There are countless products available to silver investors. This, in my opinion, is what makes diversification such a fun exercise. There are five categories within a physical silver or gold portfolio: coins, rounds and medallions, bars of constitutional or junk silver and gold, and silver granules. It’s illegal to own gold granules without a license, so I will not include them here.
Legal Tender Bullion Coins
Legal tender bullion coins are issued with a specific currency value minted on them. Other information includes the issuing government or institution, the weight and the purity of the metal. For example, the silver Krugerrand has a face value of one rand. The American Silver Eagle is a legal tender coin with a face value of one US dollar, and the Canadian Silver Maple is a legal tender coin with a face value of five Canadian dollars. In terms of gold, the American Gold Eagle and the Canadian Gold Maple both have a face for fifty dollars.
The gold Krugerrand has no face value on it at all. It is important to remember that the face value on these coins is merely a symbolic value to give them legal tender status, which has little to do with their actual value. The justification for keeping the face value on bullion coins low seems to be to void the public using the coins in direct competition with legal tender currency notes issued by the reserve banks of each issuing nation. The value of a bullion coin is based on the value of its precious metal weight and purity. For this reason, institutions always guaranteed each minted coin in terms of purity and weight.
Bullion Medallions
A silver medallion is essentially a non-legal-tender coin minted by various private mints or refineries in various sizes.
Since coins can be issued by the government only, these cannot be called coins
Bullion Bars
Until a few years ago, bullion bars were mainly minted and released by private mints or refiners around the world, but recently, various sovereign mints have released their own bullion bars onto the market. Two examples are the Royal Canadian Mint and the Royal British Mint: both sell 10 oz. Bullion bars are in direct competition with the Sunshine Mint 10 oz. bar. The guarantee of purity and quality comes from the mint or refinery that produces them. Bars are available in various sizes, ranging from 1 troy ounce for silver, and 10 grams to 1kg for gold.
Junk or Constitutional Silver
Junk silver refers to any high-silver-content coin that is not considered collectable and has no numismatic value. In general, coins that are 90% silver are desirable to silver investors and silver coin dealers who buy for silver content. The older South African coins (with the exception of the ½ and 1 coin) contained a certain amount of silver. For example, some of the old R1 coins held 0.3858 ounces of silver. Similarly, some of the old 50c coins held 5.65 grams of silver. Interestingly, buying freshly minted silver bullion coins (99.9% purity) for investment purposes only commenced in 1986 with the introduction of the American Silver Eagle bullion coin in the USA.
In the 1970s and 1980s, silver investors were those who saved their change. Some investors still collect old coins for their silver content. This is one of the cheapest ways to buy silver if these are purchased for silver content and no premium is payable for the rarity or condition of the coin. The trouble is that older coins are now either in the hands of collectors and investors, or they were melted and cast into investment-grade silver bars and rounds.
Silver Granules
Most private mints sell pure silver granules in various packaged weights. Avery small number of precious metal investors buy silver in this form. Silver granules are produced mostly for silver jewellery makers and artists, and perhaps for the electronics industry. But as is the case with junk silver, demand in this form is low. It is also the cheapest silver I would be able to source. COVID-19 and its accompanying lockdowns led to a fall in the availability of silver, as products such as the American Eagle became very expensive. This market scenario caused investors to settle for what was available and what was reasonably priced.
Article courtesy of Going for Gold: A guide for the South African precious metal investor by Zoltan Erdey
