BLOG
Should I Buy Junk Silver?
This is question many investors have considered when deciding what kind of silver to purchase. At Lone Star Bullion, we believe it is critical that investors consider their financial goals and reasons for investing in gold and silver to determine which kind of gold or silver to purchase.
Many coin shop and online dealers heavily push junk silver, emphasizing how cheap the junk silver is. Of course what most dealers never tells clients is what the resale value on junk silver is. While many investors can pick up junk silver at a cost very close to spot and sometimes slightly below spot, when it comes time to sell junk silver, most dealers will not buy junk silver back at anything above $2 below spot and many companies will pay as low as $4 or $5 below spot. This effectively means that an investor takes an automatic 6-14% hit depending on whom they sell their junk silver to. So why do coin shops and online dealers push junk silver? The answer is the commission is usually two to three times higher than any other silver bullion product out there and while some dealers may have good intentions, they have not evaluated the client’s goals.
It is always important for gold and silver investors to consider the real cost principle. They must ask both how much does it cost to buy the silver and how much will I lose when I sell it back.
Some investors believe that junk silver would make a good means of exchange in the event of an economic collapse. They emphasize the small denominations as the key factor. There are several problems with this line of thinking. First, junk silver is not an easy denomination to use. How many ounces of silver are in $1 of junk silver. 99 out of 100 people don’t have a clue or answer incorrectly and one of the first things a form transaction must have is easy to use and recognized denominations. $1 of junk silver is .715 ounces and this simply is not a form many individuals can use well because of the odd fractional value. Second, most forms of junk silver are far to small to be used in transactions. How many people do you see carrying around thousands of dollars in $1 bills? It’s just not a viable form for transactions. Even the largest form of junk silver is less than ¾ of an ounce. At the end of the day, junk silver has a horrible resell value and simply is not practicable for any form of exchange
