Prior to 1965, American dimes, quarters and half dollar coins that were circulated through the U.S. market were 90 percent silver. While the majority of the composition might be a precious metal, they are unfortunately considered to have no numismatic value—i.e., they are of no value to a coin collector. It is for this reason that we often hear these pre-1965 silver coins referred to as “junk silver.”
Yet while these coins are considered to have no numismatic value for coin collectors, they are extremely valuable to investors, as they are bought and sold in bulk due to the value of their silver content.
THE MONETARY VALUE AND HISTORY OF JUNK SILVER
When first minted pre-1965, a “face bag”–a bag with a net value of $1,000—of these 90 percent silver coins would contain a net of 723 ounces of silver. Over time, the natural wear that would occur on these coins throughout their circulation would diminish the net mass of silver considered to be contained within a face bag of silver coins, decreasing to the equivalent net of about 715 ounces of silver.
Because these junk silver coins are no longer in circulation, the approximate net of silver found in a face bag—715 ounces—is the standard mass-price ratio used to measure the equivalent silver spot price. This means that when the silver spot price increases by one cent, the value of a bag of silver coins increases by $7.15; furthermore, if the silver spot price increases by 10 cents, the value of a bag of silver coins would then increase by $71.50.
Following the end of their minting in the mid-1960s, it has become legal in the U.S. to melt down junk silver coins. People in possession of junk silver often melt it down so they can turn their coins into silver bulk, which can then either be resold or repurposed into silver mass.
The value of this junk silver comes from the fact that there has no longer been any 90 percent silver U.S. coins minted since 1965, meaning there is a finite amount of these junk silver coins. For this reason, the value of these numismatical worthless coins is quite high on the market.
The value of junk silver has changed little since the late 1960s, but it has gone through its passages of increased spot prices, melting and selling. Over the last few decades, junk metals have seen notable premiums that have exceeded the value of 20 percent over the silver spot price, but there has been one time in particular where the spot price of junk silver genuinely exploded.
The time that most affected the spot price of junk silver was around the crisis of Y2K—the conspiracy scare in which people believed that the world’s computers would crash upon the entrance into the 21st century, leading to the downfall of modern civilization as we know it. Due to these conspiracy fears, people began investing in junk silver in case digital banking and monetary systems crashed altogether. Between 1998 and 1999, the increased purchases of junk silver increased the price of bags of junk silver up to $50/oz., whereas the price of newly produced silver hardly changed.
While the junk silver spot price might have fallen since the time of Y2K, this example from recent history showed how easily the premiums of junk silver can shift during times of economic stagnation. Investing in junk silver can be a smart idea for this very reason, but it depends on the needs of each person.
WHY JUNK SILVER IS USELESS TO COIN COLLECTORS
While junk silver has historical value, due to it being minted prior to 1965, the coins are of no interest to coin collectors due to the natural wear the coins have experienced. Because these coins have stayed in circulation, and were circulated for such a long time, they underwent a great deal of natural wear that ruined the quality of the coins–their face, details, edges and noticeable intricacies.
Coin collectors are most interested in coins that are of a high-quality grade. The quality grade of coins are usually noted by a collector for their detail that is unmarred, edges that are visibly clean and more. This means that the coins should be as close to their original condition as possible—i.e., they should appear as if they had just been minted, as in “mint condition.”
While junk silver is of notable worth to investors, it is of little worth to coin collectors. For investors, be happy for this, as it means you have less of a pool of people to compete against when seeking out bags.
HOW TO KNOW IF YOUR COINS ARE JUNK SILVER
One of the main questions people tend to have when searching for junk silver is to question whether or not the coins in your possession—dimes, quarters and half dollars—are actually junk silver or not. One of the easiest ways to determine this is by looking at the edge of the coin in your possession.
If you’ve ever held onto an older quarter or dime, one that has seen a lot of circulation and has accumulated a fair amount of wear, you’ll notice that its edge has become brown. If the coins in your possession have this characteristic, it means that the coin primarily consists of copper, not silver.
However, if you have an older coin whose edges are still silver, even following a great deal of wear throughout its time in circulation, this means that you are in possession of a junk silver coin.
WHY SHOULD YOU BUY JUNK SILVER
While there are easy ways to determine whether the coins you own or are considering purchasing are silver or not, there are a number of notions to consider when purchasing. In particular, if you are unsure of whether the investment is worth it, you should take the benefits of junk silver into consideration–of which these are both numerous and noteworthy.
Limited Risk With Notable Gains
Investing in both silver bullion and junk silver has a great deal of potential for investors seeking to increase the value of their portfolio. The value of the silver you own—which has a high potential and low risk—is based off the silver spot price, which has recently resided from anywhere between $14 to $15 per ounce.
The primary benefit with silver is that it is not a flat currency like the U.S. dollar. As the value of the dollar shifts with the economy—wherein it has continued to decline—the value of silver has remained steady, meaning that it will eventually surpass the USD in terms of value. It is for that reason that people believe that precious metals such as silver will one day return to its past value. With a significant investment, or even a smaller investment, you can expect to make notable monetary gains, increasing the value of your portfolio with ease.
If the above situation were to be reversed—where the USD increases in value while the silver spot price “crashes”—you still won’t be out of luck. As long as you haven’t melted down your junk silver, your dimes, quarters and half dollar coins are still going to be worth their USD value. So even if the dividends aren’t as high as originally expected, there is very little risk in losing out from your investment.
Low Premiums at Face Value
Junk silver is sold by its weight, not its face value. When you buy junk silver by mass, you’re buying silver dimes, quarters and half dollars that still carry the same face value, and which weigh less than they originally did when minted prior to 1965. This might mean that you’re also getting less silver out of your purchases, as the amount of silver has also been worn out of the coin, but it means that you are purchasing it at a lower premium than you would on new silver. While your coins might not be as pure as a newly minted American Silver Eagle, the junk silver you invest in will be purchased at a much lower premium.
Upon purchasing a bag of junk silver, you are in complete ownership of your investment. While it is still in your best interest to store your investment somewhere within your home that is secure, you can avoid having to store your silver investments with a bank like you might have to with bullion or bars.
Planning Ahead for the Worst
We’ve already discussed the benefit to purchasing junk silver in the event that the USD crashes, but the fallout of a manmade or natural disaster has yet to be mentioned.
In the event of a global disaster, humanity is likely to fall into a state of despair and chaos, with the unprepared fairing the worst. Those with supplies, shelter and cash will be able to get by throughout the beginning, but trouble will begin to arise once cash begins to lose its worth. Once this takes place, people will return to bartering as the main means of selling and trading, whether it is services, goods, food or water. While useful skills such as engineering and general tradework can go a long way, having previous metals on hand will give you a great deal of weight against others.
By investing in silver, you’ll have a reserve that will be available to help you in the event of the worst, providing you with a means to take care of yourself and influence others.
HOW DOES JUNK SILVER COMPARE TO SILVER BULLION
Junk silver might sell at premiums similar to .999 silver bullion, but it holds a greater value within the precious metals market due to its increasingly limited supply. The reason this happens is that junk silver gains impressive premiums when its available quantity decreases, making it more likely for your investment to grow at a greater rate as the century goes on.
ALTERNATIVES TO JUNK SILVER
If you feel as if junk silver wouldn’t make for a smart investment for you, you should know that there are other alternatives out there. The best two alternative options you have are to (1) purchase newly produced fine silver or (2) become a coin collector.
Purchasing newly minted fine silver is an easy way to invest in precious metals. These items can be readily purchased, can be made through secure payments and offers you the option to make purchases either in certified silver coins, certified silver jewelry or silver bullion bars. These items can be purchased as needed and they can be readily supplanted as part of a self-directed IRA, making for safe, sound investments.
Coin collecting is a little more difficult, as it takes a good amount of time to determine just what it is you’re looking for, as well as learning what it is you want to collect. But with the right finds you can make some considerable investments. Compared to investing in either fine precious metals or bags of junk silver, you can appreciate this activity as a hobby first and foremost.
When making investments into precious metals, you want to ensure that you feel confident in your investments. While the benefits of purchasing junk silver have been laid out herein, you are the one to decide which type of investment is best for you–whether you’d like to (1) invest in the field of junk silver, (2) invest in .999 finely produced precious metals or (3) combine your habit of investing with a newfound hobby by beginning to collect coins. By taking the time to consider all of your options and the cost/benefit of each, you can find the right investment for you.
At Provident Metals, our goal is to provide you with the best experience possible when investing in precious metals. We offer a great selection, safe and secure purchasing and dependable shipping. Contact us to learn more!