Finding the Lowest Premium for Physical Silver

If you’ve tried buying physical silver recently, then you are undoubtedly aware of the incredibly high premiums charged above market value. I wrote previously about the premiums for 100 ounce silver bars, which are traditionally a low premium method for acquiring silver. At the time of investigation, premiums were running from 40% to 50%  above the market price of silver.

Premiums for virtually all other methods of acquiring physical silver are also stubbornly high. American Silver Eagles, Canadian Silver Maple Leafs, and other government issued bullion coins carry premiums often well in excess of 50%. The same high premiums persist for generic silver rounds, small size bars, and bags of 90% junk silver. Even 1,000 ounce silver bars are now carrying premiums of 25% to 30%. Many people have been actively looking for the method which will provide the absolute lowest premiums.

One area that I have noticed which seems to offer the lowest premiums is 40% junk silver coins. For those unfamiliar with the term, “junk silver” refers to legal tender coins with silver content, which have little or no collectible value. These coins are bought and sold based on the value of the silver content. In the United States, dimes, quarters, half dollars, and dollars were minted in 90% silver before 1965. A lesser known fact is that from 1965 to 1970, half dollar coins were minted in 40% silver.

While bags of 90% junk silver coins carry premiums in excess of 50%, bags of 40% junk silver coins can be found with premiums as low as 20%. A bag of $1,000 face value 40% silver coins, which contains roughly 295 ounces of pure silver, can be bought for around $3,500. This can be confirmed on various bullion dealer websites, as well as through a survey of completed eBay auctions. Bullion dealers typically sell junk silver in $1,000 or $500 face value bags, while eBay usually has listings for much smaller lots. I’ve found that even these smaller lots sell for around the same relatively low premiums of 20% to 25%.

Why are the premiums so low? Some people consider 40% silver coins too bulky and inconvenient. If you acquire 90% junk silver, you would have the same silver content in less than half the weight and volume. But in today’s environment, aren’t the lower premiums well worth the trade off? In reality, I think this is more of an overlooked area. Perhaps as time moves on and people start to take note, premiums will rise to the same levels as other physical silver options.

Disclosure: Author is long physical gold and silver.

Comments

[DGCmagazine:]

Been searching also for stock and found www.goldandsilvernow.c.../

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00 oz Johnson Mattheys
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[e-mail]

2008 Nov 20 07:27 AM

[Alex Stanczyk:]

Awesome arbitrage opportunities popping up. PPT is basically screwing themselves with this price suppression.

Going to force more contracts on Comex into physical delivery to take advantage of what investors are willing to pay.

Silver inventory in the Nymex warehouses has been dropping consistently:
www.nymex.com/warehous...

For those who dont believe it, use the above link and track it for a while and see for yourself.

2008 Nov 20 10:26 AM

[ussmls7:]

Ebay has been a clearing house for both Gold Bullion & Silver! This is nuts,to watch our own Goverment sit back & watch the Fed & its Backers,JP Morgan & GS Ruin the Free Markets that is the Life Blood of this Nation. Those that were ahead of the Gamers, & bought Physical Silver in Huge Quanities in the late 90s & early part of 2000 & 2001 are setting nice with no worries! Those that are now trying to find cheap physical Gold or Silver will PAY dearly,with no promise from some Dealers that the delievery will even happen! With no help frpm Congress or the SEC,CFTC or Regulators,the average man is screwed! Do you take a chance & Pay the high premiums or sit out a once in a (maybe) life time to make huge profits in Silver Coins & Bullion? I wish the Author would get more advice & Views from the Best Experts & Share those findings here on Seeking Alpha,it would really give some of us that are not Rich,but have a little Cash to Buy or not to buy? This is very scarey times & one wrong move could wipe many out! How much Silver should a person have & what price should he pay?

2008 Nov 20 01:02 PM

[capt Brian:]

One can buy silver bars correctly, or pay thru the nose..
Correctly is .20 over spot, and the ability to store cheaply, $5 bucks a month, or send it to you... for a small shipping charge,, anything over that is tossing money in the sewer. Coins,well what are you buying silver for, investment, gifts, coin value, make up ur mind and there are best and worst deals and everything in between. I like the 1000 oz bars for .20 over.
happy investing..

Capt

2008 Nov 20 02:15 PM

[Rod Argentum:]

Northwest Territorial Mint (bullion.nwtmint.com) generally does a fair job on premiums, and they ship to me for free.

Jun 18 05:03 PM