Silver Penny Mall

How to Invest in Silver

Silver has recently experienced some
renewed interest as a precious metals
investment. Earlier this year, the price
of silver exceeded the %20 per ounce
level. This marked a twenty seven year
high, but was still short of its all
time high above %50 per ounce reached in
1980. In recent months, the price of
silver has declined below the %10 level,
but that has only seemingly intensified
investment interest in the metal. There
are a variety of methods for making an
investment in silver.

The most common method for investing in
silver is through government issued
bullion coins. The two most popular
choices are the American Silver Eagle
issued by the United States and the
Silver Maple Leaf issued by Canada.
These coins are issued by the
governments and contain one ounce of
silver and are distributed through a
network of authorized dealers. The coins
can be purchased for a set premium above
the precious metals value. The premium
generally covers the cost of
manufacturing and distributing the coins
plus government and dealer profit
margins. Depending on the coins, there
may also be a numismatic premium
attached if the coins are considered to
be collectible. Recently, premiums for
Silver Eagles and Silver Maple Leafs
have expanded as demand has grown.

A second, related method for investing
in silver is through generic silver
rounds. These are usually privately
minted coins with various designs. In
some cases, even custom designs can be
ordered. Each round usually contains one
ounce of silver. Silver rounds have much
smaller premiums above precious metal
cost as compared to Silver Eagles and
Silver Maple Leafs.

Prior to 1964, the United States minted
dollars, half dollars, quarter dollars,
and dimes in 90%PRCTG% silver. After 1964,
certain coins were minted in 40%PRCTG% silver.
Some people choose to invest in silver
by purchasing bulk lots of 90%PRCTG% or 40%PRCTG%
silver coins. If the coins have little
collectible value, they are referred to
as junk silver. Junk silver is generally
purchased in bags containing %1,000 face
value of coins. For 90%PRCTG% silver coins
this equates to 715 ounces of silver.
There are some benefits of buying junk
silver. First, although the coins
supposedly have no collectible value, a
thorough search through the coins may
prove otherwise. Second, the coins are
considered legal tender and have a floor
value of the %1,000 face value.

A less common, but increasingly popular
method for investing in silver is
through 100 ounce or 1,000 ounce silver
bars. In the past, this has been the way
to purchase silver with the lowest
premium above the precious metal value.
This dynamic has changed in recent
months, with 100 ounce bars sometimes
carrying premiums of 40%PRCTG% above the
market price of silver. Premiums for
1,000 ounce bars have also expanded, but
not as dramatically.

A final method for investment can be
accomplished through an electronically
traded fund or ETF. The Silver ETF
allows individuals to invest in the
precious metal without physically
purchasing and storing it using one of
the methods explained above. Instead
shares of the ETF can be purchased in a
brokerage account. Each share of the ETF
represents a predetermined amount of
silver less annual custodial expenses.
As shares of the ETF are issued or
redeemed, silver is bought or sold from
a trust. In theory, the price of the
Silver ETF should track the price of the
physical metal.

Examines the various methods for investing in silver,
including bullion coins, rounds, bars, junk silver, and
electronically traded funds.

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