Sunday, February 12, 2012

The Importance of Junk Silver Coins

By Glen Phillips


Most people are probably not even aware of the wonderful opportunity that awaits them in junk silver coins, especially if they have had no former experience in the precious metals markets. Many of us have heard about the trading of gold and silver coins. These are often used as alternative investments and make fine collector's items. Junk silver coins are an entirely separate commodity from these more precious metals based coins. Their uniqueness lies in the fact that they play quite a significant role in the silver coin market.

Junk silver coins are those that are defined by coins that are less than .999 fine; most typically associated with 90% silver coins. Silver rounds and bars as well can be said to differ from junk silver coins by having a substantially higher percentage of silver.

The value and power of junk silver coins lies in the fact that they are transacted in bulk. Whereas individual junk silver coins do not carry much value, these coins become highly sought after when sold in large quantities. Typical bag sizes include $100, $250, $500 and $1,000 bags containing anything from the variety of Mercury and Roosevelt dimes to Morgan and Peace dollars. Of course it might be useful to try to maintain the same coin types within a bag so as to simplify the transactions but it will not be absolutely necessary to do so. This is because it is ultimately the silver content that drives the price, so the exact type of coin in the bag would have little effect on the total price of the whole bag.

To illustrate, consider a $500 bag of Franklin half dollars. To make a bag that has a $500 total value from half dollar coins, you would need a total of 1,000 half dollar coins altogether. Because each Franklin half dollar coin has a 90% silver content rating which is equivalent to .36169 ounces of silver per coin - the total weight of silver for that bag would amount to 361.69 ounces of silver. Supposing that the spot price for silver for that selling day was $30 per ounce, the bag would then sell for $10,850.70.

Because this is all based on the spot pricing of silver as it occurs, you would not expect to see the impact from the sale of a single coin. Bulk transactions of junk silver coins make it easier to benefit from changes in the spot pricing of silver as a precious metal sold by weight. Taking our $500 bag of Franklin half dollars a little further, you could effectively sell the same bag whose value was $10,850.70 - for a marked up price of $11,212.39 if the spot price were to jump to $31 an ounce the following day.

Bear in mind though, that silver coin dealers that deal in junk silver coins would rarely be willing to buy or sell on the exact spot price. They, like you, are in this to build profits. This will be your only serious hurdle in trading junk silver coins and it would certainly serve your interests to seek out established coin dealers that move coins within range of the silver spot price.

Do not let this deter you however from the great opportunity that lies in junk silver coins. They are excellent profit builders even though the coins themselves can be said to be inferior to higher quality silver based coins. As mentioned before the entire silver market owes its prestige to the successful distribution of 90% silver coins. This means that investing in junk silver coins will always represent a useful add on to a dynamic investment portfolio.




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