Investing in Silver Bullion and Coins

Silver has given investors a roller coaster ride over the last 12 months, rising as high as a shade under $50 per ounce and falling as low as $26 in late September last year and then a gain at the end of 2011. Now above $31 again, the market has been consolidating over the last few weeks, and now may be a good time for investors to look at silver once more.

Two popular methods of investing in silver are coins and bullion, though each offers different potential returns and are different types of investment. Investors in silver coins tend to see very little fluctuation in price of their investment, whilst bullion investors would have felt the joy and heartache of the rises and falls in the price of silver in spades over the last 12 months. This is because of the different way the two investments are viewed.

When silver bullion is bought, an investor will pay only a small premium over the cash (spot) price of silver. The value of the silver bar, or round, is based directly upon the value of its silver content, which is measured by both weight and purity.

An investor in silver coins, on the other hand, will find that he will pay a far larger premium over the value of a coin’s silver content. He accepts that a coin’s value has a greater relation to its ‘collectability’ than to its weight in silver. Rarity, condition, and history form a larger part of the value of a coin than the weight of its precious metal content.

To underline this fact on October 24th last year, when silver bullion investors had seen the value of their holdings decline by over 40% from their April/ May 2011 high, one lucky silver coin investor was setting a record for the sale price of a particular silver coin. Selling a collection of ancient Greek coins, London numismatic specialists Morton and Eden saw an overall price of $4 million, against an estimated total value of $1.5 million. The star of the sale was a stater from Crete, which depicted Zeus’s lover, Europa, on one side and a bull on the reverse. It fetched a fantastic $479,000, a world record, for a silver content that, weighing just over 11 grams, melted down would have had a value of around $12!

However, investors in silver bullion argue, quite correctly, that when the price of silver gains strongly, so to does their investment, whereas the value of a coin will not have the same relative growth. The rarity of a coin, its key to value, will not have changed and so the value will not have risen. An investor in silver bullion, who invests before a strong rally in the silver price, will see large profits in a short space of time that is not usually achievable by investors in rare coins.

For example, an investor who had bought silver bullion at the end of last year would now be sitting on a profit of around 20% in the space of just three months. And when a silver bullion investor wishes to sell his investment, doing so is easy and monies can be realized quickly. Not so with rare coins, where sale can only be made successfully through dealers or auction houses, and can take weeks to negotiate the best price.

Whatever an investor’s preferred investment method into silver, research of subject and wise investment are key to long term growth. Using both bullion and coins to invest will also ensure a level of diversification in the asset, and help to create a store of value and wealth for the future.


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Investing in Silver Bullion and Coins

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