One of the crucial turning points in human history was the invention of the silver coin. For centuries, silver bullion coinage formed the backbone of international commerce and everyday trade.
Modern silver coins still serve as an investment vehicle today, but they are no longer intended to be used as money.
How did we get here? Is the popularity of silver metal for coinage simply an accident of history? What makes silver coins so special and useful? All of these themes will be explored below.
Characteristics of Silver Coins
All silver coins share a set of basic characteristics:
- They are government-issued and have legal tender status
- They have intrinsic value based on the fine weight of their metal content
- They are either intended for investment or collecting (modern), or were used in everyday commerce and trade (prior to about 1965)
The Origins and History of Silver Coins
The earliest recorded use of precious metals as coins actually pre-dates the emergence of silver coinage. Instead, a gold-silver alloy known as electrum was used in the kingdom of Lydia, located in modern-day Turkey, as far back as the 6th century BCE.
Highly pure gold coins eventually replaced the electrum coins. Later, various Greek states borrowed the same model for their own currency coins. In due time, silver coins became the dominant currency throughout much of the ancient world, including civilizations as distant as India and the Chinese dynasties.
This wasn't the end of the story, however. Silver coins from continental Europe like the Maria Theresa stater or the Spanish eight reales became adopted as worldwide standard trade coins. Later, the Royal Mint in Great Britain would issue its own silver and gold coins for international use during the British Empire, often using the superior sterling silver (.925 fine) and silver Britannia (.958 fine) purity standards.
Why Is Silver Used for Coins in the First Place?
The reasons why silver is so well-suited for coins may not be obvious. After all, about half of silver demand comes from industrial sectors and, moreover, a shrinking number of people alive today are old enough to remember when silver was used as circulating money. It was even used to back paper money known as silver certificates for a time. The certificate's redemption value could be measured in 90% silver coins.
A few factors that led to silver being coined into currency are its recognizable color, relatively high malleability, and its nearly universal value to human societies.
The Advantages of Silver Coins as Money
When struck into coins by a government entity, silver meets all of the criteria needed for sound money:
- Silver is uniform, or fungible, meaning equal quantities of silver of the same purity are interchangeable
- Silver is portable, making it easy to transport across long distances
- Silver is durable, so it won't spoil or degrade over time in storage
- Silver is easily divisible into smaller sizes for lower denominations of money
- Silver has been widely recognized and accepted as money throughout history
- Silver is in limited supply as a natural resource in the earth's crust
Silver Coins Were Useful for International Trade
In virtually every corner of the world during antiquity, archaeologists and historians find empires and kingdoms that minted silver coins.
We already noted that silver coins originated in Asia Minor. The Ancient Romans regularly issued silver coins across many centuries. Macedonia’s famous Alexander the Great helped spread the circulation of silver coinage beyond the Greek world to Persia and India. Later, when the Persians were conquered by the Ottoman Empire, silver coins were still the most trusted medium of exchange for trade across the Middle East. By the colonial period, the silver coins in use across Spanish America also became a standard for trade, even in foreign countries.
Modern Government-Issued Silver Coins
During the 1960s and 1970s, governments the world over stopped production of 90% silver coins for regular circulation. Coins that had previously contained “coin silver” (.900 fine silver) were now made from cheaper alloys, usually some combination of copper, nickel, zinc, and/or aluminum.
Yet demand for silver bullion as a way of storing wealth continued despite this government action. In response, the 1980s saw several new bullion coin programs and semi-numismatic bullion coin series.
New coinage laws and related legislation authorized the production of legal-tender silver coins that were expressly intended for investors. Chief among these were the Chinese Silver Panda (1983), American Silver Eagle (1986), and Canadian Silver Maple Leaf (1988). On some occasions, however, these coins have become collectible. Some countries also issue special proof varieties of the flagship bullion version of their coins for collectors.
Where Are Silver Coins Made?
Two of the first entrants into the silver bullion coin market were United States Mint silver coins and Chinese silver coins, particularly the Chinese Silver Panda coin, featuring one the country's famous national symbols, the Giant Panda. Each year the panda design is updated. The obverse of the Silver Panda remains the same, depicting the Temple of Heaven building in Beijing.
In addition, you can also find:
- Perth Mint silver coins (Australia)
- Royal Mint silver coins (United Kingdom)
- Royal Canadian Mint silver coins
- Austrian Mint silver coins
Several of these major government mints also strike coins for smaller nations, such as Pacific islands like Palau, Niue, Tuvalu, and the Cook Islands.
How Are Silver Coins Minted?
In the earliest days of silver coinage, coins were literally hammered by hand. It wasn't until the middle of the 16th century that the more convenient screw press came into use. Screw presses remained the primary way of striking coins through the middle of the 19th century.
The standard mint weights (known as troy weights or troy system of weights) used for precious metals can be traced back to at least medieval England. The notion of troy ounces even has antecedents in ancient times, as well.
Coin designs have grown more detailed and sophisticated over time to match the advancement in coin minting technology. Many coin designers (known as medalists) were also accomplished sculptors, and earned great acclaim in their field similar to how Philip de László became famous for the portraits he painted. Today, medalists like George T. Morgan are likewise highly regarded within numismatics.
Some modern bullion coins, like the Canadian Silver Maple Leaf, suffer from the quality control measures of modern minting. Some Canadian Maple Leaf coins have been known to develop "milk spots." These spots have a cloudy appearance and are believed to develop due to a reaction with cleaning detergent during the annealing process.
However, it is never advisable to try to clean a coin or improve its appearance on your own.
Collecting Silver Coins
There are some silver coins that have numismatic value -- in other words, collectible appeal. Proofs and older coins are often more likely to have additional market value to collectors.
One good example is the Morgan silver dollar. Morgan dollars were minted in the United States between 1878 and 1921. The series is now widely collected and has remained high in popularity in the numismatic industry.
Even certain modern coins, like the RCM Predator Series from the Royal Canadian Mint, can command a collectible premium over their silver value thanks to factors like limited mintage or artistic design.
Other Forms of Silver Bullion
Silver coins are not the only way for investors to gain exposure to physical silver bullion. Two more popular options are silver bars and silver rounds.
The former are exactly what they sound like: rectangular bars made of highly pure silver. Rounds, however, have confused many investors over the years.
This is because rounds look very similar to coins. If you want to be technical, they are silver medallions. They are usually .999 fine silver, although you'll also see .925 fine sterling silver rounds, as well.
Unlike coins, silver rounds are not legal tender. They are not issued by a government and have no face value.
Rounds have one advantage over coins despite this drawback: Silver rounds (and bars) usually have a lower premium over spot than silver coins of comparable weight.
Why Are Silver Coins an Investment?
There's a good reason that precious metals portfolios are frequently touted as a low-risk method of investing that promotes portfolio diversity.
Bullion coins are categorized as "investment coins" because their legal tender status is largely symbolic. They are not intended to be spent as money (although technically you could do so). Instead, they are issued expressly for investors to gain exposure to the metals.
For these purposes, it's often popular to purchase bulk coins of 20 or more. This even helps customers get a small discount on the cost per coin.
Overall, silver's non-correlation with most other traditional financial assets makes it a useful store of wealth over the long run. Moreover, as both industrial and investment uses of silver increase over time, there is also upside potential for this tangible asset.