Buy Silver at Cost
The dream of every silver buyer is to buy silver at cost, without the premiums that retailers add to the price to cover their costs of operation and, in many cases, to earn a profit on the silver’s numismatic value as well. The problem, of course, is finding silver at cost (that is, at the basic spot price), and though the search can be well worth it if you locate the trove you are looking for, it is also true that such deals are relatively rare and most people are compelled to pay some kind of premium if they want any silver.
You should approach the task of buying silver at cost with the right attitude, mindset, and realistic appraisal of your chances. Because buying silver at cost means that someone, somewhere is losing money on the deal, and human beings are generally shrewd enough to avoid buying something with a premium and selling it to someone else at a discount, you should recognize the possibility that nothing will turn up. In this case, your best course is a philosophical shrug and a resolve to keep your eyes open in the future.
You should also remember that it is nearly impossible to obtain a rare, collectible coin at its spot value rather than with thousands of dollars worth of numismatic value tacked on. Such finds are equivalent to winning the lottery. It is something that you will rejoice in if it occurs, but the odds are that you would never achieve this in the course of many lifetimes.
Most purchases of silver at cost are of such forms as silver grain (a somewhat dubious investment due to assaying difficulties), silver bars, silver rounds, or “junk silver”. Basically, only silver without numismatic value will be obtainable through this method, though there is always the slim chance of an extremely rare find, as noted above.
The Garage Sale Method
If you are looking to buy silver at cost and do not have a large amount of money to invest, then your success depends almost entirely on chance. You might want to go to auctions, garage sales, tag sales, and the like, hoping that someone’s collection of silver coins is for sale, and that the auctioneer or seller does not know their actual value.
Garage sales are at the same time your best and worst bet; on the one hand, the people holding them are the most likely to have no idea how much silver coins are worth, but on the other hand, they are also unlikely to have a collection of the metal waiting for you. Auctions are considerably more difficult to find a bargain at because a trained auctioneer will have a keen eye out for anything that has a high price on the open market. It is, after all, their source of income to know a good item when they see it, and to squeeze as much profit out of it as possible.
Pawn shops are another possibility, though again you are relying on the ignorance of someone whose job it is to be well informed about the prices of valuables such as precious metals. A pawn shop owner will very likely know quite well how much silver is worth, and be unprepared to let it go at a low price when there are many people who would be willing to pay a sizable premium to obtain it.
eBay is practically useless for picking up silver at cost – not because people will not put silver up for bidding at fantastically low prices, since they will, but because thousands of other people also interested in silver are sweeping the site like barracudas, every hour of the day and night, and will soon bid the price of silver up to astronomical levels.
Playing the Commodity Markets for Silver at Cost
A more certain method of obtaining silver bullion at cost is to purchase a commodity contract for several thousand ounces of the material. By buying directly on the commodities exchange, you will be able to obtain the silver at a considerable discount because of the bulk you are buying. In effect, you will be getting the silver at cost, or possibly even at wholesale prices.
The drawback to the commodity market is that you will need to have a very large chunk of cash on hand in order to purchase even a single contract. If you are affluent enough, this is no problem, while if you are somewhat less affluent but still have thousands of dollars, making a purchasing pool with several other people is a good way to get a contract which would otherwise be too expensive.
You should buy a contract outright rather than buying a commodity option. An option is simply a reserved place to buy a contract at a later date, at a certain price. It is, however, meant for speculators, not for those who are trying to build up a stock of physical bullion. You will end up accruing more fees and needing to go through more paperwork and rigamarole if you take a commodities option than if you just buy a contract and be done with it.
Of course, you will need to find out how to get the silver delivered and make arrangements for its shipping once the contract matures and you are the owner of the physical silver. Contrary to the rather pathetic urban legends, commodities will not be brought and dumped on your lawn when you take possession of the physical goods. Rather, they are warehoused and you are billed for the warehouse space until you arrange to have the commodities brought to you.
If you buy silver in this way in order to obtain it at cost, then you should discover who to contact about shipping your precious metals long before the contract matures, in order to keep warehousing costs to a minimum, or possibly eliminate them altogether.
Beware of Sterling Silver
Though you might find sterling silver items which appear at first glance to be priced at spot or even possibly below spot, this is not actually a good deal. The millesimal fineness of sterling silver is only .925, or 92.5% pure silver, unlike the .999 fineness of silver bullion. It is therefore actually worth 7.5% less per ounce than pure silver, and possibly even less, given that any monetary use of the silver would require extraction of the alloying metals. Sterling silver is certainly better than nothing if you cannot buy anything else, but it is a metal of last resort.
