Investing in Silver with Coins, Rounds, Bars, and ETFs

Silver has recently experienced renewed interest as a precious metals investment. Earlier this year, the price of silver exceeded the $20 per ounce level. This price marked a 27 year high, but still fell short of the all time high price of $50 per ounce reached in 1980. In recent months, the price of silver has declined, but this has only seemingly spurred increased investment interest in the metal. There are a variety of methods for making an investment in silver.

The most common method for investing in silver is through government issued bullion coins. The two most popular choices are the American Silver Eagle issued by the United States Mint and the Silver Maple Leaf issued by Royal Canadian Mint. These coins are issued by the governments and contain one ounce of silver. The coins can be purchased for a premium above the precious metals value. The premium generally covers the cost of manufacturing and distributing the coins plus government and dealer profit margins. Recently, premiums for Silver Eagles and Silver Maple Leafs have expanded as demand has grown.

A second, related method for investing in silver is generic silver rounds. These are usually contain one ounce of silver and are minted in the shape of coins with various designs. Silver rounds are generally produced by private mints and are not legal tender. These silver rounds have much smaller premiums above precious metal cost as compared to Silver Eagles and Silver Maple Leafs.

Prior to 1965, the various circulating coins of the United States were minted in 90% silver. From 1965 to 1970, United States half dollar coins were minted in 40% silver. Some people choose to invest in silver by purchasing bulk lots of 90% or 40% silver coins. If the coins have little collectible value, they are referred to as junk silver. Junk silver is generally purchased in bags containing $1,000 face value of coins. For 90% silver coins this equates to approximately 715 ounces of pure silver. There are some unique benefits of buying junk silver. First, although the coins supposedly have little collectible value, a careful search through the coins may prove otherwise. Any collectible coins found could have a value well in excess of the silver content value. Second, the coins are considered legal tender. If the price of silver declines significantly, there is an ultimate floor value at the face value of the coins.

A less common, but increasingly popular method for investing in silver is through 100 ounce or 1,000 ounce silver bars. In the past, this has been the method used to purchase silver for the lowest premium in excess of the market price of silver. This dynamic has changed in recent months, with 100 ounce bars sometimes carrying premiums of 40% or more. Premiums for 1,000 ounce bars have also expanded, but not as dramatically.

A final method for investment is through electronically traded funds or ETFs. The Silver ETF allows individuals to invest in the precious metal without physically purchasing and storing it. Shares of the ETF can be purchased in a brokerage account and represent a predetermined amount of silver less annual custodial expenses. As shares of the ETF are issued or redeemed, silver is bought or sold from a trust. In theory, the price of the Silver ETF should track the price of the physical metal.

Read the latest news and commentary on gold and silver. Find more information on silver investment including 100 oz. silver bars.