Can you Really Buy Silver for $2.08?

By Travis Johnson, Stock Gumshoe, December 20, 2010

If you’ve been treading the boards at the good ol’ Gumshoe Theater of Oddities for more than a few months, this teaser for silver may sound familiar to you:

“How To Buy U.S. Government Created Silver For $2.08”

The tease is an attempt to get you to sign up for Dr. David Eifrig’s Retirement Millionaire newsletter from Stansberry & Associates, and the versions of the ad I’ve seen play off of publisher Porter Stansberry’s conviction (and he’s certainly not alone in this) that silver will be one of the best safe havens/inflation hedges in the year to come due to the fact that it has underperformed gold during the long gold bull market (though it has substantially outperformed gold more recently, like this year).

Still, I think it’s been a year or so since I last looked at a teaser like this, so it seemed time to revisit. Here’s the pitch:

“The U.S. government has created a little-known way to own silver – real, hold-in-your-hand silver – for just $2.08.

“This has nothing to do with stocks. And nothing to do with options or anything risky like that.

“Why should this government-created silver investment be of interest to you?

“Well, I believe silver is set to explode in the coming years… and this is one of the best and cheapest ways to own it.”

The basic arguments in favor of silver are probably ones you’ve heard before: “Silver is real money,” meaning it can’t be created from nothing like dollars and it should perform well if the dollar is effectively devalued by inflation; “Silver is cheap” because it’s far, far below the all-time highs and at a thousand-year inflation adjusted low using the chart that you may have seen before that puts the all-time high for silver around $1,000 back when Christopher Columbus was in his mother’s womb; Silver is “Disappearing” because, unlike gold, it has a lot of non-decorative uses and gets consumed by industry (batteries, medical devices, still some in photography, etc.).

And we’re told that this “$2.08 Silver” was produced by the government, but that production ceased in 1965. And then we get a bit more detail — actually, more detail than is usually provided in these kinds of teasers, so they’re not obfuscating as much as they could:

“There are 3 unique properties of this U.S. government-created Silver that make it such an ideal investment:

“This silver is widely recognized and therefore liquid. It has always had an eager market for owners who want to sell it.

“It is easily divisible should you need to “cash-in” a portion of your investment or use it to buy goods and services in the future.

“It is already “pre-certified” and should not need independent verification of purity and value like silver bars, silver rounds, or collectible grade coins… because every piece of silver is date-stamped and has official U.S. Government markings.

“As I mentioned, you can buy this silver investment in very small increments (for as little as $2.08). You’ll basically pay the “spot” price, which you can find quoted in many places on the Internet… plus 2% to 4%. (Remember… most silver bullion you buy will have a mark-up as much as 10-times higher.) “

So … in case that still sounds confusing, let me just quickly explain what this is. $2.08 silver would be, in all likelihood, a scuffed and scarred 1960s Roosevelt dime. And actually, as of the last silver price I saw it probably wouldn’t be $2.08, you’d probably pay more like $2.20 apiece if you were buying a small number of ’em.

Still sound odd? This ad is teasing what’s usually called “junk silver,” pre-1964 circulating coins (dimes, quarters, half dollars and dollars) that were made of 90% silver. Silver was removed from most circulating coins in 1965, in part because those coins were being hoarded for their silver content, and though you’ll still occasionally find a “silver dime” in your change, almost all of these coins are held now by collectors or silver enthusiasts as a relatively inexpensive way to buy silver.

And the tease is right — there are some nice things about these coins: since the smallest denomination is the dime, which does indeed have just about two bucks worth of silver in it at the moment, they are easily divisible and if the world goes to hell in a handbasket and we move to a barter system where you have to produce “real” value in exchange for goods, you could use your old silver dimes to pay for stuff; and yes, they are just as government-certified as the American Eagle silver coins that you could also buy if you prefer just straight silver; and, despite the fact that I don’t think it’s legal to melt down the coins to extract the silver, there is a pretty active market for “junk silver” and you should be able to sell it in the future.

Of course, “junk silver” isn’t exactly a secret — most coin dealers would happily chat with you about it, and those who deal in collectible coins probably keep a little jar on their desk to toss in the silver-content coins that are marred or scratched or otherwise have no collectible value, so probably anyone in the business has at least a few of these little unimpressive-looking coins hanging around (and “unimpressive” is no exaggeration — some of the “junk” coins I’ve seen are so worn that they’re barely recognizable).

The basics to know are this: these coins, which largely consist of Mercury and Roosevelt dimes, Standing Liberty and Washington Quarters, and Walking Liberty and Franklin half dollars from 1916-1964 (there are earlier coins, too, those from after the Civil War almost all have the same silver values, but you almost never see them), have a silver content that’s directly correlated to their face value — you may not have noticed, but these are all 90% silver coins and the weight of those coins is precisely correlated, too, so a half dollar weighs five times as much as a dime… and since the silver content is the same proportion, it’s also worth five times as much today as a silver investment.

There are two exceptions that you may have noted for the silver coins — nickels and silver dollars. Nickels don’t count in this equation, since they were largely made of nickel and copper instead of silver (as you’ve noticed, they’re a lot bigger than dimes — a proportionate silver nickel would have been too small to handle, though I think there were some tiny ones in the 1800s). There are some silver-content nickels from the WWII years (nickel shortage) that are also collected as such (they’re worth more than half a dime, more like $1.60 at the moment) … and, actually, modern nickels also have a melt value that’s slightly above their currency value, with about three cents worth of each copper and nickel included in a 2010 nickel.

And silver dollars are worth slightly more than ten nickels or four quarters — so Morgan and Peace dollars, both of which are also 90% silver, weigh in with a current value of about $22. Not sure if this is just because they get proportionately less wear, or maybe they were slightly heavier … doesn’t really matter for our purposes, other than that if you want to focus on silver dollars as junk silver, you’ll pay slightly more.

When silver was out of favor and not seen as an important precious metals hedge against calamity, inflation or whatever more dire survivalist picture you wish to paint, junk silver was typically sold at a discount to the silver value and you might have been able to buy it for, just as an example, a 5 or 10% discount to the “melt value” … in part because you’re not really allowed to melt it down and it’s not “pure” silver like an American Eagle silver coin or other investment or industrial grade silver.

Those days are over, at least for now, so you will in all likelihood pay a premium over the melt price for “junk silver” — but since premiums are pretty high on silver coins and bars right now, it will seem cheaper since “junk silver” probably still has the lowest average premium (I’m no coin expert, but the sites I’ve checked quickly indicate as much). You can always find junk silver changing hands on eBay, with a roll of silver dimes here and an assorted pile of old Washington quarters there, at prices that usually end up closing at a premium of at least a few percent (plus the transaction costs of shipping, etc.).

There are also some big dealers who usually have junk silver and typically sell it by the face-value bag. $100 worth of these dimes, quarters and half dollars has an estimated 71.5 ounces of silver in it, $1,000 in face value represents 715 ounces, so some dealers sell bags of these culled coins — APMEX, for example, will sell you a $100 face value bag for $2,093 with silver at $28.85. If you want to do the math, that comes out to being a premium of just 1.5% — at that price you’re effectively paying $29.27 for an ounce of silver. So, pretty reasonable compared to the pretty large premium that dealers get for American Eagle coins these days (you’ll often pay a $3 or so premium for a small order, which is more than a 10% premium), though it may be similar to what you would pay for similarly “junky” random silver bars or rounds, or for a big block of industrial silver (like a 100 oz bar, for example).

The only way to buy silver much cheaper is to buy something like the Silver ETF — the iShares Silver Trust, for example, has a .5% management fee and is supposed to match the price of silver minus that fee, so that’s sort of like paying a half percent premium … though the ETF does sometimes also trade at a premium to that value, as of the close on Friday it was at more than a 1% premium so that works out to be about the same as “junk silver” — and since most of the ETFs use derivatives and other foofaraw to match the silver price and you don’t get to hold the silver in your hand, it’s just not the same as a mittful of grubby old dimes and quarters.

So yes, you probably can buy silver for just a bit over $2, depending on the fluctuation of the spot price and the premium that you end up having to pay — but it won’t be an ounce of silver, a “junk silver” dime, the smallest amount of silver that you can reasonably buy, has about .07 troy ounces worth of silver. Just multiply .0715 by the spot price of silver, and that’s the equivalent fair price for a “junk silver” pre-1965 dime (assuming you’re willing to pay the market price of silver for the coin). You can see the current (or at least, frequently updated — not current to the minute) values of “junk silver” coins at coinflation.com.

I personally hold some “junk” silver, and some nice shiny new silver that I basically hold as a form of savings (even better than a bank account, because it’s hard to spend!) … I hope it will hold its value since I do expect the dollar to continue the long-term trend of losing value over time, though I don’t expect it will be enough to get the propane tank filled if we end up in some kind of a post-apocalyptic Road Warrior existence in the decades to come. And of course, I’m going to need to have a reminder postcard sent to me before the apocalypse so I can take them out of the safe deposit box and fill my rucksack.

That’s just a quickie to get you started on this pre-holiday week — if you’ve got any thoughts on silver, junk or otherwise, just let us know with a comment below.


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31 Comments on "Can you Really Buy Silver for $2.08?"

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David
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David
December 20, 2010 1:06 pm

With all the calculations for the value of silver, you forgot to include the storage cost. Safe deposit boxes will add to the cost. Best to bury it in the back yard!

Gravity Switch
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December 20, 2010 1:30 pm

Good point! I'm afraid the frozen tundra up here might break my shovel, though (or my back). 🙂

gerard
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gerard
December 20, 2010 4:01 pm

In 1973 , a $1. paper dollar would buy 3 gallons of gasoline , a silver dollar would buy the same………..Today a $1. paper dollar buys 1/3 gallon of gasoline……….a silver dollar $1. will buy at least 8 gallons of gasoline.. "nuff said"

Larry
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Larry
December 20, 2010 8:44 pm
The dimes actually have .07234 oz of silver. Quarters have 0.18084 oz silver. Half dollars have 0.36169 oz silver. The silver dollars are different and have a greater percentage of silver in them 0.77344 oz silver. The ETF's are not a good place to play the market with your metals especially with the lawsuit of silver manipulation in JP Morgan and others today. It is best to take possession of your silver and put it into a safe that you have affixed in your home. Hide it well in your home, because you could have some looking for it later.… Read more »
jill
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jill
December 21, 2010 7:45 am

Just don't get caught melting it down because it is a federal offense.

Charles
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Charles
December 21, 2010 10:08 am

That’s why we sew it in our underwear.

The Old Fashioned Way
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The Old Fashioned Way
December 21, 2010 5:14 pm

Is it really a Federal Offense to melt down old coins? People say that all the time, but is it true? Also, do you really think that people in other countries (think Mexico) would hesitate, for even a brief moment, if they could melt down some of our old coins and sell the silver at a profit?

Peter
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Peter
December 28, 2010 7:42 pm
"In 1973 , a $1. paper dollar would buy 3 gallons of gasoline", Well. that's only in 73 but in 1980: ================= 1980s Flashback-Economy / Prices1983 Economy / Prices … Consumer Price Index: 99.6. Unemployment: 9.7% … Cost of a gallon of regular gas: $1.24. Cost of a dozen eggs: $0.86 … Source(s): Google ==================== And by the way, people get crazy about Gold and Silver those days, you know what that means… If you invest in Coca Cola in 1973, you'd be a millionaire by now.. So, yes, PM could be good store of value, but in terms of… Read more »
Dave Wood
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Dave Wood
January 1, 2011 8:57 pm

I have a question for readers. What comments would a collectible car going forward bring? I am wondering what the effects of high fuel costs will have as the car is acting as a hedge against inflation. I'm concerned that the change over in technology in cars combined with the increase in the cost of gasoline may be harmful to the investment.

PoBoy Charles
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PoBoy Charles
February 11, 2011 10:27 am

Thanks for your article about buying cheap silver. It helped clear up the cobwebbs and dampened my desire to buy silver. I really needed to read this to get another opinion. Great job ! To be a good survivialist, we will need food, water, medicine, guns & ammo, and our bible to overcome what is ahead.

Brian Lewis
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Brian Lewis
February 16, 2011 1:14 pm

what is the actual place I can buy the silver from the government for these cheap prices. just seems like its a mysetry trying to find out. A reply would greatly be appreciated.

Eric
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Eric
June 25, 2013 1:14 am

Coin and pawnshops will have “melt” silver, check coinflation for the number, if its 20.2, four quarters will be 20 dollars and 20 cents.

Gravity Switch
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11
February 16, 2011 1:23 pm

You can\’t buy it from the government, this is just old currency that\’s 90% silver — you can probably buy it from pretty much any coin shop if you wish, or many online coin dealers sell it by the bag at a set premium to the price of silver. Per ounce, it\’s not necessarily cheaper than any other silver investment, but can sometimes be slightly cheaper.

FairBanks
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FairBanks
February 27, 2011 11:42 am

just watch out for the coin shops as they are the biggest shysters in the country. I only know this as I had a fairly large coin brokerage firm for fifteen years and they will rob you blind. know who you are doing business with and exactly what you are paying/getting. Buyer beware. good luck as there are some reputable dealers out there.

Steven Douglas
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Steven Douglas
March 7, 2011 7:38 pm
Sigh. This is like kids who are afraid to remove tags on pillows that say, "NOT TO BE REMOVED EXCEPT BY CONSUMER UNDER PENALTY OF LAW" — without realizing that THEY are the consumer, or why that tag could not be lawfully removed by anyone else. For the record, it is NOT illegal to melt U.S coins — of any demomination. Section 331 of Title 18 of the United States code does provide criminal penalties for anyone who FRAUDULENTLY "alters, defaces, mutilates impairs, diminishes, falsifies, scales, or lightens" any of the coins coined at the Mints of the United States.… Read more »
Eric
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Eric
June 25, 2013 1:17 am

Back in the day when people wanted silver flatware, the smith didn’t buy silver, he just melted down enough coins to get the job done, perfectly legal.

Sir David
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Sir David
October 26, 2011 9:56 am
I’m confused about Melt Values. If a coin is worth x-amout in melt value, can we actually melt it? Not that we’d melt it for ourselves, but are there actual markets where we might get the ‘melt value’ for our coins, because otherwise we are the mercy of coin dealers. I am more interested in the silver itself than the coins. I have a reasonable sized collection of Mercury dimes, Roosevelt dimes, Kennedy 1964 halfs, Franklin halfs, Morgans, Peace Dollars, Walking Liberty’s, Barbers etc. I can’t claim to be a true collector because most of them were passed down to… Read more »
G4RP
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G4RP
January 22, 2012 2:10 am

Yes there are markets where you can get the melt value, and even more. Look online, ebay is one place but I wouldn’t bother because of all the fees. Craigslist is much better you can just meet someone at your bank and do the transaction there you can even probably charge a premium over spot. Other than that you can sell them at wholesale prices to mints and coin dealers at varying rates depending on the particular business.

Stansberry CS
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Stansberry CS
February 7, 2012 10:36 am

If you have any questions about Stansberry and Associates, please do not hesitate to call customer service at 1-888-261-2693. We would be happy to assist you. We are open Monday – Friday 9-5 EST.

johnng
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johnng
May 15, 2012 9:22 am

What is informative articles. It certainly saved me $39 this year and may be every year!

David Allenson
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David Allenson
July 9, 2012 11:11 am

Forget investing in silver. Or Gold for that matter. Invest in HSY (Hershey) stock. It has out-performed gold and silver in past markets for the past 75 years! I would not have believed it – had I not seen the past data. It has been a mainstay in ALL past economic down-turns. It has out-performed gold and silver, as well as the S&P 500!

norman schaefer
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norman schaefer
July 31, 2016 2:52 pm

I subscribe to Retirement millionare and a few years ago you told of some companies you would recommend to bu junksilver from. Who are they? Also I checked that SD Bullion seems to have the lowest price for the Silver American Dollar. Are they reputable?

tmartin
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tmartin
February 13, 2011 7:47 am

Just add a little more silver when you melt it to get it above 90%.

george
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george
February 19, 2011 7:52 pm

ITs like the typical us laws,take your property ,you don't really own it ,you rent it from the gov.(taxes)= rent..if they want your property they can take.(iminent domain)…Money,same thing,the us makes it so you have a way to buy things and thea can keep tract of it,unless you work under the table.another words its the govt,s. money you just get to use it ,and if you destroy it ,your destroying their property.Except the penny,you can destroy it….

tru
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tru
March 2, 2011 8:35 am

what about pawn shops ????

Dis_Illusion_here
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July 24, 2011 9:24 am

Thank you for pointing out the emperor's nakedness in a very informative and fact filled manner.

ben
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ben
March 25, 2012 9:42 am

Dude, learn to spell! it’s Eminent domain; You don’t keep tract of things, you keep track. Tract is a piece of land. And it’s in other words, not another words. Jesus

kelley
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kelley
June 13, 2012 12:48 pm

Grow up buddy

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