Rounds VS ASE's Which To Buy

Perhaps you should address my point that even though you can sell them for over spot you buy them for even more over spot than that and it is the difference between buy and sell price(better known as profit to most of us) that is important. Look at Provident published online buy and sell prices and then tell me you would make more on ASE's than generic silver rounds.

 

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I have never seen junk silver sell for cheaper than generic rounds or bars. You have to take into account that you can't just compare ounces because generic silver is 99.9% silver and junk is 90% silver. There is also the wear factor on junk silver. The dealers in junk silver use the figure of .715 ounces of silver per $1 face value of junk. So if you have 10 oz of junk silver you have got 7.15 oz of silver whereas 10 oz of generic rounds is 10 oz of silver.

 

Some dealers, especially online, report their premiums on junk silver as a percentage over spot per ounce. The wear issue is significant, however. Most junk silver sold at low or 0% premium is largely in cull condition coins, which will have certainly lost some of their weight.

I actually work for Gainesville Coins, and we frequently offer junk silver coins at 0% over spot in our clearance section. Of course, shipping costs and attrition due to wear as you mentioned will influence the price you effectively pay per ounce...but shipping also affects the actual price paid for rounds and bars.

I won't include a link so as to head-off accusations of posting this as an ad, but you are certainly welcome to fact check me on your own.

 

That may be true if you're simply looking to flip them to some bidiot, but try holding them for 25 years and compare the prices of the two.

Chris

 

What are your exit strategy plans? I ask as what you should buy depends on how you plan to use it (cash it out).

As for melting, all US coinage can be melted legally except for nickles and pennies.
Read tghis article: http://coins.about.com/b/2008/03/12/coin-dealer-ethics-melting-coins-for-profit.htm

As of about 2 years ago, dealers are getting a higher premium on silver US "junk" dimes/quarters/halfes than before so many have chosen to not melt them like they used to. For example, where the premium was around 7/8% during most of 2000 - 2011/12 it is now well over 15%.

 

I was at a flea market a few weeks ago. A seller had a basket that included a bunch of generic mercury dimes and pre-65 quarters. Nothing special, all common stuff. He had everything priced at 2x melt value. His reason, hat is what the book price was for their condition. I see common halves the same way at antique/flea markets. I could show them closing prices on eBay, but I am also not going to pay that much so I just move on. IMHO, I should be able to buy them somewhere between what a dealer would buy them for and then resell them for. Ultimately, if prices hit where I am going to sell I go straight to my LCS and sell them.

 

Now comes the second big debate for stackers -- whether to HOLD to protect and preserve the purchasing power of one's liquid assets well into the future, or TRADE to make a little money here and there.

 

Well, we do not really need to debate that here do we

My approach to any investment is going to include considering how that investment will eventually become a return-on-investment. If one has no idea how they are going to liquidate, or how to guide their descendents towards liquidating, then they are not fully putting their investment strategy together.

IMHO, owning physical implies having long term goals in place. Dealers have short term plans in place.

 

Oh, the debate is quite clear, and you'll find some of both persuasions on CT -- whether to "trade" silver for short-term gains, up and down, up and down, OR whether to "hold" silver (or gold) for the long-term, to protect the purchasing power of your otherwise-depreciating cash, i.e., via inflation, or worse, hyper-inflation.

There are decent arguments on both sides.

 

Trading for short term gains is a dangerous game, one that a lot of average Joes may be a bit under-equipped for. That is not to say they're stupid, mind you. If I were to do it, it definitely would only be with a fraction of my overall investment in precious metal.

 

I agree, "trading" with physical silver or with the SLV/GLD ETF shares -- dangerous. But there's an additional risk that apparently no one thinks about.

Let's assume you are both skillful and lucky trading physical silver, and have fairly consistently netted (say) 15% per year, which would be an excellent, a very high return. You buy and sell, let us further assume, several turns of your inventory in a year, making 5% more often than you lose 2%, etc. In other words, a net gain.

After you have sold your holdings, and are waiting for the price to go down again, silver (or gold) suddenly spikes. It wouldn't take much; Russia halfway invading Ukraine, failure of a couple second-tier banks in Europe, an assassination, an Ebola outbreak in a major European city -- there are plenty of spike-events out there.

The long-awaited spike, the breakout, the surge, whatever you call it, means that you will probably never have the opportunity to "get back in" at a price you think is reasonable (or worse, logical). End of game, start of PM's upward march.

A year later, it's obvious you left A LOT OF MONEY on the table by trading instead of holding. It isn't exactly money out of your pocket, but it's still the mother lode of profits all the stackers were waiting for. By the way, the stackers didn't sell. That would be trading. And that's the unspoken risk of trading.

 

Just to clarify, there are two laws that I am aware of that pertain to the destruction of coins. One that makes it illegal to fraudulently deface US coins and the other that expressly forbids the melting of pennies and nickels.

The one that would apply to Silver (and gold) American Eagles is the former, since it is neither a penny nor a nickel. This law only makes it illegal to fraudulently alter coins. Changing the date in an effort to increase its value, or shaving some of the silver off the edges, or dissolving some of the silver in nitric acid, would be good examples. However, it is perfectly legal to completely melt a Silver Eagle to use all of the silver for other purposes.

 

It has already been mentioned, but the first question that comes to mind is "why melt them"?

If you want to use the silver to make something like jewelry or solar panels, then that's one thing. But to melt them simply for resale as bullion is silly. They are already in a highly recognizable form with a known weight and purity. This is the basis for their premium over generic silver rounds. While technically "legal", melting them for resale as bullion would guarantee you would lose that premium.

Edit: I just read your post where you said you didn't intend to melt them, but the people you eventually sell them to might want to.

 

To make and sell fake rounds is petty fraud and might get you a police report. To make and sell fake ASEs is counterfeiting and gets Secret Service involved. As far as guaranteeing authenticity, which is the bigger stick?

 

I think you may have of meant that if you have $10 face value then you have 7.15 ounces of silver. If you had 10 oz of junk silver you'd have 9 ounces of silver. (because junk silver is 90% pure silver)

 

Right now Provident Metals has 1 oz .999 silver rounds for .29 over spot, that's the lowest I've EVER seen from an online retailer, I'd take a look at that if you are considering buying silver. (sale lasts till Sunday according to their page)

 

I only buy US government bullion, as it has a greater chance of appreciation. Currently I buy a few ASE’s for my collection, but have shifted most of my silver bullion purchases to the 5oz collector P-Pucks. The P-Pucks can be bought from the mint (eliminating the risk of counterfeits), at about the same cost as 5 ASE’s, yet have much lower mintages. The P-Pucks have performed much better than rounds or ASE’s in declining PM markets and should continue to perform well with their extremely limited supply.

 

If they are truly being sold as a percent over spot based on the actual number of ounces, then wear would not be an issue, because any given weight of 90% silver will contain 90% silver, regardless of the amount of wear.

However, if you are calculating the number of ounces based on the face value, then yes, wear could be an issue. Looking at Gainesville Coins' web site, all junk silver offerings I see are measured in face value. I suspect this is what you were referring to in your post.

I don't think it would be a problem with Gainesville Coins though. Included in the specifications for their 90% silver offerings is an actual silver weight of .715 ozt per $1 face value. If you were to receive a lot that had a total weight of less than .794 ozt per $1 face value, then you would have grounds to request a partial refund or an additional shipment to make things right.

 

$0.794 vs $0.715 ?

 

This wasn't addressed to me, but your post seems to assume one buys and sells to a dealer, likely the same dealer.

Buying and selling ASE between private parties can eliminate this "profit" you speak of, or even create an opportunity to capture some of that profit. I routinely sell to private parties at a higher premium than I buy ASE from Provident. I have also bought ASE for spot, but this doesn't happen very often.