I went to lunch with a friend of mine the other day and we had a pretty wide-ranging discussion. We hadn’t eaten together in a while so this type of conversation is typical. He is a trusted confidant of mine and knows all about, and encourages, my proclivities even though he and his wife may not be fully on-board with ALL of my various interests. But he’s curious and sometimes that’s enough. We’ll be working together on a nice robust garden at his new home come spring… If his wife and I have anything to say about it that is.
First, it started out as a discussion regarding food. We talked about the garden they wanted and then I told him a quick story about how I’d stumbled across 72-hour kits for $12 a piece so I bought the max allowed (4) for the family. I do this from time to time as I encounter online deals or flash sales. Typically, a 72-hour food kit runs north of $20 apiece so I thought it was a good deal and jumped at it. Then I mentioned how my wife wasn’t fully on-board and has expressed dismay on several occasions with my purchases. I shrugged and said, “She’ll thank me one day.” Then the next several minutes was spent trying to figure out just how much food I had and how long it would last my family of four. In the end, I determined that I haven’t reached my personal goal, but I’m getting there.
Eventually, the topic turned toward PM (precious metals) purchases and my thoughts on some form of currency exchange between varying types of PM’s like gold, silver, platinum, copper, and diamonds. Curious, my friend also wanted to understand why I valued one approach over another and why I focused more on one type of commodity over others. Sounds cryptic and vague, but what follows was basically my response.
Collectibles vs Junk vs Bars
First things first, let me define how I’m using each of these terms.
- Collectibles: As I explained to my friend, to me, the concept of ‘collectibles’ generally refers to coins that are more valuable for their age and rarity than they are for their weight in any particular metal. Examples would be Proof Silver Eagles, Morgan Silver Dollars, Uncirculated Gold Eagles, American Platinum Eagles, etc.
- Junk: Coinage that was minted before 1965 is generally referred to as a ‘junk’ coin. These coins actually contained silver and the silver content varied from either 90%, 40%, and 35% depending on the year and the coin in question (nickel, dime, quarter, half dollar, dollar).
- Bars: You can go onto any PM website and purchase gold and silver bars from as small as 1g ($50) to 1 oz ($1275) to 1 kilo ($40,000) for gold and 1g ($3) to 1 kilo ($550) to 100 oz ($1700) to 5000g ($2950) for silver. There are a lot of other sizes/weights to choose from, but you get the point.
The important thing to remember is the weight of the bar or coin when it comes to exchanges. For example, a standard U.S. nickel is 5g, the dime is 2.268g, a quarter is 5.670g, a half dollar is 11.340g, and in an odd twist, according to the U.S. Mint, a one-dollar coin is 8.1g which is actually lighter than the half dollar, but it’s smaller in circumference so go figure.
Now let’s discuss these three concepts.
Factors to Consider for All Scenarios & Discussions: Silver on the open market today is about $16.00 per ounce. 1 ounce is the same as 28.3495 grams. These are important numbers. Take note as the prices of silver, gold, etc. change daily.
Based on our conversation, I got the distinct impression that my friend was considering the purchase of, or was already in possession of, an array of collectible coins. Coin collecting is a fun and engrossing hobby, to be sure, but I am skeptical of its post-Schumer usefulness. I’ll explain why in a minute. Now, if you’re keeping a weather eye on the horizon, you might be able to kill two birds with one stone with each purchase. With that being said, let’s look at an example.
1921 Morgan Silver Dollar
Factors: The Morgan Silver Dollar is one of the most famous U.S. silver coins ever minted. It was produced by the U.S. Mint from 1878 to 1904, and then again in 1921. It is highly popular with coin collectors and precious metals investors. There were 86,730,000 total coins minted and each coin is comprised of .7734 troy ounces of 90 percent fine silver.
The first thing we have to do is deal with this troy ounce business. A standard ounce to grams conversion is 1 oz = 28.3495 grams. Troy ounces are a little meatier in that 1 troy ounce = 31.1035 grams. Almost 3 g more than a standard ounce to gram conversion. As a result, 1 troy ounce is equal to 1.09714 standard ounces. Therefore, .7734 troy ounces equals 0.85 standard ounces (or 24.05 g).
Now that you’re thoroughly confused, let’s see how much it’s worth.
Cost Analysis: The face value of the coin is $1… hence the name ‘silver dollar’. However, the age of the coin coupled with its relative rarity and lack of current circulation means you can purchase a 1921 Morgan Silver Dollar from a dealer for about $20.00 per coin online. Not bad. It’s worth $19 more than its face value. Now it’s time for the tricky math…
The Morgan Silver Dollar is 0.85 ounces (or 29.09709g) and is comprised of 90% silver. So that would be 29.09709g x 0.90% which is equal to 28.187381g of silver. Since silver is trading for $16.00 an ounce, based on weight alone, we already know that the collectible value will be greater than the silver content value, but let’s follow this on through to its conclusion. 28.187381g of silver / $16.00 per ounce equals $1.64 (rounded up because there were a lot of numbers after the decimal).
In today’s modern world, when there’s been no Schumer hitting the fan, collectibles are a good hedge as they tend to retain their value. However, in a post-Schumer world, in my opinion, you’d be hard pressed to get any more value out of the coin than its weight in silver content. However, if you happened across another collector in a post-Schumer world, after all of the hemming and hawing over collectible value, you’d most likely get more than the $1.64 that its silver content would fetch. I’m a bit of a realist/pessimist so I am not confident that there would be coin collectors just out and about looking for bargains on these types of coins. Therefore, in the end, you’re more likely to get the silver content value of the coin and nothing more.
Junk Coins and Percentages of Silver Contained Therein
As I stated previously, a U.S. quarter, regardless of the year minted or it’s presumed silver content, weighs 5.670g. Well, technically I didn’t have all of that ancillary detail about percentages or mint year, but who’s counting. Regardless, despite the year or the silver content percentage, the weight of the quarter is constant at 5.670g. However, if you consider the percentages of silver contained in each coin, the value associated with each coin changes drastically.
You should be aware that many online retailers will sell bags of 90% silver coins for about $1200 even though the face value of the coins listed is only $100. This is because they are selling it based on the coins overall silver content (e.g. weight).
Just for shits and giggles, let’s review the U.S. quarter as an example.
Now, if you have a junk quarter minted before 1965, it could be worth any of the following values based on its silver content (Note: As far as I can tell, only dimes and nickels were ever minted in less than 90% silver content. Below is just an example IF quarters were minted in varying degrees of silver content):
Math: If the quarter is 90% silver, then the total weight of silver in a 90% quarter is 5.670g x 0.90% which equals 5.103g of silver. Not bad. Now if you take 5.103g of silver and divide it by $16.00 an ounce, (5.103g / $16.00) the silver in a 90% quarter is worth about $0.32. The quarter is worth more in silver content than its face value.
Math: If the quarter is 40% silver, then the total weight of silver in a 40% quarter is 5.670g x. 0.40% which equals 2.268g. This is the exact weight of U.S. dime. Now take the 2.268g of silver and divide it by $16.00 an ounce (2.268g / $16.00), you get a 40% coin worth $0.14. The quarter is worth more in face value than it is in silver content.
Math: If the quarter is 35% silver, then the total weight of silver in a 35% quarter is 5.670g x. 0.35% which equals 1.9845g. Now take the 1.9845g of silver and divide it by $16.00 an ounce (1.9845g / $16.00), you get a 35% coin worth $0.12. The quarter is worth more than double in face value than it is in silver content.
Junk Coin Conclusions
If you have junk coinage, it is my assertion that in a post-Schumer world, no one is going to bother with the percentage values of the coin. They are going to go strictly by the mint year. Therefore, if it is a pre-1965 coin, you’re set. People are inherently lazy and most everyone will work off of the assumption and the math that a U.S minted pre-1965 quarter is the equivalent of 5g of 99.9999% pure silver. Whether or not you choose to hedge your bets on the stupidity of others and purchase/collect only 35% silver coins (most likely nickels since they seem to be the only coins containing 35% silver) is entirely up to you. It is a viable strategy, just not very ethical.
Many online retailers sell gold and silver bars that are as small as 1g to as large as a kilo, sometimes even larger. You can buy a 1g silver bar for about $3.80, but the price goes down depending on quantity for most online retailers. Conversely, a 1g gold bar is about $50.00, but it too sees a price reduction based on quantity.
Math: Retailers value 1g of silver at $2.80, depending on quantity, but an ounce is selling for $16.00 on the open market. Are you being taken advantage of? Let’s see… 1g / $16.00 equals about $0.0625 per gram. If I did the math right, that’s about a 450% markup. Ouch. Unfortunately, this is what you’re going to find anywhere you choose to shop when you are purchasing 1g and 5g bars. Prices re-enter our atmosphere when you buy silver bars by the ounce. These bars are as low as $16.50 an ounce (depending on quantity) which is more in line with the $16.00 per ounce open market value. Gold is just insane, not just because of pricing, but also because of availability in a post-Schumer world.
Unless you are dealing in 1oz bars of silver or greater, you are being taken advantage of from a mark-up perspective. However, that being said, 1g and 5g bars would be more easily traded and divisible.
Overall Conclusions for Collectibles vs Junk vs Bars
Personally, I prefer 1g, 5g, and 1oz bars over collectibles and junk coins for a variety of reasons.
- I know they are 99.9999% pure silver and their value cannot be questioned.
- They are more affordable than gold.
- They will be more easily traded/exchanged and change provided.
- Silver (collectibles, junk, and bars) will most likely be more plentiful than gold.
- Potential conversion rates for goods and services will be more easily made with silver.
For additional information regarding currency options after a collapse, please navigate to my Resources/Research Downloads page and review the “02/16/2016 – Currency Options After a Collapse” file.
We never did get around to discussing the nuances between what the equivalent values of say 1g of gold is worth compared to ‘X’ ounces of silver. Maybe next lunch.
Inherited Family Silver
After our discussion regarding collectibles vs junk vs bars concluded, the next topic of discussion turned toward silver that had been inherited. When my dad was in the Navy, it was tradition for the Junior Officers (and wives) to present the Senior Officers with some sort of post-cruise gift. Apparently, back in the 1950’s-70’s, that gift was typically something in silver. The oldest stuff is pure silver while the later 1970’s era gifts was merely silver plated. Regardless, I have a bunch of it. I’ve got a week of vacation coming up so I think I’ll get it all loaded up and take it down the street to the local jeweler that trades (buys and sells) in this stuff and see how much I’ve got, it’s content (pure vs plated), and how much its’s all worth. That’ll be interesting.