Chapter twenty-nine. My "hedge" against dropping prices.

If nothing else - silver has been volatile lately.

Going back just a little bit to April 2012 the spot price for silver was around $34 an ounce. Today it is at $17.60 an ounce. Nearly a 50% drop in dollar price. We know it will never fail and always have a store of value. But, is there any way to offset this (on paper) loss in our investments?

Yes, I think so.

Morgan dollar selling prices.

In this chart if you look at early 2012 and compare it with the current selling price you will immediately notice certified silver dollars (I used a 1921 MS64+ Morgan dollar as a typical example) dropped nowhere near the same as spot silver for the same period. This Morgan silver dollar went from $102.00 in April 2012 down to $94.00 in September 2014.

So, while silver spot prices dropped $16.40 for a 45.3% loss, the value of a 1921 Morgan dollar dropped just $8.00 for an 8% loss. A huge difference.

The reverse of this is also true. As silver spot prices rise, so do the coin prices. Coins rise and fall just like spot silver BUT FAR SLOWER, particularly on the downside. The upside rises more dramatically as silver spot prices rise. If silver were to jump to a hundred an ounce, trust me, no silver dollar could be bought for much less than that. The obvious reason for this is that with numismatics there is a completely separate market from the "silver bug" market. These coins have value for two reasons. First because they are made of silver or gold (precious metal). Secondly because they are sought after for their historic value and collect-ability.

A piece of American history in my hand!
What I consider a fine specimen. Why it isn't a PL is beyond me.
But, let me make this perfectly clear:

Unless you are knowledgeable regarding certified silver/gold coins, you can lose. And lose BIG! If that's the case, stick with bullion. Much of my blog deals with collectable coins (certified) and that is a start towards the knowledge you need to avoid big losses. But that alone isn't enough. You need to spend some online time yourself, learning what to buy. I get stuck sometimes myself paying too much or even buying a coin which isn't what I thought it was, and I have been at this since the mid 60s (and even before in some ways). Just be careful is all.