 bucks because it’s a collectible commemorative coin when if I ever need to use it as currency it will only be worth its weight? “Junk” rounds and ingots cost the same per ounce for their silver weight and content. I buy them as both a hedge against inflation as well as a possible future tender. As well silver rounds or ingots would well serve as barter currency. A US Silver Eagle $1.00, one Troy ounce silver coin, in such a situation would still only be worth its weight in silver, so why pay any added value premium for it? Just for the name “US Legal Tender” on it? If confidence in the US system were to drastically decline so would any “guarantee” of our money and its value worldwide, so the value would be only in its weight. See my point? I refuse to pay a premium on speculation.
Let me also clarify something. Owning silver in stocks or certificates is risky in the extreme and not nearly so sound as owning “physical” silver for many reasons. If we have another event like September 2008 and financial institutions were hard hit imagine that many companies could fold, their cash flow dry up and their assets disappear into thin air as paper assets can and will do. The stock market are all paper assets and without money actually changing hands except at purchase or sale, the values go up and down.
If the company from whom you purchased silver stocks or certificates collapsed how would you get your money back? Insured assets, ya say? Think again. Wanna buy a bridge? Some oceanfront property in Iowa? To hold certificates and think them as sound as actual holding of the commodity in one’s dirty little paws is a huge mistake. If we saw a repeat of 2008 and the insurance company insuring your certificate went belly up you’d get nothing. If you own physical silver no one can take it from you.
Lastly there is one more benefit to owning the physical entity. NOT THAT I ADVOCATE THIS, but any transaction below $10K does not have to be reported to the IRS. Think about that. If one sold $10K of silver in stock or certificate form and that amount were pure profit it would be subject to massive taxation. If instead one sold physical silver in less than $10K increments the transaction would not be reported. Just mentioning it, again, not that I argue anyone should attempt to do such, but that there is no paper trail is for me a great added benefit.
The reasons for owning physical silver and in “junk” ingots and rounds are many and the downsides are to my knowledge, non-existent. Buy from a local dealer…every city of any size has multiple dealers, often those who specialize in stamp and coin collecting. Search for who charges the LEAST commission. Sometimes commissions vary greatly by dealer so shop around. Just call and ask them how much they charge per ounce as commission. Expect a commission as low as 3% and as high as 30% if bought off the internet. Most local shops will charge less than 5% commission and there will be no insurance and shipping charges. It can be done as a cash transaction leaving no paper trail.
For my last example to prove my point click here. This is an Amazon sale price for a $1.00 Silver Eagle selling for $51.89 + shipping + insurance. So one is paying AT LEAST $51.89 plus for what I buy at the local dealer for $43.01 + 3% for the exact same weight. If I purchased a $1.00 Silver Eagle from my local dealer it would be “spot” price of silver + $3.00 premium + 3% commission.
If one is buying it as an investment or to hedge their bets against inflation or serious economic downturn or a collapse why would one want to pay more for the investment than needed. Again, in dire straights only the weight of the silver would determine its value. Any premiums or collectible aspect would be moot and thus wasted money that would cause one to realize a lower return on investment.
AUTHOR’S NOTE: Everything said here about silver applies to gold as well. The only difference are in the percentages, as a 3% premium on a $1500.00 ounce of gold is $45.00 whereas the same 3% premium on and ounce of silver would be about $1.25. Basically as the ratio of silver to gold is “34” ounces of silver for one ounce of gold, multiply any dollar number by 34 to see how much the same amount of gold would cost in raw US dollars as of Friday’s close of trading.