June 23, 2024

Buying Physical Silver at the Lowest Premium

If you’ve tried buying physical silver recently, then you are undoubtedly aware of the incredibly high premiums charged above market value. I wrote previously about the premiums for 100 ounce silver bars, which are traditionally a low premium method for acquiring silver. At the time of investigation, premiums were running from 40% to 50%  above the market price of silver.

Premiums for virtually all other methods of acquiring physical silver are also stubbornly high. American Silver Eagles, Canadian Silver Maple Leafs, and other government issued bullion coins carry premiums often well in excess of 50%. The same high premiums persist for generic silver rounds, small size bars, and bags of 90% junk silver. Even 1,000 ounce silver bars are now carrying premiums of 25% to 30%. Many people have been actively looking for the method which will provide the absolute lowest premiums.

One area that I have noticed which seems to offer the lowest premiums is 40% junk silver coins. For those unfamiliar with the term, “junk silver” refers to legal tender coins with silver content, which have little or no collectible value. These coins are bought and sold based on the value of the silver content. In the United States, dimes, quarters, half dollars, and dollars were minted in 90% silver before 1965. A lesser known fact is that from 1965 to 1970, half dollar coins were minted in 40% silver.

While bags of 90% junk silver coins carry premiums in excess of 50%, bags of 40% junk silver coins can be found with premiums as low as 20%. A bag of $1,000 face value 40% silver coins, which contains roughly 295 ounces of pure silver, can be bought for around $3,500. This can be confirmed on various bullion dealer websites, as well as through a survey of completed eBay auctions. Bullion dealers typically sell junk silver in $1,000 or $500 face value bags, while eBay usually has listings for much smaller lots. I’ve found that even these smaller lots sell for around the same relatively low premiums of 20% to 25%.

Why are the premiums so low? Some people consider 40% silver coins too bulky and inconvenient. If you acquire 90% junk silver, you would have the same silver content in less than half the weight and volume. But in today’s environment, aren’t the lower premiums well worth the trade off? In reality, I think this is more of an overlooked area. Perhaps as time moves on and people start to take note, premiums will rise to the same levels as other physical silver options.