Silver Bars or Coins? What to Buy?
There is no “one size fits all” answer. Let’s examine the pros and cons for each group of investments. These are my opinions; do your own research and choose what works best for your circumstances.
You can buy in 1 ounce, 10 ounce, 1 kilogram (about 32 ounces), 100, 1,000, and 5,000 ounce sizes. The 5,000 and 1,000 ounce sizes are unsuitable for most investors. One ounce bars are portable and inexpensive, but they have a larger premium per ounce than the other bars. If you have limited storage space, such as a safe deposit box, buy the 10 ounce, the kilo, and 100 ounce sizes. They stack well, and you can store a large value in a small space.
As this article is written, silver is about $31 per ounce, so a 100 ounce bar is worth in excess of $3,100. You can store many bars in a 5″ by 10″ safe deposit box. (I do not recommend a “sock drawer” storage solution.) I prefer 10 and 100 ounce bars. On the other hand, you can’t sell half a bar, so you are limited if you need to sell. Plan accordingly.
You have many choices for coins, including Chinese, Australian, Canadian, USA, and generic. A generic coin is a silver “round” that looks like a coin but is not created by a government mint. They carry a smaller premium than official coins, and have no numismatic value (more on that later).
The Canadian Silver Maple Leaf is a beautiful coin that is popular and highly desirable. The same is true of the Silver Eagle, the coin struck by the US Mint. I like the coins from the other countries, but I love the Silver Eagles and Silver Maple Leafs. They are universally recognized, guaranteed 1 ounce of silver, and lovely to possess.
Eagles usually come in tubes of 20 coins (Maple Leafs come in tubes of 25) but do not stack as well as bars. They will cost more – say up to 12% over spot price (COMEX price for 5,000 ounce bars) for silver. If silver is $31, the Silver Eagle might cost $35, which seems, at first glance, expensive. But, to compensate, you can expect to sell your Eagles for perhaps 4% – 6% above the spot silver price.
If the US Mint ever restricts production or stops producing Eagles, then the premium on all your existing Eagles will jump in value. Why would the Mint stop producing Eagles? A skyrocketing price for silver (quite possible in a few years), politics (anytime), supply shortage (anytime), or even a war with a huge demand for silver in electronics could cause the Mint to restrict the supply of Eagles.
Silver Grain or Shot
This is industrial silver for jewelry or manufacturing. This is NOT investment grade silver. Although this form of silver is less expensive than coins, there are two problems with it. First, it may be difficult to sell or trade as it will not have recognized value to many people, whereas coins and bars will be recognized and valued by almost everyone. Second, if you sell it, you will probably receive less than spot price – a negative premium, as compared to several percent of positive premium for coins.
An example is a 1906 Morgan Silver Dollar in “uncirculated” condition. These are beautiful coins, a part of our history, rare, and they are over 100 years old. Should you invest in numismatic coins? Invest only if you know the market or trust your supplier.
I like rare coins, but they have a high markup and your ability to resell them may be quite limited. A silver eagle is worth the price of silver plus a few percent anytime, but a rare coin is worth what the buyer is currently willing to pay for it.
The numismatic market could be depressed or speculative, and so your coins, when you want to sell them, might be worth a lot less than you think they are. Unless you know this market well, stick to Eagles and Maple Leafs, especially if you have limited investment funds or are making periodic purchases.
On the other hand, if you know this market, love coins, and are in no rush to sell, then buy and enjoy rare coins. In my opinion, this does not include “proof” Eagles (often seen in media advertisements) because they are not rare and are quite expensive. Others may disagree.
Unless you know the market, avoid numismatics. Depending on storage considerations, resale plans, and your love of beautiful coins, buy 10 and 100 ounce bars, Silver Eagles, and Silver Maple Leafs. There are many other choices, but these are my top suggestions.
The Deviant Investor