Micro-Investor's Guide to Buying Silver

[bennett]

In the case of economic collapse where we’re faced with barter based markets, it seems clear that a well-rounded survival inventory should include some silver, and probably gold. For example, see the “Safeguarding of Assets” and “Survival Awareness” on the Resources page of this site (thanks Bill & Kerry).

Now I’m not an expert, or even very experienced “precious metal investor”. 2 months ago, I didn’t know the first thing about it. But listening to George Green’s July interview on Project Camelot finally motivated me to look into it. I was wondering how the heck does someone like me without a lot of money get some precious metals. I certainly can’t afford to be buying gold eagles. But after some research on the internet, found that it’s really quite simple and came up with an approach that is working for me. I’d like to share some of my finding and tips for those who may be interested, in the hopes that it may help to jump start your own efforts. There’s a lot of info on this, and this is a long post, but I’ll try to minimize the detail while providing some links to start with should you like to look into it further. Also, this mostly applies to those who live in the USA.

First, focus on buying “junk silver” American coins. These contain 90% silver and include dimes, quarters, half dollars and silver dollars issued in 1964 or earlier. Many reasons for this, but again, keeping it brief. See http://www.cmi-gold-silver.com/small...ver-coins.html

Second, the best place I’ve found is (take a guess) EBay. Searching “circulated silver”, “junk silver”, “silver rolls” will return 100s if not 1000s of listings. I find that other places, such as coin and bullion dealers, tack on fairly large premiums ($2.00 or so per oz.), have large minimum purchase requirements and mostly don’t provide for on-line purchase. If your looking at 10s of $ per purchase like me, instead of high 100s or 1000s, EBay is the place to go.

Third – how to calculate a fair price to pay. For ultra simplicity use the online calculator here: http://www.coinflation.com/coins/sil...alculator.html This calculator automatically enters the current spot price of silver. You use a pull down menu to select which coin you want and enter the quantity, and it returns the total value. A couple disadvantages here: If you’re looking at a mixed lot, you’ll have to calculate the value of each set of coins separately. Also the calculator doesn’t apply the generally accepted discount for wear or real-world melt value, so the price may be a little more. But for the dollar amounts we’re talking about, the difference is almost negligible (about 11 or 12 cents per $10), which is lost in the noise what with bidding and shipping charges.

If you want to calculate yourself, the formula is:

Fair price = ($ face value) x (today’s silver price in $/oz) x (discounted amount of silver in troy ounces/$ face value).

You can get the current silver price on http://www.kitcosilver.com/ or many other financial web sites. On Kitco, I use the ask price at the top left corner.

The discounted amount of silver per $ face value is:
o For dimes and quarters .715 tr-oz per $ of face value
o For Halves: .719 tr-oz per $ of face value
o For Dollar coins: .765 tr-oz per $ of face value (this is my own estimated discount, which actually is pretty useless, because dollars always seem to go for $2 or more premium)

Here’s an example: Let’s say your bidding on a roll of 50 dimes, silver closed at $11.65.
Face value = $5.00
Silver price = $11.65
Amt of silver is .715
Fair price = 5.00 x 11.65 x .715 = $41.65

Using the on-line calculator returns $42.14

That may seem like a lot for “$5 worth” of coins, but in a collapsed economy, it might just buy you a few meals or some clean water.

A couple other tips:
You’ll probably end up paying 5 -10% more than your calculated price after final bid with shipping charges. That’s true especially now with silver at a 2 year low. A lot of sellers disappeared when prices tanked, so there’s a relatively lot of demand with less supply. My own feeling is that current prices are a bargain even if you pay a dollar or so more than spot price.

Dollar coins go for a large premium as mentioned above; older coins and halves seem to go for a small premium. I don’t know if that’s because they’re scarcer or what, but in my mind, Roosevelt dimes will probably trade just as well as Mercury dimes in survival mode. For the best average price, I try to stick with dimes and quarters, with a small selection of halves and dollars.

Stay away from single coin purchases. Most of these are collector coins which aren’t really appropriate. Or if they’re junk, then they’re not worth the price you’ll pay after shipping. Best are rolls, or odd and mixed lots of at least half a dozen coins. I think my smallest lot was 11 coins, which was only an okay deal after shipping.

As with many EBay auctions, better deals are found in off hours. When prices were higher, I got most of my deals around midnight on week nights. Here on the west coast, late night is an advantage, it might be better early AM on the east coast. With judicious buying, I was able to keep my purchases right around spot price, even after shipping. Now though, with prices down, I don’t see many auctions ending in off hours. That will change when prices rise again, as they inevitably will.

If you haven’t already, I encourage everyone to get a least a small amount of silver while prices are down. Read the silver articles linked on the Resources page – it’s obvious that the market is being manipulated. Besides our concern about future economic conditions, fundamental supply/demand dynamics haven’t changed, there’s no real market driven reason why prices are low. Silver will go up.

I hope this has been helpful. I’d love to hear comments, suggestions, corrections and/or insights from those who may be more knowledgeable. Also insights from our brothers and sisters living outside the US.

Good luck and blessings…