Letter Re: Silver Canadian Leaf Bullion Coins

I’m getting ready to add to my collection of gold and silver coins and wanted to bring up a perhaps significant point: American Silver Eagles have a face value of $1, whereas the equivalent Canadian coin (the 1 ounce Maple Leaf) has a face value of $5 Canadian – about $4.65 USD at the current exchange rate. The face value represents a built-in stop-loss should silver prices fall through the floor for any reason. At current prices, the face value of the Canadian caps your potential loss at slightly higher than 50% whereas with the U.S. coin you could potentially lose more than 90% of your investment. Granted, a fall to such low prices is extremely unlikely; nonetheless, a stop-loss is an important component of any investment position and should be carefully considered when buying coins.

And, patriotism aside, I think the Canadian coin is prettier [than the U.S. Silver Eagle] 🙂

Best, – Matt R.

JWR Replies:
Your point is well taken. Although the chances of a collapse in the price of silver below $5 per ounce is quite small, it doesn’t hurt to hedge your bets. Another “stop-loss” approach like yours is buying US silver half dollars that were minted between 1965 and 1970. Unlike the pre-1965 US coins (that were 90% silver), these later half dollars were minted with just 40% silver content. The beauty of investing in these is that if the price of silver were ever to collapse, you could simply spend them. The only downside is that because they are only 40% silver, they are a much bulkier and heavier way to invest in barterable silver. The 40% silver half dollars are available in $500 and $1,000 face value bags, from coin dealers. Here is some data that you should jot down, for calculating the bullion value of circulated US coins:

1964 or earlier 90% dime, quarter or half-dollar bags ($1,000 face value) contain approximately 715 ounces of silver
1965-to-1970 40% half dollar bags ($1,000 face value) contain approximately 296 ounces of silver

So, for example, to determine the bullion value of $1,000 face value in 40% silver quarters, simply multiply the current day’s spot price of silver ($10.85, as of this writing) x 296. Thus, $10.85 x 296 = $3,211.60 per bag. Based on that you can estimate that these coins are presently worth 3.21 times their face value. (A 40% silver 50 cent piece is worth $1.60 in FRNs. Meanwhile a 90% silver 50 cent piece is worth $3.88 in FRNs.) Silver would have to collapse to below $3 per ounce before it would make sense to spend 40% silver half dollars as regular pocket change. But, even then, given the long term trends for the value of the US Dollar, it would be crazy to do so.