Chapter forty-four. So many ignorant - so little time

My blog is meant to be educational. I think the need for this is increasing daily based upon some remarks I have read regarding silver coins and prices. 

Any time a coin/precious metal dealer advertises online, the comments come pouring in with remarks such as: "Sure, a one-dollar coin for eighteen-dollars!" or similar, which express the writer's total ignorance. No offense meant. Just that it applies. I am not saying people are stupid. Just ignorant. There is a big difference. (Some few are indeed both!)

I began learning about coins in the early sixties or even before. I made a big push in learning in the mid-eighties and into bullion much more recently. I am sure most of the comments I am referring to are from people who haven't even begun their educational journey.  I hope to make this blog a part of their learning process so they wont continue to embarrass themselves with ill-informed comments online or elsewhere.

Any investment in precious metals, including collector's coins, requires the buyer to have information about what is being bought. There are many things to consider. For example, to buy bullion you need the current "spot" prices. They are available in many places online. 

After you understand that a "spot" price is what the metals are selling for in huge quantities to large dealers, you can estimate the value to you. Most of the time you can look for the amount added to each ounce above spot prices to compare offers. Yes, dealers are in business and need to make a profit! They wouldn't last very long if they bought at spot price and sold at the same price. So, don't expect that from them any more than you expect to buy any other commodity at the seller's cost. In fact, be leery of any sales offered at spot or below.

However, some individuals may indeed sell for spot or less. Those items are a rare bargain, and there is certainly nothing wrong with buying from individuals. However, be certain about what you are buying. Fakes do exist. Don't own one!

The amount over spot price is what matters. Anything printed on the bullion doesn't matter (usually). So, if an ounce of gold/silver has a value number printed on it, that has little or nothing to do with its "actual value". A new USA silver dollar says "One Dollar".  It will say that forever. It is totally arbitrary. It has nothing to do with its current value. Nothing! This one topic is perhaps the biggest problem facing the new investor. Just remember the spot price is what matters. What is stamped on the coin or round or bar means almost nothing.

There are rare exceptions in bullion buying. One that comes to mind is the bars from Englehard. They are no longer in business and the prices are a little higher than other bars because of the ongoing scarcity. But as far as value based on spot prices, they are simply worth the same.

Another factor which I hold in a high place personally is the identifiability of real vs. counterfeit bullion. How can you tell? I covered this elsewhere, but to me I prefer the newer Sunshine Minting bullion. They are encoded with a validity hologram type emblem which may be impossible to reproduce. It is visible only with the decoder, which they also produce. When I go to sell to someone this a valuable feature, plus of course when I buy.

SunShine Mint's decoder at work.
If you are investing in US coins, which were once in circulation, there are other things you need to learn. As with any investment, you must study and get informed or you will lose your shirt!

Circulation US coins were not minted for the exclusive use of collectors nor for bullion. They are mostly 90% silver or 22 K gold. Not pure (99.9%). In the case of gold, since it is so soft (even the newer gold American Eagle "coins" produced for collectors are not 99.9%).

In other words, these (circulation US coins) are the coins which once were used in every day transactions and were once spent for the amount printed on them. This is where some confusion exists in the minds of under-educated buyers. After 1964 nearly any coin made for circulation was clad and had little or no silver in it. Therefore, they are simply "worth" the printed value. Yes, there are many exceptions like the Kennedy half which went from 90% to 40% and some proof coins which are still made especially for collectors which are 90%. But, in an effort to simplify things you only need to remember that no coins made for circulation dated 1965 or newer are 90% silver. Later you can dig deeper if you want.

Keep in mind that if (when) the system crashes and you have a bunch of 40% Kennedys or a bunch of silver proof coins, you will need to spend time and effort to educate others about why they are part silver, and that potential buyer will probably not be very interested. I recommend that you focus on pre 1965 silver only. 

There are many 90% silver coins which are readily available and extremely recognizable for what they are. The Morgan dollar. the Peace dollar, Franklin and walking liberty halves. Mercury dimes are also popular.  Today, these are worth much more than their face value and can be valued by you based on spot prices. Remember they are 90% silver, not 99.9%. As I said elsewhere, if you put back just a hundred Morgan dollars you will do pretty well in the crash. Today they are valued (in dollars) around $18-25 each. They will always be recognized by nearly everyone for what they are. Other of my blog pages go into these coins and the slabbed high grade versions of them. Check around.

As for gold it is different. They stopped making gold for circulation long ago. Any gold coin is valuable and is based on current spot prices. Similarly, what is printed on a gold twenty-dollar coin (or other denomination) is totally meaningless as to the coins value.

There are "golden dollars" minted in the US. These are NOT gold. They are GOLDEN color. They have ZERO gold in them and are one-dollar coins worth one-dollar made for circulation.

The spot prices are used by all dealers in figuring selling prices both for silver and gold. However, the difference between spot price and selling price will vary due to the quantity and the size of each bar or round purchased. For example, a one-tenth ounce silver bullion round today sells for $5.09 each. That is $50.90 an ounce. The exact same quality silver in a one-hundred ounce bar sells today for $1,898.56, which is $18.99 an ounce. So, you can easily see which is, by far, the better price. But, keep in mind that one day you will need to buy something with your silver. Then, it will be far more difficult to "spend" a one-hundred ounce bar than say a one ounce bar. That is referred to as "liquidity". Smaller sizes are far more liquid. Unless you go to buy a car using a hundred ounce bar of gold that is!

Additionally, a larger number of items you purchase will drive your cost down. Example: A one-ounce bar of silver from Aydin Coins (Sunshine Mint) costs $21.30 right now. If you buy twenty of them they cost $19.80 each. You spend more but save $1.50 on each one. So, purchase as many/much as you can each time. But, do invest! These costs will, of course, change as the value of the dollar fluctuates.

What you use to make a purchase sometimes matters as well. Many times a dealer will sell for a little less depending on what you use to pay. There may be a lower price if you pay by check or wire for example. Using PayPal or a credit card is a little higher price than check or wire. An example is Silvertowne for a ten ounce bar: Cost today $185.61 for one. If you use a check (waiting until it clears) or wire the money it sells for $180.20. Savings is $5.41. Be sure to consider this savings in dealing with them or similar dealers.

Shipping! Whatever you purchase, the shipping is a part of your cost. Never forget to add this. On eBay there are many with free shipping - and many without. Be sure to read all the screen (RATS!). The cost of shipping is lower on larger purchases (per ounce bought) so don't forget to break out the calculator and figure your total costs.