Best Types
With the large number of different kinds of silver bullion that are for sale in today’s world, someone new to the precious metals scene may be confused or daunted by the sheer volume of choices available. Even a veteran of the market may experience a moment of doubt when confronted by the seemingly endless cornucopia of sizes, shapes, special features, weights, and other ways that governments try to make their product stand out from the crowd and win your purchase.
The first thing to remember when you are buying silver is that the metal itself is all equal, regardless of where it originates. 99.9% pure silver, or silver of .999 fineness, is used universally by all the nations of the world when minting their bullion coins.
Wanting to compete successfully against governments, private companies and banks which issue rounds and silver bars also make use of 99.9% pure silver. Therefore, whether your coin is minted in Perth or Paris, Vienna or Shanghai, the metal in it will have the same intrinsic worth – the current spot value of silver for that specific weight.
The one exception to this is Canada, whose mint refines the silver with fanatical diligence until it is 99.99% pure, with a .9999 fineness. This means that their silver coins are purer than other coins by 0.09% – a slight trace, but possibly significant when you are purchasing in very large quantities.
However, the premium over spot which some coins but not others can command alters the equation considerably. Coins are worth not just the intrinsic price of their metal, any more than a book is worth no more than the total cost of the paper in its pages, regardless of other factors. Although the spot value and price of a coin are often fairly close, especially if the coin was recently struck and/or is very common, some coins are highly collectible and are worth large amounts of money.
Proofs are a good example of the type of silver which possesses a very high premium over spot even shortly after being issued. These coins are highly valued for their rarity, their double striking (which renders the impressions on them exceptionally clear), and the special finishes which are placed on them, including such effects as deep cameo, mirror, deep mirror, and frosting.
Although the numerous types of silver appear confusing at first glance, there are actually some types which are better than others, depending on what purpose you are buying them for. The nature of the buyer determines which type of silver is most desirable from their perspective, so if you arm yourself with a clear knowledge of what role you occupy in the silver market, you can focus on the type of silver that is best suited to your purposes. You can always diversify your portfolio later by purchasing smaller amounts of the other types once you have more knowledge and experience.
Investors
The best silver for investors – those who want to “play the market”, buying and selling the precious metal regularly in order to produce an immediate profit – is that which has, or will soon have, a high premium over spot. Spot value does not appreciate as quickly as premiums for rarity and collectible features, at least in normal times.
If you are an investor who means to work the market for an income, you should familiarize yourself with all of the major coin types, and learn which have a high premium over spot. Special issues of coins, such as proofs, tinted coins, coins with inlaid gems, and other “art” versions of ordinary bullion coins are an excellent place to start. Some coins are highly prized just because they are unusual – for example, the Chinese Silver Fan coins, whose rectangular shape has made them exceedingly popular and driven their premiums up to several times the coin’s spot value, or more.
The object, of course, is to buy low and sell high. You don’t want to buy a coin when its price is already near the peak. Fortunately, popular collectible coins often come in series, allowing you to “get in on the ground floor” with each new release, buying it shortly after minting and then reselling it after the price has risen. Study existing coins for hints as to which coins may become popular in the near future, and invest in these – your demand, however small it is relative to the market, will still help to increase the prices over time.
If you have enough money, you may also want to buy a few collectible coins which are not particularly active at the present time, but which have some characteristics that look promising (a beautiful or unusual appearance, limited minting, proof condition, and so on) on the chance that they will appreciate in price.
Although this is something of a gamble, it is highly unlikely that the coins will depreciate significantly, so at worst you will be able to sell them, recover your money, and use it for something else.
Small Buyers
If you are a small buyer, then the cheaper silver coins (those with a low premium over spot) as well as silver rounds and the smaller size of silver bars, are all good choices. Their value will appreciate modestly over time if the general trends of the precious metal market continue to follow their current patterns into the future. You will not get rich buying and selling coins in this manner, but you may be able to fund a purchase or payment in the future using your stock of silver.
Rounds and lower priced coins are also a good way to hedge against inflation, as are the lighter silver bars (one ounce, five ounce, or ten ounce bars). Building up your reserves a few coins or bars at a time will eventually add up to quite a store of value – which should, from all indications, be mostly inflation-proof, offering financial protection to you and your family in the event of economic disruption.
Alternatively, you can try to become an investor on a small scale by purchasing one or two coins with rapidly rising premiums due to their collectible nature, just like an investor as noted above. You can then roll profits into buying a few more coins, and slowly widen your efforts as you build up more money. Eventually, you may graduate from small buyer to investor.
The problem with trying to invest – as well as buying and selling rapidly for a profit – when you are a small buyer, is that you have very low diversification. In short, if you can only buy one coin, and your guess that its premium will soon rise proves to be wrong, then your whole investment strategy is a dud. Larger investors can ensure more steady, reliable profits by purchasing an array of different silver, while you are essentially forced to “put all your eggs in one basket” exactly because you can buy so few of them.
Large Buyers Looking For an Anti-Inflation Hedge
If you are a large investor looking to buy silver as a hedge against inflation, then you can purchase larger bars, including the 1 kilogram, 100 ounce, and 1,000 ounce bars that some companies create. These large bars are an efficient store of value and will not be too difficult to liquidate at the scale you are operating at. The principle is largely the same regardless of whether you are an affluent individual buyer or if you are buyer looking for an inflation hedge for your company.
Large buyers are faced with the problem of storing and managing their silver as well. Keeping it in your possession ensures that you will have access to it, but it will be more exposed to risks and may be inconvenient if you ever need to move it from one physical location to another.
Placing the silver in a vault and just retaining the certificate reduces the chance of random theft, and frees you of the physical burden of keeping and moving the silver, but does leave you at the mercy of the vault’s honesty in a situation (economic upheaval) when defaulting on the certificate and refusing to release your silver could prove very tempting for some storage facilities.
Some banks have been known, according to recent accusations, to denounce gold certificates as frauds in order to retain the gold that has been deposited with them, and the same thing could theoretically happen with silver as well. Large bars are the best anti-inflation hedge for larger investors, but keeping them in your possession may be the wisest course if you do not entirely trust the vaults.
Silver Collectors
If you are buying coins simply because you like the way these gleaming, finely etched miniature pieces of art look, then there is no “right” silver to buy, other than that which you find attractive. Rounds, bars, and coins are all potential sources of aesthetic appreciation and the sense that you have made your collection more rounded and complete.
In short, if you are a collector, interested only in the coins as art objects, without regard to their price or usefulness as a hedge, then buy whatever you like most.
