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Why Buy Silver?
Silver has been given many endearing nicknames over the thousands of years it has been used as money and a store of wealth. Sometimes it is called "Poor Man's Gold" because it is a cheaper precious metal alternative to gold. It has also been characterized as the "Money of the People" because low-denomination silver coins were traditionally far more accessible to the general population than high-denomination gold coins. One thing that these monikers reveal is that silver and gold have a long history of measuring, preserving, and transferring wealth. Buying silver is a great way of connecting to this economic history.
The Ancient Greeks are credited as the first civilization to use silver as coins regularly in commerce. Prior to this innovation, large silver ingots (along with gold ingots) were transported across the ancient world as a way of conducting business. This was a time -- centuries, in fact -- when bullion was everyday money. Eventually, coins proved to be a more efficient way to do this, but the principle was the same.
The Ancient Egyptians actually held silver in higher esteem than gold because the latter was actually more widely available in the region, and silver was more scarce. They believed that the gods had skin of gold but they also believed their deities had bones of silver. For this reason, silver value was relatively much higher in Ancient Egypt than the silver price today when compared to gold.
Over the centuries, silver became an increasingly common monetary metal. Nearly every country in the world relied upon silver coins to carry out transactions in the local and international economy. Even kings and queens would pay large international debts in silver. In many languages, the word for "money" and "silver" are actually one and the same. It's also worth noting that, before the supremacy of the U.S. dollar, the British pound was essentially the global standard for money. It is frequently referred to as the "pound sterling," and this is because it was tied to a specific amount of silver. To this day, silver with the traditional .925 fine (92.5% pure) purity standard is known as sterling silver. Nonetheless, it's worth keeping in mind that silver bullion prices are for silver of at least 99.9% purity.
However, legal tender silver coins -- those that were traditionally minted from 90% pure silver -- have not been in circulation in the United States in more than five decades. (The Coinage Act of 1965 removed the silver content from the dime and quarter. Half-dollar coins still contained 40% silver until 1970, and became fully copper-nickel clad thereafter.)
With silver for the most part only being used for commemorative collector coins in the United States since then, consumers in America and around the world began to turn to private silver bullion as a way to protect their hard-earned money from the ravages of inflation. Compared to fiat currencies, which unavoidably see their value erode over time due to inflation, the precious metals typically resist the effects of inflation; that is, their nominal value rises over time as currencies become devalued. This is why gold and silver are each widely considered to be a hedge against inflation.
What do we mean by "hedge against inflation"? Simply put, because both silver and gold are tangible commodities with a history of monetary use, their values tend to rise when government-created currencies lose their purchasing power. As a result, gold and silver spot prices have historically risen over time because of the relative devaluation of the U.S. dollar.
Beginning in the 1980s, many government mints around the world began to sell silver through investment coins known as bullion coins. The silver versions of these coins, such as the American Silver Eagle, the Chinese Silver Panda, or the Canadian Silver Maple Leaf, were struck from .999 fine silver, meaning their composition is 99.9% pure silver. These silver bullion coin programs, and the network of authorized distributors who sell them to the public, have significantly eased the confusion about where to buy silver.
While the legal tender status of these silver bullion coins means that their precious metal content is guaranteed by the full faith and credit of the government that issues them, the main appeal is their fine silver content. The full backing of the U.S. government is also part of the allure of the Silver American Eagle, of course. Investors often buy these 1 oz silver coins as a reliable way to add precious metals to their portfolio.
Besides bullion coins, another option for investing in physical silver is private silver bullion, which comes in the form of silver bars or silver rounds.
Silver rounds get their name from their shape. They are round pieces of bullion. For this reason, they closely resemble coins and are often confused for legal tender. This is why the Hobby Protection Act requires any round that too closely resembles the design features of a real coin (for instance, using a similar design of George Washington that appears on the U.S. quarter) must be stamped with the word "COPY" in order to alert consumers to the fact that it is a replica, as well as distinguish it from government-issued money. Silver rounds never have a monetary value; instead, they are bought, sold, and traded based on the value of their underlying silver content (plus a small premium for the cost of labor and manufacture).
Meanwhile, silver bars are similar to the large, brick-shaped pieces that you would expect to see stacked up in a bank vault. (You may have seen this type of image in cartoons, for instance.) They fit the definition of "bullion" because they are composed of extremely pure (i.e. highly concentrated), investment-grade precious metal content. Just like silver rounds, they bear no legal tender face value and are thus solely intended to be an investment vehicle in the metal they are made up of.
The vast majority of silver bars on the market are produced by private refineries that are found around the world, such as Johnson-Matthey, PAMP Suisse, and the Royal Canadian Mint (RCM). Although you will find silver bars in one-ounce and five-ounce sizes, it is more common to see 10-ounce silver bars and larger. Oftentimes, investors will purchase 1-kilo (32.15-ounce), 50-ounce, and even 100-ounce silver bars in order to add silver to their holdings in bulk amounts. In addition, the price per ounce often (though not always) decreases when you buy silver in larger amounts. This makes purchasing larger silver bars more attractive to investors who are without a doubt interested in getting the most "bang for their buck."
When someone is deciding whether they should buy silver, or what form of silver they are looking to buy, one of the main considerations is the premium over spot. This describes the amount in excess of the spot price (or melt value) the customer must pay for the silver product. The lower the premium, the closer you are paying to the melt price. Unfortunately, you won't find silver for less than its melt value; if that were the case, nobody would be making any money whatsoever! The premium for government-issued silver coins may be slightly higher to account for the higher production quality and assurance of government backing for these coins. Meanwhile, the most generic silver bullion items will generally carry the lowest premiums over spot.
Buy Silver Online
Gainesville Coins offers a large selection of silver and gold bullion and collectibles for secure online purchase. If you'd rather conduct your purchases with a live person, you can visit our showroom or call one of our phone traders. Our expert staff is happy to assist you. We maintain an A+ rating from the Better Business Bureau and a 5-star rating from the National Inflation Association.
Silver is often chosen as an investment vehicle because it is a physical means of storing of wealth. As a tangible asset, it can function as a “safe haven,” meaning it retains its value better than paper money in the event of an economic disruption or political instability. For this reason, it has proven over time to be a viable hedge against the effects of inflation on the dollar. Moreover, silver offers investors a way to diversify their financial portfolio by adding precious metals to their holdings, in addition to stocks, bonds and other paper assets.
Due to its low price relative to gold, platinum and palladium, silver lends itself to being purchased in larger quantities. The more affordable price attracts investors who want to procure a significant amount of precious metal at once. As a precious metal, it is also highly liquid if you are choosing to sell your silver when the time finally comes. It's useful to be able to sell silver in small amounts when in need of cash quickly. Silver is a commodity that appeals to the majority of investors because it can be obtained on almost any budget.
Silver is sold in coins, bars, and rounds, each of which come in several different sizes.
Purchasing Silver Coins
Coins are a very popular form of silver and are widely traded among both collectors and investors. Silver coins must be government-issued legal tender that are inscribed with the year of issue and conform to exact specifications of weight, purity, size and design. This standardization gives collectors and investors the peace of mind that their precious metal is authentic, and also ensures that their bullion will be readily recognized and more easily exchanged. Silver coins have their precious metal content backed by the full faith and credit of the issuing government. Modern silver bullion coins like the American Silver Eagle are now the preferred choice of most investors. Many buyers are also drawn to the Royal Canadian Mint's Canadian Silver Maple Leaf. Some collectors are also drawn to commemorative silver coins.
Numismatic Silver Coins
In addition, silver coins sometimes obtain a numismatic value (or collectible value) above their intrinsic worth (or melt value). This collectible premium may be due to low mintage for a particular issue, or high collector demand for a specific design. Many times, collectible silver coins are commemorative in nature and feature a special proof finish. Some coins may be graded by a third party grading service, and sealed in a protective casing (known as a “slab” in the industry). Coins slabbed by major grading services such as NGC or PCGS typically come with higher premiums, since their condition and authenticity have been expertly certified.
Junk Silver Coins
“Junk silver” is probably the most inexpensive means for accumulating silver coins. This term refers to U.S. dimes, quarters and half dollars minted before 1965, when circulating coinage was made from 90% silver. These non-collectibles are sold very close to the price of their metallic content and often come in large bags containing a mixture of dimes, quarters and half dollars. Old silver dollars like the Morgan dollar and Peace dollar are usually worth more than their melt value, and are not considered “junk silver.”
Investing In Silver Bars
Silver bars are sold solely for their precious metal content rather than any historical or collectible value. Bars are typically 0.999 fine (99.9% pure). They are produced by a number of private refineries, and are either individually cast or minted in large sheets and then cut. A variety of sizes are available, ranging from one troy ounce to 1,000 troy ounces. A popular choice is the 100 oz silver bar. Regardless of size, silver bars maintain the high level of purity mentioned above.
Low Premium Silver Bars
Compared to other forms of precious metals, bars usually offer the lowest premiums over the intrinsic worth of the metal content. Larger sized silver bars are usually sold at a lower premium per ounce than smaller ones, often just a few dollars over the spot silver price. This makes bars an attractive option for the cost-conscious investor interested in how to buy silver. In other cases, investors prefer something that has a more recognizable brand name. This includes PAMP Suisse, Johnson Matthey, and Engelhard silver bars. These brand name silver bars usually entail slightly higher premiums.
Regardless of their premium level, silver bars usually have their weight and purity stamped directly on the bar. As an added assurance, some bars even come with an assay card or a certificate of authenticity from the refinery, that verifies the weight and fineness of the bar.
What Are Silver Rounds?
Silver rounds may look similar to coins, but they are not legal tender. Instead of a face value, they often bear inscriptions of their weight and purity. Rounds are purchased for their bullion value in the same manner as bars. Some rounds carry classic designs that were originally featured on old coins. This can certainly add to the confusion, but most of these type of rounds will have the word COPY on the front or back.
Many popular rounds, such as those from Sunshine Minting, carry original designs. Rounds are made in a wide variety of sizes, down to as small as 1/10 of an ounce. This affords the buyer a great deal of flexibility to trade, invest, or liquidate their silver incrementally as they see fit.
Bars and rounds produced by ISO certified refiners are eligible for inclusion in a self-directed Individual Retirement Account, or IRA. Always be aware of where your bar or round came from -- a private mint or government mint -- and the reputation of the refiner when you are buying silver bullion.
To learn more about purchasing silver, visit our Learning Center.