Investment in Silver Bullion Coins

Silver Coins: Investment Basics – How, What and Where

KEY QUESTIONS

Why Invest in Silver Bullion Coins or Rounds?why invest in silver coins and bullion rounds

Once you’ve decided to invest in silver, why would you choose to buy silver bullion coins or rounds over bullion bars? After all, larger silver bullion bars will typically have a lower premium than bullion coins, with the largest bars seeing 5x lower premiums than the best priced coins.

But bigger isn’t always best. Due to the massive sales volume of 1oz bullion coins and rounds – coupled with high competition between dealers – you’ll often find 1oz coins and rounds work out better value than most 1oz – 5oz bars.

Another reason for coins popularity besides offering great value, is most likely down to the fact that we’re accustomed to coins – we use non-bullion coins in our every day life so the concept of coins is hardly alien to us.

silver half dollarAnd unusually America still has genuine silver coins in daily circulation. Older quarters, dimes, half dollars, and dollars can contain up to 90% pure silver silver! While they’re becoming increasingly rare due to silver investors “coin-roll hunting” we’ve all handled them whether we know it or not.

Plus there’s the collector in us. Who hasn’t or doesn’t know at least one person who’s collected coins at some point.

Whether they are unusual, old or foreign – coin collecting is a common hobby here in America.

Finally coins are more liquid than big bars. A stack of 100x 1oz coins is always going to be much more flexible than a 100oz bar. If you need access to some money in a hurry selling a few coins at a local store is going to be easier than hauling in a big bullion bar.

Cheaper, easier and more familiar – what’s not to like?

 

So What is a Silver Bullion Coin?

Silver bullion coins are precious metal coins made specifically for investment. Because they are often tax-advanatged or even tax exempt, there is often a legal requirement for them to be bought and sold near to silver’s market (or spot) price. For a silver coin to be classed as bullion it’s value must only be based on the weight of silver it contains and no other factor such as age, beauty or rarity.

what are silver bullion coinsCoins with higher premiums due to these factors are classed as numismatics – and don’t carry any tax advantages.

Bullion coins are truly universal and can be bought and sold at close to spot anywhere in the world. Because of a coin’s purpose, they are by design compact, easy to carry and store, easy to hide if required and in the case of legal tender coins they can come with additional tax benefits depending on your location.

Bullion coins are available in a wide range of sizes, from fractions of an ounce (fractionals) all the way up to one kilogram coins (32.15 troy ounces) – although a standard silver bullion coin contain one ounce of fine silver.

Larger coins are available but are less common and can be collectors items with may carrying a higher premium. Kilo coins are little more than disk-shaped bullion bars but due to their attractive appearance and comparative rarity cost more than their brick-shaped family.

silver bullion coin tubeSilver coins are easy to stack and store within coin tubes or specially designed boxes – or can be held in individual plastic capsules to help protect from scratch damage and tarnishing.

Silver Bullion coins are made in a two step process where carefully measured blanks (or planchets) are die cut from sheets of silver in a “blanking press”. These blanks are processed, cleaned and deburred then fed into a press machine, where a “strike” forces the blank between an upper and lower coin die – two negatively engraved formers which when forced together imprint the blank with a design, edging, a display of fineness and other information such as face value. Coins don’t typically carry serial numbers as bars do.
 

Bullion Coins – Top for Choice

Choice in silver bullion coins and rounds is simply staggering with some featuring truly beautiful ornate designs with coins like UK Britannias verging on collector quality.

Other bullion coins like US Silver Eagles from the United States Mint are extremely popular in the US ticking the patriotic buy-America box in a way that little else in the market can. Silver Maples from Canada are another very popular coin with American buyers due to the 99.99% pure silver – and usually low premiums.

Coins from prestigious mints and legal tender government mint coins will normally carry a higher premium in comparison to generic rounds from workaday refiners.

Scrap Silver Coins

buying scrap silver coinsWhile most investment grade silver bullion coins are between 99.9% and 99.99% pure silver there are some, especially those traditionally used as legal tender or commonly used as a medium of exchange made instead from an alloy designed to make them harder wearing.

Popular “scrap” silver coins include US circulation silver dimes, quarters and half dollars, being between 45-90% pure silver and pre-1967 Canadian dollars at 80% pure.

Alloyed circulated coins will be less costly on a per unit front – generally selling at scrap silver value – a big advantage for new investors – but it will also disallow them from use in a precious metals IRA which has strict rules regarding fineness or purity, and will similarly mean they don’t have the same tax advantages as pure silver bullion coins in states or countries where that advantage exists.

Bags of scrap silver coins can offer exceptional value, when buying purely on weight

Other Considerations

Although the purpose of investing is usually buying as low as possible, big-name mints and legal tender coins are often more expensive than generic.

They’ll typically be easier to resell in any market than their generic counterparts and command a higher price due to their increased trust and desirability, often reselling higher than spot. Dealers will rarely offer anything above spot for generic rounds.

In the US, Silver Eagles will always be the easiest coins to buy and sell.

 

Secondary Market Coins / B-Grade Coins

Secondary market coins (pre-owned) are closer to spot than new coins offering investors some significant savings especially when buying at quantity.

Scratches and scuffs are inevitable and can run from almost none to significant, detracting from any value over a basic scrap price. Dealers will sell slightly damaged new coins as “B-grade”.

Investors reselling damaged coins should be aware that even when they are from premium mints they’ll only ever resell to dealers below spot.
 

Bullion Coins for Home Stackers

silver bullion coins for stackersHome stackers who gradually buy whatever coins or rounds are available on special offer and at the lowest price will quickly develop a wide collection of varied designs, nationalities and sizes, something which can make the investment process more fun and almost addictive, verging into a collector’s territory.

Truth be told, for a home stacker it can be very easy to flip from being an investor into a hobbyist then into a fully-fledged numismatist collector.

Numismatics is a highly specialist field where it’s possible to lose a lot of money if you lack knowledge, due to the often very high premiums involved – and so we always recommend sticking hard and fast to bullion and enjoying the variety of bullion coins on offer.

Of course as a true investor all you’re really interested in is a coin’s silver content and minimizing your buy/sell costs – but even the most puritan investors, will have a preference for certain coins.

The best way to keep your buy / sell spreads to a minimum is by buying coins direct from your dealer and direct vaulting with them – the coins will be new and can be resold to the dealer at any point almost instantaneously.

And because the dealer knows the coins, their provenance and their fully secure chain of custody, dealers will often pay more at buyback time than any third party dealer.

Buying silver coins can be silver investing at it’s most enjoyable – a simple and affordable process where you can slowly gather a safe and solid investment, you know will be easy to liquidate when the time comes.

Discover tricks the pros use to help get best value buying silver coins inside Goldco’s free Precious Metals Investor Guide
Click to Order Your Copy
your free gold investor guide

Is Investing in Silver Coins a Good Idea?is it a good idea to invest in silver bullion coins

As we’ve established, silver bullion coins are easy to buy, easy to sell, universally popular and they’re an excellent combination of size, premium and low unit cost. They’re also more immediately relatable than bullion bars.

In our book that makes investing in silver coins a very good idea!

We’ve already touched on tax advantage but in some jurisdictions specific legal tender silver coins are exempt from Capital Gains Tax.

This means when silver rises significantly in value and you come to resell you will avoid a tax bill. In a state or country with zero sales tax or VAT on investment silver, your silver bullion coins could end up being fully tax free at both the buying and selling end of any deal.

Although capital gains tax exempt coins can save you significant sums when you make a large gain at liquidation, their initial purchase price can be as much as 10% higher than an equivalent generic round, and so you need to weigh up savings at purchase versus anticipated savings at sale.

Silver has gained an average of 26% per year between 1920 – 2020, so provided the metal sticks to this average for the next hundred years it won’t take long for the tax benefit to be felt.

 

Are Silver Coins a Safe Investment?are silver coins a safe investment

Even though silver is more volatile than gold, it’s value has risen consistently over the longer term – and silver coins are one of the most plentiful and universally accepted forms of silver investment available.

Silver coins take all the advantages of silver, wrapped up in an easily bought and sold low-priced unit.

But be careful – not all silver coins are as they seem.

We’re seeing an increasing number of fake silver coins coming onto the market. Although many are very obvious Chinese copies of popular coins like Silver Maples or Silver Eagles, there are also more sophisticated copies specifically designed to defraud.
 

 
These are typically aimed at the higher priced numismatics market, where high-value collectible coins will be expertly faked to appear as genuine old coins to the inexperienced. True coin experts will be able to see the tell-tale signs but a new investor is much more likely to be fooled.

What to Look Out For

look out for fake silver coinsAs with anything, if it seems to good to be true it usually is. Silver coins rarely sell at spot and literally never below spot – so unless an established and trusted dealer is running a loss-leading offer to bring in new customers, beware. Although you may occasionally come across a seller who doesn’t know the value of what they’re selling, the internet is making this increasingly unlikely.

To be absolutely sure your silver bullion coins are the good investment you want them to be, you should only ever buy from a reputable source – namely a major precious metals dealer like Goldco, direct from the mint or through a professional silver investment company.

Remember there is rarely a bargain to be had in a popular and easily traded commodity like silver.

Learn how to spot common scams inside the precious metals market – with Goldco’s free Precious Metals Investor Guide

Click for your free Copy

your free gold investor guide

 

How Much do Silver Coins Cost?how much do silver coins cost

Silver coins are a special investment commodity and in order to be treated in a tax advantaged way they should be priced close to the spot price of silver.

In reality legitimate silver coins will always sell for more than spot due to the cost of mining, refining, minting, packaging, storage, insurance and transportation plus a small profit for the wholesaler. Once at the retailer or bullion broker there needs to be a further allowance made for business and marketing expenses and yet another small profit.

price on silver bullion coinsMuch will also depend on the size of the coin.

A coin’s built in costs and expenses are more or less the same for a standard 1oz coin as they are for a fractional such as ½ ounce and ¼ ounces. They are also the same for a silver coin as a gold coin despite the big difference in value. This means premiums on fractionals are far higher in relation to their unit price than standard coins and percentage premiums on silver coins are significantly higher than on gold.

Further price differences can be found between silver coins and rounds from different mints, whether governmental or private mints, with some of the most respected mints carrying a higher premium on a like for like basis than those from smaller, less well known mints or on generic rounds.

A 1oz Kangaroo from Australia’s Perth Mint is usually going to cost more than a 1oz round from APMEX or Sunshine Minting.

 

How does this translate into the real world?

The overall premiums on silver bullion coins and rounds can range from as little as 11% over spot for generic rounds up to 150% on big-name mint fractionals.

Dealer premiums can often be reduced by ordering multiples of an item allowing the dealer to share some of their wholesale discount with you due to economies of scale.

The following chart shows price premiums both per coin size and across different mints from generic rounds to the most desirable coins – with all premiums taken as an average of 5 major e-commerce bullion dealers:
 

Average Premium By Coin Size for Branded, Generic and Bulk

Size / Brand Premium Branded Generic Coin Bulk Buy
1/2oz 175.0% 101.1% 59.6%
1oz 36.2% 15.1%: 11.0%
2oz 33.1% 16.1% 12.7%
1oz Eagle 18.1% 14.0%
1oz Maple 16.4% 11.3%
1oz Britannia 19.1% 12.2%
1oz Philharmonic 20.5% 11.8%
1oz Kangaroo 16.5% 12.0%
1oz Libertad 27.5% 19.0%

As can be seen buying silver coins and rounds in different sizes and from different mints can carry an eye-opening range in premium.

Key Takeaways:

  • The premium on fractional silver coins is too high to be a serious investment.
  • Buying 1oz coins and rounds in bulk will usually carry a similar premium to buying high-end mint coins in bulk.
  • With generic rounds at 11% versus Canadian Maples at 11% we’d side with the Canadians every time.
  • The most popular coins and rounds carry lower premiums than many bars when bought in bulk. Silver bars don’t typically offer comparable premiums until at 50oz.
  • Copy the tricks expert investors use to get best value buying silver – with Goldco’s free Precious Metals Investor Guide
    Click to Order Your Copy
    your free gold investor guide

    Where Can I Start Investing in Silver Coins?where can I invest in silver coins

    When first looking for silver bullion coins, most of us begin with an online search. It’s important to remember you’re looking for bullion coins and not collectables / numismatics – so stick with bullion dealers and not collector coin stores.

    Finding a trustworthy bullion dealer is paramount because over the past few years several big name coin stores have gone out of business owning their customers millions. Read reviews and look out for slow or non-delivery complaints as these can indicate cash-flow issues.

    There are currently over 1400 bullion dealers listed in the industry directory – so you’re never going to be stuck for choice. Dealers know this and are really having to bring their A-game to compete with the best in the industry.

    Although online auctions can be tempting, they are notoriously when it comes to selling fakes, so if you wish to avoid that risk, stick with a known national brand or a trusted local dealer for your first test buy.

    Precious metals may be solid long-term investments, but it’s important you make sure your investment journey starts off on the right foot by only working with a trusted company like Goldco.

     

    What are Popular Silver Coins for Investment?what are popular silver coins for investment

    This varies considerably depending on the local market. In the US, Silver Eagles and Canadian Silver Maples are always going to sell well due to trust, ease of purchase and a certain degree of sticking with the home teams.

    American based private mints do well thanks to their excellent value silver rounds with names like Lady Liberty, Walking Liberty or Buffaloes – and generic mint branded rounds from the likes of APMEX and Sunshine Minting are massively popular.

    American silver investors also like to buy UK coins such as Britannias, Australian Kookaburras, Austrian Philharmonics and Mexican Libertads although none of these come close to the volume of purchases where Eagles, Maples and US minted rounds are concerned.

     

    What are Popular Silver Coin and Round Mints?popular bullion coin mints

    Specific silver coin popularity varies by country although most investors in the West will be aware of the major mints operating across the US, Canada and Europe.

    Some European mints carry a higher premium in America due to shipping costs and their comparative rarity. Sometimes however they may be offered at lower wholesale prices to help break into the US market. As an example UK silver Britannias are often lower-priced in the US than the UK.

    Brands of silver bullion coins popular in the US include:
     

    APMEX

    APMEX, Inc., are based in Oklahoma City, Oklahoma, and are the world’s largest online retailer of precious metals, having sold over $10 billion in precious metals since being founded in 1999. As well as being a bullion dealer selling a wide range of coins from around the world, APMEX produce their own silver rounds in 1/10oz, 1/4oz, 1/2oz, 1oz, 2oz, 5oz weights at 0.999 fineness (99.9% pure silver).

    Click Here to Expand List

    Learn how to buy the best brands and the most popular coins – with Goldco’s free Precious Metals Investor Guide
    Click to Order Your Copy
    your free gold investor guide

    Is There Tax on Silver coins or rounds?is there a tax on silver bullion coins

    The tax investors pay on silver rounds depends on which state the round is bought and stored in as each of the 50 states can set it’s own level of sales tax. New IRS rules mean the bullion dealer selling the coin has to deduct any tax at point of sale meaning there’s no chance of avoiding it.

    While some states are zero-rated on investment grade bullion rounds, other states can charge up to 10%. This basic state-wide tax is in addition to any local county or city sales tax. Tax may be charged on sales under a certain threshold or on historic or foreign silver coins but not US coins.

    Investment bullion rounds bought outside of state can be subject to a “use tax” at the same rate as the sales tax.

    This same does not apply to US Legal Tender bullion coins – which in most cases are exempt from sales tax (unless sold as collectibles). This means a 1oz American Silver Eagle is going to be sales tax exempt even in states with a sales tax on silver – whilst a 1oz silver bar will be taxable.

    Foreign Legal Tender bullion coins are only exempt from sales tax if sold at face value – something unlikely when most bullion coins have a far lower face value than metals content.

    Click Here to Display State Taxes

     

    Capital Gains Tax on Silver Bullion Coins

    Although there are legal moves being made to clarify that the sale or exchange of precious metals bullion and coins are not to be included in capital gains, losses, or any other type of federal income calculation – at present the IRS considers bullion coins to be both a Capital Asset and a Collectible, so Capital Gains Tax (CGT) will be payable on any gains made when bullion is sold, and this is set at a maximum of 28% (collectibles).

    In reality the actual rate paid will vary depending on a number of factors including the seller’s income and the length of time the assets have been held.

    To discuss specific CGT liabilities you should speak with a licensed accountant or tax specialist.

     

    Can Silver Coins be held in an IRA?can silver coins be held in an ira

    The IRS now allows specific grades of investment bullion coins to be held in an IRA allowing for silver to be bought in a highly tax-advantaged way.

    As you would expect from the IRS there are strict rules governing what metals can be bought and where they should be stored which we cover in detail in our Silver IRA section.

    Silver coins for IRA use must meet minimum fineness requirements and be manufactured by a NYMEX or COMEX-approved refiner/assayer and should be ISO9001 Certified. The minimum purity should be .999 fine (99.9% pure silver) or greater.

    Acceptable coins named by the IRS are:

    • American Silver Eagle coins
    • Austrian Vienna Philharmonic coins
    • Australian Kookaburra coins
    • Canadian Maple Leaf coins
    Other acceptable coins/rounds include:

    • UK Silver Britannia coins (2013+)
    • Sunshine Mint silver rounds
    • Candian Silver Arctic Fox coins
    • Australian Silver Kookaburra coins

    For more details on Silver IRAs including specific advantages, rules and regulations click here
     

    Want more? Get our free Metals Investment Guide – a unique physical investor kit delivered direct to your door.
     
    claim your free investing in silver kit

    Learn more about silver’s properties for protection and growth, either as part of your investment portfolio or inside an IRA.
    Click for Your Free Metals Investment Kit
    your free gold investor guide