Letter Re: Advice on Getting Started in Precious Metals Investing

Dear Jim, I would like to build up a moderate sized collection of precious metals as a hedge against inflation and also in case of an Argentina like economic melt down. I do not have a whole lot of cash to spend and want small denominations so silver is what I am looking for. I got into the links section and found Eastern Numismatics but from there it got confusing. Different coins had different values which makes sense but I just want to get some “junk silver” so the difference between x coin and z coin is of no concern to me (should it be?) as long as both have the amount of silver.

Also, since I will be purchasing in small amounts of a couple coins a month. It will not add up fast but it is feasible. It would be nice to be able to go to a local store instead of saving up and making a mail order/ internet order from time to time and not get hosed, is this realistic? I know different coins have different amounts of silver and (aside from collectors value) should thus have different prices. It would be great to know what older U.S. coins are worth so I can be an informed consumer.
All advice would be real helpful. Thanks. – TheOtherRyan

JWR Replies: First and foremost, I’ll begin with the caveat that SurvivalBlog readers should not invest anything in precious metals until after they have an honest year one year food supply set aside, and they already have all of the other requisite essentials for their family’s preparedness (Water filtration, first aid, commo gear, guns, ammo, and so forth.)

I often stress in my writings and in my conversations with consulting clients that the precious metals emphasis for preparedness-minded families should be on common date pre-1965 US 90% silver bullion coins. Leave the numismatic coins to the collectors. For barter purposes, you strictly want the most bullion value for your dollar. Pre-1965 US coins are widely recognized here in the US, and hence will be the most useful for barter transactions. Outside of the US, other coins will doubtless be preferable. In Mexico, it will likely be either be silver Pesos, or perhaps silver “Libertad” Onza de Plata coins. In Canada, it would be pre-1968 (80% silver) quarters, and in Australia it would be pre-1954 silver Australian shilling coinage or perhaps the handsome new .999 fine silver Kookaburras.

Many people buy one-ounce .999 fine silver “trade dollars.” They do have their merits–most notably that they are minted in precise ounce increments–unlike 90% “junk” silver U.S. coinage minted in or before 1964. If you already have some one once rounds, keep them, but do so with the realization that they are not nearly as readily recognizable and trusted by the general public for barter purposes, and hence they may not be trusted in a post-collapse economy. (The question you can expect to hear is “How do I know this is real?” That will only rarely be an issue with pre-’65 US coinage.) Also, since most of these have no hardeners added, (they are pure silver) they will begin to wear quickly if a barter economy carries on for an extended period of time. If that ever happens, then through trade you should gradually get rid of your silver “rounds” and “medallions”, and replace them with pre-1965 quarter and half dollars.

It doesn’t make much difference if you buy 90% silver dimes, quarters, or half dollars. However, it has been suggested that silver dimes might be the inferior choice, only because they tended to be more heavily circulated and hence suffered the most from surface wear–to the point that they noticeably started to lose weight. (If you are offered a bag ($1,000 face value) or a half bag ($500 face value) of dimes, take a look and see if it contains a high percentage of heavily-worn Mercury dimes. If that is the case, then you might want to pass. (A heavily-worn Mercury dime can be shy as much as 7% of its original weight–and hence you aren’t getting full value for your money.)