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When I put some serious thought into purchasing silver as a hedge against the rapid inflation of the US dollar, I was overwhelmed by the complexity of the task. Go to eBay’s web site and type in the search criterion “junk silver” and you will be slammed with about 2,000+ different auctions on an average day advertising everything from “face value” (FV), to Troy weight and standard weight, to vials of silver flakes and silver jewelry from someone’s estate sale.  A little bit of knowledge goes a long way when it comes to buying precious metals, especially if you’re shopping on a budget.

Troy Weight
When you go to kitco.com and they list the current price of silver or gold (commonly referred to as the “spot price”), the value that you see listed is the current trade value of one “troy ounce”.  Troy weight is entirely different from the typical weight scale we use in the US today, more specifically called the avoirdupois system.  Troy weight is only really used for precious metals, gems and gunpowder, so unless you have experience trading in those markets, you may need a little education on this scale.

First of all, a troy ounce is not the same as a standard ounce.  I’m not going to bore you with numbers and values and conversion tables.  If you’re truly interested in the specifics, there are abundant resources available.  Suffice it to say, a troy ounce has about 10% more mass than a standard ounce — that is to say, it’s heavier.  However, a troy pound is smaller than a standard pound.  There are only 12 troy ounces to a troy pound, while there are 16 ounces to a standard pound. 
Why is this important? you may be wondering.  A large percentage of the auctions on eBay will have the amount of silver being sold listed by weight.  If you plan on getting value for your purchase, it is critical that you understand what scale the seller is using.  If they don’t specifically state that the amount is troy weight, you should assume its standard — which means there is less silver up for auction. When you see a weight listed in pounds, you can safely assume they are referring to standard pounds, as the troy pound isn’t commonly used.   As there is a significant difference between these systems, you should read the auction carefully to try and determine which scale the seller is using.  Most reputable coin brokers will only use troy weight, as it is the recognized industry standard.

Which Silver?
When you start looking for junk silver or silver bullion on eBay, you will see a wide variety of items listed for sale.  Knowing which to invest your hard-earned money in will mean the difference between throwing good money away or having a valuable trade commodity on hand when it’s crunch time.
I believe strongly in limiting my purchases to pre-1965 US silver coinage.  Primarily, its because these coins are already standardized.  Their silver contents are established, as are their weights.  In addition, they are already denominated and widely distributed, so they are likely to be used regularly in common transactions.  Lastly, they are also the most readily available bullion on the market today.  Most of the silver auctions you find on eBay will be for these types of coins, so there will be no shortage for you to bid on.

You will also see silver bars available for sale and may be tempted to invest in these.  You should avoid buying the 1-gram bars, or bars weighted in grains.  These tiny bars are pure silver, but they rarely offer any kind of value.  You would need to accumulate 31 one-gram bars or 480 grains to get a single troy ounce.  As these bars usually sell for a couple of dollars a piece, plus the cost of shipping, there is virtually no benefit in buying these. 

Larger bars can some times be a good value, but it’s unusual.  These are sometimes called “art bars” because some of the value associated with the bar is for the quality of the engravings. These should be avoided because you will be competing with collectors and art enthusiasts and they often value these much higher than their weight in silver.  What you will want to look for are larger metal bars called “ingots” manufactured by a metalworking company.  These should be stamped with the quality of the silver, preferably .999 fine silver, as well as the troy weight.  Occasionally, you may find a large ingot being sold at a good value.  I tend to avoid silver bars altogether however. If the weight is smaller than an ounce, I’d rather have it in coins.  If it’s greater than an ounce, I’d rather convert it to gold.
You will also find other assorted silver items for sale.  These may be valuable purchases in terms of “melt value”, that is to say the item’s value if it’s melted down and the silver is extracted. Most often, you’ll find vials of silver flakes, junk jewelry and sometimes flatware.  The vials of silver are garbage for tourists and idiots, frequently suspended in liquid to increase the weight.  Under no circumstances should you purchase these as an investment.  Other items like jewelry might be a good value, but the lack of standardization diminishes any benefit.  When used for trade, these will need to be tested for purity, weighed and their value negotiated.  You may even need to consult with an expert, who will undoubtedly require compensation for their services.  So any advantage you may have gained in the purchase, you have lost in time, effort and cost when trading.

Other coins can also be an excellent value, but there are some disadvantages.  By these, I mean, foreign silver and modern US silver coins.  The problem with foreign silver is they are less widely disseminated in the US and therefore harder to commonly identify. Outside of a smaller circle of coin collectors (numismatists) and brokers, most people won’t know the content or purity of the foreign coins, so the same hurdles you face trading silver jewelry, you encounter here. 

As for modern US silver coins, I avoid these as well for the same reasons I avoid art bars – they are collected and I will be competing with individuals who place a higher value on them than their silver content.  The US currently only mints silver coins in limited runs, usually for commemoratives or collectors.  The one exception to this policy is the American Eagle silver coin, which is the US Mint’s silver bullion coin.  All of these coins are highly sought after by coin collectors and usually valued well over the spot price of silver.  Even the American Eagle bullion coins are collected for their numismatic value, so their cost will often be much higher than you should be willing to pay.

So What Should I Look For?
In general, when looking for coins to buy for their trade value, you should avoid anything that is “slabbed”.  Professional numismatic services will grade coins and place them in hard plastic cases to protect the grade and to catalog the coin in their systems.  These hard cases are often referred to as slabs.  You should avoid these coins because they are being traded to collectors for their uniqueness, value and rarity.  They can be fantastic investments, but not for their content in precious metal, which is after all your primary interest.

Since graded coins are of little to no interest to you, you can ignore any reference to grading, the numismatic community’s 1-to-70 [Sheldon] scale of coin quality.  Terms like “BU” (brilliant uncirculated), “MS” (mint state), and “proof” (a different type of mint process with a highly-polished die) shouldn’t mean anything to you.  In addition, lots that are advertised as “unsearched” should have little meaning to you as well.  This only means that these large lots of coins haven’t been thoroughly sorted for key dates, rare coins or “toned” coins.  (Toning refers to unique colors older silver coins can acquire, which are often desirable by some collectors.)

Your focus should be on lots of silver coins sold either by their weight or their face value.  In general, these coins are called junk or trash silver because they have no value to collectors.  Most of the coins will be worn, scratched, dented, gouged and possibly almost unrecognizable – basically all of the qualities of coins that have lived long lives as pocket change.  You can rest assured that any coins of outstanding numismatic value have been weeded out of these lots already, but this isn’t to say that you won’t come across a modestly rare or key date coin from time to time.  However, it would take a great deal of time to sort through and research large quantities of coins to find these modest value rarities and any benefit would be lost in the time and effort spent searching.

For the most part, US silver coins minted prior to 1965 contain 90% silver, often listed as .900 silver.  Please note, I said for the most part.  There are a few coins typically lumped with junk silver that contain proportionately less, specifically 1942-1945 Jefferson Nickels (called war nickels, having 35% silver),  1965-1970 Kennedy Half Dollars (40%) and on rare occasions 1971-1976 Eisenhower Dollars.  There are two versions of the 1971-1976 Eisenhower Dollars, one that contains 40% silver and the other that is clad.  (Cladding is a metallurgical process of putting an outer layer of a different kind of metal on an item.  Turn a modern coin on its edge and you will notice that there appear to be layers of metal.  Silver coins do not have this layered appearance; the edges will appear to be of one uniform metal.)  The silver Eisenhower Dollar was only issued as a collectible though, so its not typically in circulation and isn’t likely to be in any of these auctions.

The auctions you are looking for will advertise that they only have 90% silver coins in them.  They may list what kinds of coins they will include, so check for reference to those coins that have less silver, as it may be very important in getting a good bargain.  The following list is of all the types of coins you should find acceptable:

• Barber Dime (1892-1916)
• Mercury Dime (1916-1945)
• Roosevelt Dime (1946-1964)
• Barber Quarter (1892-1916)
• Standing Liberty Quarter (1916-1930)
• Washington Quarter (1932-1964)
• Barber Half Dollar (1892-1915)
• Walking Liberty Half Dollar (1916-1947)
• Franklin Half Dollar (1948-1963)
• Kennedy Half Dollar (1964 only) [The later halves are either 40% silver, or are clad.]
• Morgan Dollar (1878-1921)
• Peace Dollar (1921-1935)

Weight Versus Face Value
You will see auctions for lots in both weight and in face value.  We’ve already gone over the importance of clearly knowing what weight scale the seller is using, so I won’t go back over that. You may be tempted to skip over auctions for face values, because sellers won’t guarantee specific weights.  Silver being valued for its weight, the face value of the coin may seem to be irrelevant.  However, face value is just as accurate a means of evaluating these lots of silver, as long as the lots don’t contain 40% silver Kennedy Half Dollars.  

Since silver was used to determine the values of these coins when they were in wide distribution and common use, it was alloyed into them in proportionate weights.  So 10 silver dimes has the same silver content as 4 silver quarters and 2 silver half dollars.  This means that regardless of how a seller distributes the coins to you, $1 in face value has the same amount of silver.  There are a couple of exceptions to this rule however.  Morgan and Peace dollars are actually slightly heavier than $1 in lesser coinage.  Also, despite having a lower percentage of silver, there is actually more silver per dollar [of face value] in the Jefferson War Nickels than in other coins.  Much more.

The spot price of silver today is $31.23 and always in fluctuation, so these valuations are only good as an example.  However they should give you a fair idea of the relative values.  So today, the melt value of $1 in 90% silver coins is $22.59.  The melt value of a Morgan or Peace dollar is $24.15.  And the melt value of $1 in Jefferson War Nickels is $35.14.  However, the melt value of $1 in 40% Kennedy Half Dollars is only $9.24.  Do you see how knowing which coins are being included makes a big difference?

As far as buying by weight goes, you should only look at auctions that have 90% coins in them.  The lesser content coins are large and heavy and have less silver in them relative to their weight.  As a result, less valuable metals like copper and manganese take up more of the mass of the lot.  Avoiding these auctions is also a matter of principle in my opinion.  Dealers who are including these coins in their lot are preying on the ignorance of new and uninformed buyers, swindling them by giving them less value for their purchase.  This is no different than a butcher putting their thumb on the scale.  Ethical and conscientious people should vote with their wallets and put these guys out of business.

Navigating eBay
Don’t be intimidated by the fast-pace and the abundance of hyperlinks and advertisements.  There will be a timer counting down the auction and, psychologically, the closer the auction gets to ending, the more eager you will become – anxious to win your item.   Ignore it.  If you miss this one, there will be others.
As for the security of making a purchase on eBay and the likelihood of getting cheated, suffice it to say that unscrupulous people can be found in all corners of the planet and in all walks of life.  eBay and coins brokers are no different.  There are some steps you can take to protect yourself though. 

First, as with any purchase, get to know the seller.  The seller will have an eBay nickname or handle, and right beside that handle in parentheses there will be a number and possibly a colored star.  The number is the number of positive “feedback” comments the person has acquired.  Feedback are short comments buyers and sellers will leave for each other after a successful transaction, and they can be positive, negative or neutral.  If you click on the number, you will be taken to a page which lists these feedback comments for the seller.  Take the time to look them over, especially any negative or neutral ones.  Often these are from disputes, miscommunications and misunderstandings, so you can get an idea of what the seller’s history in dealing with customers is like. If you click on the person’s handle, you will be taken to a profile for the seller.  These aren’t always filled out or detailed, but there will be links to other auctions the seller has up and their eBay storefront, if they have one.  I’ll often take the time to look at other items they have up for sale to get an idea of what type of merchandise they sell. 

Second, ensure the auction is covered under eBay’s buyer protection policy.  Only a handful of auctions aren’t, but take the time to make sure.  There should be a banner underneath the terms of the auction with a shield beside it.  If you open your package and its not what was described in the auction or if you never get your coins at all, this is how you will go about getting your money back.  eBay will act as a mediator between you and the seller to get the issue resolved and usually the results are quite positive.

Third, you can utilize PayPal as an additional method of security for your purchase.  PayPal also offers buyer protection and it does make online transactions easier.  I’ve had an account with them for years and have never had an issue with security or fraud.

Fourth, check the shipping terms of the auction.  For larger value purchases, the seller will usually ship with some kind of delivery confirmation and insurance.  If they don’t, you can contact the seller and request it.  They will usually comply, but might ask that you cover the additional costs.  I typically seek out sellers that offer free shipping.  After all, when you’re purchasing $1,000 or more online, they don’t have to maintain a storefront, pay rent, hire staff, pay for healthcare, taxes and insurance, etc.  So who’s getting the better end of the deal?  In other words, their overhead is minimal, so its not unreasonable to expect them to pick up the $5-$20 shipping costs.  Many sellers pass this expense on to you however, so be prepared for that.

And lastly, set limits for yourself.  The psychology of an auction appeals to our competitive nature, so don’t be surprised to find yourself in a bidding war.  Set a hard limit on how high you will go and if the auction passes it, walk away.  Like I said earlier, there are about 2,000 junk silver auctions on eBay on any given day, so winning this particular auction isn’t life-or-death… yet. 

How Much Is Too Much?
It’s important to remember that the spot price of silver is a guideline only.  It’s a baseline from which trades are made.  If you were running a business trading silver and you bought and sold at the spot price, you would lose money.  So you can rationally expect to pay a higher price than spot for your silver.  After all, most sellers aren’t looking to give away their merchandise.  This is why buying online can offer such a good value. 

Most traditional stores and businesses operate on a 40% profit margin.  Anything less than that and most businesses are losing money.  This keeps the lights on, the bills paid, the employees on salary and covered by health insurance, guarantees next week’s deliveries, etc.  With silver trading at about $30/oz (Troy) a traditional store owner would have to sell silver at $42 an ounce to keep the doors open! As I previously stated, an online business owner has substantially less overhead.  For all you know, it could just be a guy in his den with a barrel full of silver and a computer.

For my part, I look for buys at about 10-15% over spot and consider myself fortunate to find them.  Just this week, I picked up $32 FV for $800.  Doing the math on that, that’s a melt value of $723, and a profit of $77 for the seller.  Have I done better?  Sure.  I’ve also done much worse.  But the auction is guaranteed 90% silver, with at least $2 in Morgan and/or Peace Dollars, the seller has an excellent reputation and a 14 day return policy, and the auction has eBay buyer protection.  Plus, I didn’t have to drive all over the county at $4 a gallon, hunting down pawn shops, coin shops, flea markets and swap meets, crossing my fingers and hoping to find a handful of coins at a good value.  For those things alone, it’s worth the extra $77 dollars to me… and the price of silver is still rising.
I hope this sheds a little more light on the subject of buying silver online.  It can seem very daunting and confusing, especially when you start trying to make conversions and calculate values and keep pace with an ever-changing commodities market.  The harsh reality is that it’s not for everyone.  If you don’t have the patience and depth to do the research and put in the time, you will get cheated.  If you take nothing else away, remember this:  If it sounds too good to be true, that’s because it is.  No one is giving silver away these days.  No one.

When currency isn’t current: Old $50 bill found real, but not before bearer arrested.

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