Silver Eagle Coin
A primary advantage of the Silver Eagle is that it’s very liquid, so buying and selling are easy and convenient. A primary disadvantage is that the premium can run as high as $2 over the metal content value (depending on the dealer).
The $1,000 bag weighs about 55 pounds and contains about 715 ounces of pure silver. What kinds of coins are in the bag? If half-dollars were used, there would be 2,000 coins. If the coins were quarters, then there would be 4,000 coins. Dimes? 10,000 coins. Because the bag of coins is bought as a bullion investment, the price of the bag would move in correlation with the price of silver. Many firms can sell you half bags that have $500 of face-value silver coins to make it easier for storage and handling.
Even though these old coins are generally priced as bullion, they are coins that are no longer minted. That tells you that the supply is finite, so prices for these bags could rise further if demand increases.
The difference between the buy and sell is fairly constant, and there are investors who buy bags when premiums are cheap or negative and trade them when premiums increase substantially. Keep in mind that you’re required by law to report your sale of $1,000 face value 90 percent bags on IRS Form 1099B. Smaller quantities of 90 percent aren’t reportable. (Ninety percent silver means that all the coins are 90 percent silver content and are typically U.S. dimes, quarters, and/or halves issued 1946–1964.)
The Peace dollar being the less expensive is quoted by the bag. Such coins are always in average condition and grade VG (Very Good). A Morgan dollar bag and better-quality coins are available at slightly higher prices, so it pays to ask questions before placing an order. This option is popular because silver dollar bags have represented real, portable wealth for more than 100 years.
The 40 percent silver bag has a number of advantages:
- These are real U.S. coins and therefore are legal tender. In an emergency, this could be significant.
- The bag has a high face value ($1,000), which limits the money anyone could lose should silver move lower. This is easily seen in a down market because premiums almost always move higher.
- Unlike 90 percent silver bags, you’re not required to fill out IRS Form 1099B on 40 percent bags when you sell.
- 1,000-ounce silver bars: These bars tip the scales at about 68 pounds. They’re typically used to settle the delivery obligations of futures contracts at NYMEX (the New York Mercantile Exchange, which is part of the CME Group). A typical futures contract is tied to 5,000 ounces of silver, so five of these bars will cover the physical requirements for delivery. The bottom line is that this size isn’t practical for average-sized or small transactions typically done by investors. Besides, why get sued by the delivery guy for his backache?
- 100-ounce silver bars: Another popular way to own bullion silver is the 100 troy ounce bar, which is 0.999 fine. At a tenth of the size, it’s also a tenth of the weight: 6.8 pounds. This is the most typical weight for large retail transactions among investors.
- 10-ounce silver bars: These are popular and the most common for small investors. They come with a slightly higher relative cost, but as an absolute transaction, they fit the small investor’s budget.
The common popular brands that most investors will come across are Engelhard and Johnson Matthey. There are more obscure sources, but these two have a long-time reputation for their standards such as metallic quality and authenticity.
Serious investors may consider a portion into bullion as a part of their precious metals foundation and then allocate a portion of their investable funds among some of the paper assets (such as mining stocks and ETFs). Over the long haul, accumulating your investing among the different classes of physical and paper assets will prove rewarding as the precious metals bull market unfolds.