Letter Re: How to Buy Silver?

Dear Jim:
I noticed in your SurvivalBlog post of January 27 that you mentioned that you have invested in 100 oz. Englehard silver bars.

1.) Do you recommend this type of purchase in today’s silver market? [JWR’s replies are in-line.]

Even at $10 per ounce, silver is still a relative bargain.  (It certainly when you consider the real value of the U.S. Dollar–which is essentially nothing.) I recommend that you first buy one $1,000 face value bag of circulated (“junk”) pre-1965 dimes or quarters for each family member as your designated “barter” silver.  Those coins could presumably be used for day-to-day purchases in a recovery stage (post-collapse) economy. Beyond that, for “investment” silver–designed as a time machine to protect your wealth from one side of an currency crisis to the other–you should buy bullion silver with the lowest premium per ounce, yet still not regularly subject to assay.  IMHO, the type of bullion that best fills this need is serial number stamped 100 ounce bars, from a well-known maker such as Englehard or Johnson-Matthey. The big 1000 ounce industrial bars almost always require assay for re-sale, which is expensive and time-consuming. Not to mention that they are a pain to transport.

2.) What about 10 oz. bars? What, if any, are the advantages in owning 100 oz. or 10 oz. bars?

When coin dealers buy silver bars, they typically pay the spot price of silver, or just below the spot price if they are in a particularly greedy or grumpy mood. When they sell silver, dealers charge a premium over spot, which provides them most or all of their profit on the transaction. Silver almost always has a higher premium than gold, because of the greater minting cost and shipping weight of silver, per dollar. (By weight, gold is presently around 59 more times more valuable than silver.) Currently 10 ounce bars carry a 70 to 90 cent per ounce dealer premium (profit over the spot price), whereas 100 ounce bars have a premium of as low as 50 cents per ounce. Hence, unless you foresee the need to press your bullion silver into service for day-to-day barter, then it is best to buy the 100 ounce bars.

3.) What do you think about “silver rounds”?

I don’t recommend buying the one ounce rounds.  They often carry a higher premium per ounce than circulated (“junk”) pre-1965 coins, and they will probably be suspect as counterfeit in a barter situation. (With one ounce trade dollars and perhaps even with one ounce American Eagles, people may ask: “How do I know those are real?” In contrast, pre-1965 coins will be much more readily accepted and trusted with little more than a glance at the edge of the coin.

4.) What about Peace or Morgan silver dollars?

Silver dollars, even in poor condition sell for about 20-to-30% more than the equivalent in silver dimes or quarters, both because of their slightly higher silver content (per dollar), and because even cruddy-looking silver dollars still have some numismatic value. So for barter you are probably better off with dimes and quarters. However, it s noteworthy that U.S. silver dollars will be even more recognizable and trusted than the smaller denomination coins. So if you presently own any silver dollars, save those for transactions with your most reluctant barter customers.

5.) Are assaying expenses of any consideration, and, if so, what are they?

Typically, assay is only an issue with bullion bars that are not serialized, and of course any bars that are heavier than 100 ounces each, regardless of whether or not they are serialized.

6.) In light of the impending “explosion” in silver (if not all precious metals) what immediate action do you recommend?

Stock up!  Even if you are one of those folks that feel you should’ve bought back when silver was $8 an ounce and that you have “missed the boat”, then don’t worry. At $10 per ounce, the downside risk is minimal, and the the upside potential is huge, particularly in this new “Bernanke Era.”

I appreciate your valuable insights. – Dr. Sidney Zweibel