Silver Coins (IRA, brokerage, collection, investment)

[blktoptrvl]

I'd always wanted a silver coin to carry around. I like the feel and weight of it in my hand.

So, back in '11 I purchased a Silver Eagle. When I bought the coin, I made sure to chose one that had very few flaws. At the coin dealer I handled it with cotton gloves and made sure the dealer encased into at the time of purchase.

I have since replaced the Silver Eagle with a Rushmore commemorative to carry around. However, now I look at the Eagle and I see two small fingerprints on the reverse. The obverse still looks good.

I know enough not to clean it with chemicals, but does anyone think wiping it down with cotton will clean it? Or is it far too late after 3 years? Are the oils and acids from the finger no longer removable?

Also, I am thinking about collecting at least one new coin a year. What is the best percentage over the spot you think I can get silver coins for? It looks like prices (from the US Mint) for the coins are at 28% over silver spot - which seems awful expensive to me. I did find a website where the price is about 15% over, but then I'd also have to pay S&H. Not sure yet what price I will find locally.

[IDtheftV]

Originally Posted by blktoptrvl

I know enough not to clean it with chemicals, but does anyone think wiping it down with cotton will clean it? Or is it far too late after 3 years? Are the oils and acids from the finger no longer removable?

The old fingerprint oils are gone, but the acid/salt has etched the metal.

Coins that have obviously been cleaned lose more value from the cleaning than any impairment. You can't clean it without making an obvious spot. Uncleaned coins have "mint luster" which is a microscopic structure on the surface that can be seen on non-proof coins as you tilt it in the light.

These coins are not likely to have significant numismatic value, so it's strictly a bullion item anyway.

Originally Posted by blktoptrvl

It looks like prices (from the US Mint) for the coins are at 28% over silver spot - which seems awful expensive to me.

People worry about the premium all the time, but if you go to sell them, you also get a premium.

If you are just buying one coin a year, paying an extra $5 or so isn't worth worrying about. What if you double or triple your money next year? On a $20 "investment," who cares?

If you buy a roll of 20 or more coins, you get a better price per ounce, but you still are paying a lot for the 0.9999 pure silver government coin.

If you want a carrying-around coin, just buy a "junk" silver dollar. If you want to clean it with lemon juice and baking soda from time-to-time, you won't change the value. If you want a shiny-looking proof-quality coin, silver "rounds" from a private mint, rather than a government mint is going to get you a better price.

[blktoptrvl]

Thanks for the feedback. You've confirmed what I thought. I appreciate it.

[oneslip]

Flawed or not- wouldn't the price be dependant on spot silver price? I understand if it is an "old" coin where imperfections would be considered but in that case you would be seeking a premium due to age and rareness in addition to spot.

[Jaggy001]

The coins you are buying essentially have bullion value from an investment perspective and you are unlikely to get much back over and beyond that bullion value. So that 28% is basically 'lost' when you buy the coin unless silver appreciates in value to make up for it. The fact that your coin has a mark on it will probably do nothing to alter the value because that value is based on silver content and not on the intrinsic desirability of the coin.

There is, however, an investment market in coins but these tend to be older and rarer. That market, at present, is being driven largely by investors from the Far East. I am a coin collector rather than a coin investor. However, in the last year I have sold two coins, one with a net profit of around 95% and the other with a net profit of 45%. However, to be able to do that you need to really know the area you are buying in and you need to be able to spot the bargain when it comes up.

[blktoptrvl]

Thanks all...

I have no real concern about the value of the coin. As was mentioned above, I am not buying them for investment purposes but for collecting; and where the fingerprint is concerned, it is the aesthetics that I am concerned about. From my observations, with a coin minted two to three years ago and sealed back then, it would be much easier to tell if it has flaws than a coin minted yesterday. But then, how do you know when it was sealed?

I have come to understand that there is essentially no way to know that the coins I am collecting have been "previously touched" before as it can take six months for the fingerprint to show. So I can buy a new coin today that looks perfect, but within the year find that it had been previously marred, bummer.

The cost over spot is important too, but only because I do not wish to over-pay for anything.

So, does anyone know if getting a certified coin will guarantee that blemishes will not turn up later? I doubt it, but it doesn't hurt to ask.

[Jaggy001]

All certification does for you is to certify that the coin is what it is and to assign a grade to it. Depending on the grade it may or may not have blemishes. Some blemishes - or 'toning' - are considered to be desirable.

[IDtheftV]

Government issued "bullion" coins all carry a large premium over spot.

Originally Posted by Jaggy001

So that 28% is basically 'lost' when you buy the coin ...

That's not true. These coins all carry a premium in the secondary market. Coin dealers and bullion dealers will pay more than spot when they buy these coins. There is always a bid/ask spread since that is how the dealer makes their profit.

Originally Posted by oneslip

Flawed or not- wouldn't the price be dependant on spot silver price?

The fingerprint is a slight impairment and will adversely effect the value, but for someone just looking to buy a bunch of "bullion" coins, just getting a discount of 25-cents might be all it takes to seal the deal. As an impairment, I wouldn't worry about it. As a fun thing to have, it will bother you as long as you own it. Sure, if the price of silver goes up by 25 cents you make up for the impairment, but you still have to sell at a discount because of it. The OP essentially paid an additional 2% or so over spot because of this.

BTW, did you ask the dealer if they would replace the coin with another? Most reputable dealers tend to do such replacements. As I mentioned, it is likely to only cost the dealer, maybe, 25 cents to take the coin back when they probably made a buck or so selling it to you. Having you come back later to buy more coins just helps make it worth the dealer's while.

On a PM dealer's site I see that spot Ag is $15.40.
-o-- A lot of 20 Eagles is going for $19.29/each ( 25.3% premium )
-o-- A bag of $100 face - about 35 ounces is going for $18.68/oz ( 21.3% premium ) ( referred to as "junk" silver )
-o-- A 10-oz bar goes for $17.39/oz ( 12.9% premium )

In all these cases, you are buying silver in a recognized form that doesn't need any special treatment to buy/sell. You are also buying a considerably smaller portion than the 5,000 ounce contract that spot Ag is based on.

I'd consider re-posting this in the http://www.city-data.com/forum/collecting-antiques/ forum. This is more of a "coin-nerd" question than an investment question.

Interestingly, when "junk" silver first became a "product" it used to sell below spot. The theory being that it was not pure and would need to be refined later if melted. The premium has been creeping up and up. I recently bought a $50 bag of Roosevelt dimes and put together two complete sets ( all dates and all mintmarks ) out of that bag. These bags are a good way to help a young coin collector in the family do some numismatic work in a world that is now gone ( finding old silver coins in change ). One can build a decent collection of all but one type of old US coin dating back to 1892 by buying "junk."

Silver dollars, BTW are also traded as "junk" and carry a much larger premium. The coin itself carries 10% more Ag than four quarters or ten dimes, etc.

I'd also close with buying physical silver is purchasing a store of value. Doing this as an investment is pretty nuts when you can do this much easier buying SLV in a brokerage account. ( Naturally, someone is likely to mention that buying silver as an investment is nuts in any case, but that's off topic. )