Silver Bullion – What You Need to Know Before You Buy
We recently met with a first-time buyer of silver coins and bullion and spent approximately an hour explaining the different types of products, premiums, demand, and the liquidity of each item. Throughout 2020 and 2021, we’ve recently seen a surge in new silver coin and bullion investors and thought that we’d take this opportunity to share with you some of the information that we shared with our customer in hopes that it will make purchasing silver bullion less confusing.
In this article we’ll explain what silver bullion is and share with you the three different tiers of silver bullion offerings in the marketplace, including the premiums, demand and liquidity of each type of product.
If you’re new to investing in silver, you may be a bit confused as to what constitutes silver bullion. You may have found conflicting information online, so we thought we’d take this opportunity to define silver bullion. When we refer to silver bullion, which is also the widely accepted opinion in the coin and bullion industry, we’re referring to privately produced .999 fine silver in the form of silver bars, rounds and ingots.
The most common form of silver bullion is in the form of one ounce silver bars and rounds, but many other sizes are available, including 5 oz, 10 oz, 25 oz, 50 oz, 100 oz and even 1,000 oz bars! Silver bars with a weight of 1,000 ounces are typically institutional size or grade and rarely trade in the retail market.
All silver bullion is produced by private mints or producers of silver, with three exceptions, which we’ll discuss in further detail below.
However, before we highlight the government-issued bullion, we’ll begin our discussion with the three different levels or tiers of silver bullion that exist.
Premium Silver Bullion
Premium silver bullion is produced by the most recognized, popular and trustworthy producers in the industry. The most popular manufacturers of silver bullion include Johnson Matthey, Engelhard, Pamp Suisse, and Credit Suisse. Because of their popularity, you can expect to pay a higher premium over the spot price of silver for these items.
In general, these items can be purchased at a slightly lower premium than American silver eagles and Canadian silver maple leaf coins; however, premiums are oftentimes on par with other government-issued silver coins, such as those from Austria, Mexico and the UK.
We’re of the opinion that if you’re debating whether to purchase silver bullion or a government-issued silver coin at the same price, you’re probably better off purchasing a government-issued coin. The reason being is that there is an implied guarantee from the country of origin that the coin will contain the exact weight and purity as outlined in the specifications.
Secondly, if in the future, you find yourself outside of the country, we suspect that a government-issued silver coin would be more recognized, liquid, and therefore easier to sell.
Name Brand Silver Bullion
Name brand bullion includes silver bullion produced by an established mint or mining company. There are literally dozens of name brand producers of bullion, including Sunshine Mining, Sunshine Minting, NTR, OPM, APMEX, Pioneer Metals, SilverTowne and Pan American, just to name a few. These producers “stamp” their name or logo on the bullion that they produce as well as the size or weight of the bullion so that it can be easily identified.
The market for name-brand silver is quite liquid, but the popularity of the items is slightly less than the aforementioned premium silver. As such, you should expect to pay a slightly lower premium for name-brand bullion. The premiums on silver rounds and silver bars tend to be the same, as the interest level for the two forms of silver bullion is similar.
Premiums on silver bullion tend to be approximately half of the premiums demanded for silver eagles, but of course, this is subject to change based on supply and demand at the time of your purchase.
Generic Silver Bullion
We all love bargains, and this is what you can expect when you purchase generic bullion. Generic bullion runs the gamut from popular images such as the American buffalo and Morgan silver dollar to bars and rounds with images of the holidays, famous people, popular events in U.S. history, etc. During our time as a coin dealer, we have literally seen hundreds of different images on generic silver bars and rounds.
Due to the fact that generic silver bullion isn’t at times as well known as name brand and premium bullion, it’s important that do your due diligence prior to purchasing these items.
Your best chance of success is to purchase these items from a reputable coin dealer, but at the very least, you’ll want to make sure that the round or bar has one of the following stamps: “one troy ounce,” “.999 fine silver,” or “one ounce .999 fine silver.” You may also want to consider using a small portable scale to confirm the weight of the item.
As a reminder, one troy ounce of silver weighs 31.1 grams. We also suggest applying a strong earth magnet to the bullion to confirm that it’s not magnetic prior to making a purchase. We take it a step further and also test the generic silver bullion that we purchase with an electronic precious metals tester, but if you only occasionally purchase silver bullion, it may not be worth making this investment.
As we alluded to above, bullion is primarily produced by private mints; however, at the time of this writing, three recognized government or sovereign mints produce silver bars.
The most popular and recognized of the government mints is the Royal Canadian Mint. The most common sizes they produce are 1oz, 10 oz, and 100 oz silver bars. However, other sizes exist, which are most difficult to come by and trade more like collectibles than bullion.
The Perth Mint, which mints gold and silver coins for Australia, also produces silver bars. The most common size silver bars produced by the Perth Mint are 1 oz, a kilo or kilogram, and a one hundred ounce silver bar.
The last of the government mints that produce silver bars is The Royal Mint in the United Kingdom. They produce attractive 10 oz and 100 oz Britannia silver bars, but also have cast or hand-poured silver bars, which are less common.
In conclusion, we’ve defined silver bullion and have also discussed the three levels or tiers of bullion available in the marketplace. Premium bullion is the most popular and recognized forms of silver bullion, and as such, you can expect to pay the highest premiums for these items. If the cost of premium silver bullion and a government issued silver coin are similar, we recommend that you opt for the government minted coin.
The next tier of bullion is from name brand producers of silver bullion. These items are very liquid, but are not quite as popular as premium silver bullion. Expect to pay premiums that are slightly less than those charged for premium bullion.
Lastly, generic silver bars and rounds are popular items, but typically don’t identify the mint or producer of the item. They can include any number of images including famous people, points of interest or historic events.
Physical silver is a great addition to any investment portfolio and highly sought after by investors and collectors alike. Silver bullion bars and rounds follow the spot silver prices pretty closely in terms of their value due to the silver content typically being nearly 100%.
The most important point to remember when purchasing generic bullion is to check for a “stamp” to confirm that the item is authentic. We hope that you found today’s article to be helpful and welcome you to contact us with any questions that you might have.