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April
17
2017

The Double Play Potential of Pre-1965 U.S. Silver Coins
Stefan Gleason

The case for owning low-premium bullion products, and avoiding high-premium numismatic products, is straightforward. Specialty coins that carry hefty collectible premiums above melt value put buyers an immediate disadvantage. If they have to turn around and sell, they might get back only a small fraction of the premium they paid.

Bullion coins that sell for close to melt value don’t carry that type of downside risk. They tend to closely track spot prices with relatively small bid/ask spreads.

However, supply and demand dynamics within the retail bullion market can sometimes cause premiums to trend higher or lower. Especially sensitive to fluctuations in supply and demand are historic, no longer minted products such as pre-1965 U.S. 90% dimes, quarters, and half dollars.

The silver bullion market is not merely the spot silver market. Each type of bullion product is its own market with its own bid/ask spreads and premiums. Most ordinary bullion bars and rounds don’t deviate much from spot prices in normal market conditions.

In recent years, however, premiums on 90% silver have swung dramatically. In September 2015, Money Metals Exchange quoted premiums as high as $6/oz on so-called “junk” silver! A similar premium spike occurred in late 2008 and early 2009 as the financial crisis caused the physical market to decouple from the paper market.

Holders of silver futures contracts and silver exchange-traded products didn’t see any premium bump. The biggest gold and silver ETFs track only spot prices. These financial instruments won’t reflect any shortage-induced premium spikes in the coin market. You could try to amplify your upside in an ETF by employing leverage. But doing so also amplifies your downside risk.

Unleveraged physical silver – pre-1965 silver especially – gives you the opportunity to see the value of your holdings diverge positively from paper prices during times of financial stress and/or heavy physical demand.

Granted, these aren’t necessarily opportune times to sell. In late 2008 and again in late 2015, the silver spot market was in the process of bottoming out. But those who needed to sell due to personal circumstances found that the rise in physical premiums provided something of a cushion against extreme draw downs in paper markets. That’s because bullion dealers will raise buy-back prices on products that are also commanding higher premiums.

When premiums on a particular product such as 90% silver coins soar, arbitrage opportunities open up to holders who don’t want to lose their silver position. For example, they might be able to switch a 90% silver bag for rolls of silver rounds and end up with more ounces of silver. Obviously, for this trade to be a net gain, the premium differential has to be large enough to more than cover all transaction costs.

At present, the best opportunity in 90% silver is to be a buyer. That’s because premiums now sit at historically low levels. In quantities of a half bag or larger, junk silver can be had for under $1/oz over spot prices!

Buying Pre-1965 Silver Right Now Offers Downside Protection and Potential Upside Profit

You pay virtually nothing extra now to own an asset that could command much higher premiums in the future. It’s like getting a free option on rising premiums that never expires. When a period of extreme tightness returns to the market, you may wish to exercise that option.

In baseball terms, it’s a double play opportunity. You have the potential to make money two ways – from rising silver prices and rising coin premiums – with one purchase.

There have been times when market conditions were so tight on junk silver that Money Metals Exchange paid retail sellers up to $4.50/oz over spot to buy their coins.

At some point in the future, a secular and permanent rise is premiums on historic silver coins is possible – one that sees them priced in an entirely different category than ordinary bullion products. So far that hasn’t happened.

At the very least, another cyclical rise in junk silver premiums is likely to commence at some point in the future. It could be a great profit opportunity for those who acquire bags of 90% silver dimes and quarters at today’s low valuations.

 

StefanGleason is president of Money Metals Exchange, a national precious metals investment company and news service with over 1,100,000 readers, 75,000 paid customers, and $120 million in annual sales. He launched the company while president of a national newsletter publishing company dedicated to helping subscribers protect their freedoms, assets, and privacy.

He founded Money Metals Exchange in 2010 in direct response to the abusive methods of national advertisers of “rare,” collectible, and numismatic coins who mark up their coins to 50%, 100%, or even higher above their actual melt value. Money Metals believes the average investor should never purchase precious metals that are not priced at or near their actual melt value. The rare coin market is only suitable for highly experienced collectors with money to blow.

Previously, Gleason served as Vice President of the National Right to Work Legal Defense Foundation in Springfield, Virginia. As the first strategic litigation organization in the individual rights and free enterprise movement, the Foundation has led the national legal battle to block the expansion of union special privileges over workers and the U.S. economy since 1968. In addition to managing fundraising programs and many of the internal dynamics of the Foundation's $7 million-a-year operation, he was the Foundation's primary spokesman on a number of critical, high-profile legal cases, some of which were heard by the U.S. Supreme Court.

Gleason has frequently appeared on national television shows and networks such as Fox News Channel's O'Reilly Factor and Special Report with Brit Hume, CNBC's Closing Bell, Christian Broadcasting Network, CNN, and C-SPAN's Washington Journal. He has frequently been interviewed on national radio shows such as the Lars Larson Show, Michael Reagan Show, G. Gordon Liddy Show, and Ken Hamblin Show.

Gleason's articles and expert comments have appeared in The Wall Street Journal, Detroit News, Washington Times, and National Review, among thousands of other national, state, and local newspapers, wire services, and Internet sites.

A seasoned business leader, investor, political strategist, and grassroots activist, Gleason is also a graduate of the University of Florida with a BA degree in Political Science.

 

 

 
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