Why 90% Silver Coins Are No Longer Considered “Junk”
You know the old saying, “One man’s junk is another man’s treasure?” Well, individuals who have been in and around the silver coin industry for years are likely
familiar with the term “junk silver coins” which can indeed be treasure!
Junk silver coins are typically referred to as 90% silver dimes, quarters and half dollars minted in 1964 or earlier, but technically they can refer to any government issued silver coins for general circulation that are primarily bought and sold for their silver content.
Other Examples of Junk Silver Coins are:
- 80% Canadian silver coins minted in 1967 and earlier
- 40% silver Kennedy half dollars minted from 1965 – 1970
- British silver coins minted prior to 1947
However, with the recent surge in demand for 90% silver U.S. coins, rarely do you hear individuals refer to these coins as “junk” these days. Rather, most folks request 90% silver coins in general, a specific denomination coin, or they use another common term used for 90% silver coins – “constitutional silver.”
Demand & Premiums for Junk Silver Coins
While the demand for 90% silver coins and the premium for these coins vary over time, at the time of this writing, we haven’t seen the type of premiums that we’re currently experiencing in the marketplace since 2008.
There appears to be a new found respect for “junk” silver coins, and considering that demand continues to outstrip supply, we don’t see interest in these coins waning anytime in the near future.
Dimes, quarters and half dollars are all in high demand, but interest in 90% half dollars continues to remain higher than the other denominations. This has historically been the case for a few reasons.
- It’s easier to store rolls of half dollars than smaller denominations.
- It’s easier to estimate the value of half dollars based on the spot price of silver.
- Substantial investors in silver coins tend to prefer larger denomination coins.
- Some older half dollars, such as Walking Liberty halves, may have some collectible value – especially in high-end condition.
Why the Increased Demand?
It’s difficult to know for certain why we’re currently seeing an increased demand for 90% silver coins, but we know that in 2008 many individuals were purchasing silver as a hedge against financial and economic crises. They were also likely seeking a flight to quality or safer investments.
At that time, the stock market plummeted, many smaller banks were failing, and the consensus among many folks was that the largest banks had an enormous amount of toxic loans on their books, which effectively made them insolvent.
Current Financial Situation – Sept 2022
At the time of this writing, we’re officially in a recession or at least what historically has been deemed to be a recession with two consecutive quarters of negative GDP growth. While third quarter GDP is expected to be positive, the Fed has lowered projections once or twice already, so it’s possible that we could see a third consecutive quarter of negative GDP growth.
Up until 2022, the Federal Reserve pursued an accommodative monetary policy, but recent consumer price index (CPI) reports, which measure the inflation rate, by and large, have surprised to the upside. September was no different, as we saw another increase in the inflation rate. In response, the markets are expecting the Fed to tighten monetary policy by increasing interest rates and selling assets. This will likely cause higher interest rates in the bond market, mortgage market, higher interest rates on business loans, and a slowdown in the economy.
Interestingly, at present, nearly all central banks are tightening their monetary policy, except for Japan, which has yet to see the nearly double-digit inflation we’ve experienced in the U.S. and Europe. However, it’s only a matter of time before inflation in Japan exceeds the Central Bank of Japan’s target, which will cause them to pivot and sell bonds as opposed to purchasing them.
It’s clear that we’re in an inflationary cycle, without a catalyst on the horizon for a reversion to the Fed’s target inflation rate of 2%. With that said, 90% silver coins are not only a hedge against inflation and financial crises, but many individuals are of the opinion that if the dollar is destroyed due to high rates of debt, deficits and monetary printing that silver coins may also be used as money or for bartering in the future.
With this being the mindset of some folks, they believe that a combination of dimes, quarters and half dollars is a prudent choice, as using these coins for transactions will be similar to using different denominations of paper currency. For example, you might be able to use a dime for a loaf of bread, a quarter for a gallon of gas and a half dollar for a meal.
While in time we’ll likely see a reversion to the mean (or that asset prices and volatility of returns will eventually revert back to their long-term average levels) for 90% silver coins, it’s difficult to know when that may be. However, since a number of 90% silver coins are being melted every year by refineries and jewelers, even though this practice is illegal, fewer of these coins will exist in the future. Considering the demand and constantly shrinking supply, it’s possible that we’ll continue to see higher sustained premiums than we’ve seen in years past.
Due to the current high demand and increased cost for 90% silver coins, very few people these days view “junk silver” as an appropriate term for 90% silver coins and more as treasure.
As to if the premiums will sustain over the long run, it’s anyone’s guess. Considering that many silver coin dealers are having a difficult time keeping these coins in stock, we suspect that the current interest level in these coins will likely persist for some time.