Or 90% Face?
Silver Eagles….

As today seems to be a lazy Saturday afternoon with not much new to report, we thought we would bring readers’ attention to an old piece written by Ted Butler’s mentor, Izzy Friedman, and open it up to discussion.

Izzy wrote a piece several years ago advocating US Silver Eagles as the best form of silver to invest in.
While USSE’s carry the highest premium over spot, Friedman looks for the US Mint to one day soon stop producing eagles entirely, which he believes will cause USSE premiums to skyrocket.

Personally, The Doc thinks that Izzy is correct, yet all of Mr. Friedman’s arguments also apply to 90% silver US face coins (Pre-1964 coins)- and some of these very arguments are the reason why The Doc believes  90% US face coins to be the best form of silver to purchase today.
*90% face coins have one of if not THE lowest premiums of any investment form of silver available today, meaning you can exchange your fiat dollars for more ounces of silver in 90% form than you can for silver rounds, bars, Eagles, etc.
*90% face coins have ALREADY been discontinued from production, meaning that the same potential production stoppage of USSE’s has ALREADY happened with 90% face US coins!
*90% face coins were also produced by the US Mint, meaning that investors can trust the silver content of the coins at 90% just as much as they trust that the silver content of a silver eagle is .999.
*90% face coins are FRACTIONAL silver pieces, which The Doc believes will result in higher premiums vs. 1oz denominations when the silver shortage arrives and silver reaches valuations near Friedman’s levels.

I will include Mr. Friedman’s thoughts below.
We are interested in our readers’ thoughts and perspective on this issue as well.
What do you believe to be the best form of silver to invest in?

From Izzy Friedman:
Money cannot solve a shortage of material, only material can. When the industrial users come into the market for real material, the shorts will be destroyed. At that time we will have a bigger scandal than the subprime mortgage crisis of today. In my opinion, we need a shortage to put silver in a free market. When this occurs the real value will come and no one can predict what the price will be.

Mr. Butler has a modest view on future prices, and my opinion is more extreme. I can see very high prices. If I tell you the price you will need a seatbelt, not to fall from your chair. With this kind of opinion on future silver prices, what is the best single form for buying and holding real silver? Looking at my crystal ball, considering that a silver shortage is likely, and that silver prices will then reach or exceed the price of gold; I think silver Eagles are the best way to own silver. Why?

I can see silver prices so high, that the risk of imitation or phony silver coming to market will be great. Great price increases always bring out frauds and crooks. People will want to be sure they are buying the real thing. Coins are more difficult to counterfeit than paper instruments. At current silver prices, there has been no big incentive to counterfeit silver Eagles or other forms of silver. Because the US Mint produces silver Eagles, an added level of protection against counterfeiting is present. The US Government does not sit still on counterfeiting.

Because Silver Eagles are sold at a premium to the price of silver from the Mint to wholesalers, few if any of the 160 million regular silver Eagles minted and sold since 1986 have been, or will ever be melted for their silver content. The same with millions of more expensive Proof Eagles and commemorative silver coins issued by the Mint. Silver Eagles that are sold by investors are bought by other coin investors. Therefore, the silver used in Eagle production is taken off the market, in my opinion, forever.

But the premium on Silver Eagles will explode someday, because the Mint will stop making them in the future. When the silver shortage comes, and prices start to escalate wildly, the US Government will not wish to aggravate the shortage by continuing to take silver off the market. By then, the users will be screaming for relief from high silver prices and the mint will see this.

According to Mr. Butler, before the gold and silver Eagle program began in 1986, it was decided that, in order not to hurt domestic miners, only metal purchased from domestic miners would be used in the Eagle program, so government owned metal wasn’t dumped on the market.

But the Silver Users Association, fearing higher silver prices because of demand for Silver Eagles, lobbied behind the scene to change things to their advantage. They couldn’t kill the program completely, but the silver users were still successful. Gold was left unchanged in that domestic production was to be used, but silver was changed so that only silver from the Strategic Defense Stockpile was to be used for Eagles, until it ran out, which it did in 2001. Since then, the US Mint has had to buy more than 50 million ounces of silver to produce silver Eagles.

It will not take much convincing by the silver users to get the US Mint to cease production of Silver Eagles, when the silver shortage hits. So a premium could develop, if and when that happens. The same kind of premium that develops when an artist dies and it becomes known there will be no more new works of art from him. Now some may say, what kind of numismatic premium could develop on a modern bullion coin with a total amount in existence of more than 160 million? I say, a very big premium. The Silver Eagle is no ordinary coin. It is the world’s leading silver bullion coin. The US Government guarantees its purity and weight. It is recognized everywhere. In the years to come, people from all over, including India and China, will want to buy them. It is, in my opinion, the most beautiful coin in the world.

At any point in time, very few old Silver Eagles are available for sale in any large quantities. That’s because Silver Eagles are widely held by many small investors and coin collectors. Many are given as gifts and hold sentimental value. Grandparents, like me, set them aside for their grandchildren. Silver Eagles are not a trading vehicle, they are mostly held for the long term. The market relies on the fact that new coins from the Mint will always be available for sale, in order to satisfy new demand. But always isn’t forever.

When the shortage comes and silver explodes, the price will be so high that most people won’t be able to afford even a 100 ounce bar. Then, there will be much more demand for silver in one-ounce denominations, just like there is for gold today. That extra demand will put a bigger premium on the smaller pieces compared to bigger bars. The best small piece is the Silver Eagle and it will have the biggest premium of any other one-ounce choice. Also, it will be easier to sell in one-ounce pieces when prices are sky-high.

I think the premium on Silver Eagles will go to such crazy levels, that out of respect for Mr. Butler, I will not say a number, because he thinks it will sound too extreme. Instead, I will be very conservative and just say that in the future, when the silver shortage comes, the premium on Silver Eagles to the price of silver will be much greater than the total cost of an Eagle today. If that comes true, it’s like buying silver at today’s price for free.

To those who are inclined to own silver, buy Silver Eagles. To the gold investors, please change some gold into Silver Eagles. If anyone is lucky enough to buy, say, 1000 Silver Eagles or more, in 15 years it will be worth a sum that will shock you. Don’t think for one minute that I have a financial interest in selling Eagles. I don’t work for the Mint or for commissions. I write for love of silver and my friend Ted Butler.
Read more from Izzy Friedman’s piece here:

  1. Remember 'Gresham's Law'. The highest quality coinage will be retained. As a result, the 'junk' will immediately gain cache and be demanded aggressively in an early period of tumult. It's my humble suggestion your initial allotments for accumulation might best be about 60% 'junk', 40% 'fine'. Once silver trade approproaches a state of commonplace exchange, I would expect the 'fine' silver to be sought for 'savings' purposes and command a bit more premium over the 'commodity' coinage. Plan ahead for that circumstance by guesstimating how much 'junk' would hold you through the 'early period' then concentrate on 'fine' silver and gold beyond that provisioning. If you've got a hell of a lot of banknotes, mix in very selectively chosen mining company shares as well.

  2. I've always been curious as to what type of JS/Fine Silver ratio might be prudent, but that helps a lot. The ratio I have is the opposite of that, but that's because it used to be 100% Fine silver and we've slowly been able to increase our Junk Silver the past few months.

    Appreciate all the posts.

  3. Friedmans article is a classic. I went the ASE route but don't think you can go wrong with either. Honestly Friedmans article played a big part in me getting eagles. There both gonna be worth a crap load more one day than they are today.

    I subscribe to Ted Butler and for Jakes info he had the exact same amount of short covering today as Jake had yesterday so it's hard to argue against that. Thanks for posting Izzys article and adding your commentary Doc.


  4. For quite some time, I have advocated buying Mercury and Roosevelt dimes. First of all, the Chinese are not counterfeiting them as they do with Morgan and Peace dollars. Secondly, there is a very low premium as compared with silver Eagles. Thirdly, when silver is at $400, your silver dime will fetch $35 paper dollars. The lowest denomination will be the most trade-able unit. Weight: About 0.072 ounce per dime, and about 3.5 ounces per roll of 50.

  5. I agree with BrotherJohn on his point to buy what you really like as far as numismatic or even high end silver bullion like scottsdale silver because they always have much higher premiums later.. Especially when there low mintage..

  6. I did purchase some silver panda from China. As I know, 99% of Chinese don't buy Silver Eagle. They buy Silver Panda. The mintage of silver panda is much rarer and have higher premium than Silver Eagle. There are many fake pandas in the market, but it is hard to be counterfeited. If you have a genuine one, even a layman like me, can tell the difference between the fake panda and genuine panda.

    I am not discouraging people buying Silver Eagle. I just share the truth occurs outside the US. If someone believes China will replace US to be the top 1 superpower in the future, they should consider Silver Panda.

    Actually, Silver Panda has its disadvantage too. It takes more space to store the panda as every panda come with a capsule.

  7. Add to the junk silver pile of U.S. silver coins are the 90% silver USA/filipinas coins (pesos, 10 & 20 centavos minted 1903-1905. The later ones (1907-1945) have lesser amounts (80% for pesos, 75% for the 20 and 10 pieces). Many of these were brought back to the U.S. after WWII.

  8. I agree with the thread of comments here…

    I consider ASE's to be the "gold standard" of silver coinage, and yet, you can get most bang for the buck with 90%.

    There's another consideration though, that I haven't seen mentioned yet.

    Personally I think we're gonna have to use some of our silver just to pay the bills and live. With the Doc, and others believing silver will go, perhaps 1 to 1 with gold….this will make using silver to pay the bills rather difficult. With silver, say, at $2,000 an oz…this will make paying your light bill, or filling your gas tank a bummer…because we'll have to sell a whole ounce just to pay for something that's a few hundred dollars.

    I personally have a friend, who put his entire life savings into dozens of $1,000 bags of silver dimes. Very smart. If silver hits one to one with gold, one silver dime will be worth $100 to $200 at least. This means we keep more of our silver, while still being able to use it.

    If I could go back, I'd do one thing differently in my silver purchases: I'd get smaller denominations.

  9. If you live in Europe, the best investment is definitely the Sterling Silver commemorative Euro coins (specially german, dutch and spanish). Their price equals their face value, and at the moment, their silver content is higher than their price. Obviously they've just run out.

    These coins have 3 'powers':

    1. The face value equals its price, so if there is finally no collapse or we end in deflation, you can convert them into cash again in the corresponding national bank.

    2. The silver content and purity (0,925).

    3. The numismatic value.

  10. I have this one question that has been nagging at me for years and now I found the appropriate blog to ask it….If I were to purchase an American Silver Eagle coin from the US mint, would I be wasting $ in buying the proof set and not get the uncirculated? Since each is 99.9%silver content, then would a future buyer of my coin care if it is proof or not?

  11. I would class silver coins from the Perth mint with any other generic silver round.

    As far as Proof Eagles, these are numismatic coins due to the exorbitant premium, and are not typically purchased in bulk as a silver investment. They are usually purchased individually and given as a gift, etc. The premium is simply way too high to be purchased in bulk as a silver bullion investment.

  12. What about private Silver Mints, such as Golden State Mint, that have great reputations, what will happen to the value of the silver rounds that they produce. Silver is silver, right? Is the value of the US Silver Eagle just numismatic? Based on trust (as if anyone should trust the US Government)? If you had "generic silver rounds, would you trade them in for USSE's?

  13. 1. Silver is silver. Get the most you can for the cheapest. Junk silver coins are ultimate.

    2. Learn how to build a furnace that can get up to 2000F/1100C and your lack of small denomination is cured.

  14. If you are expecting silver to gain in real purchasing power terms then it would make sense to buy smaller denominations. One example given was that if silver goes to $400, then a silver dime will be worth $35. If $35 has the same purchasing power when silver is $400 that it does today then having the dimes makes sense.

    However if it takes $35 to buy a gallon of gas, then it doesn't really matter if you have silver dimes or full 1 oz rounds.

Leave a Reply