There has been a major development in the silver market that needs to be shared. Here’s the details, and what it means for investors…
Today I got some very valuable information from one of the largest coin refiners/wholesalers in the world.
I won’t name who they are because it was a casual conversation and not a formal interview, but this information needs to be shared because it is significant.
There is something major going on right now in the silver market in general and specifically with the pre-1965 half dollars, quarters and dimes we commonly call “90%”, “Constitutional Silver” or “Junk Silver”.
First a bit of background:
It is legal to melt down 90% silver coins, but It is illegal to melt down pennies or nickels. Read about it yourself right here on the U.S. Mint’s website.
Essentially, there was a ban from melting down silver coinage from 1967 – 1969. Many people mistakenly think it is illegal to melt down old silver coinage but it is not. The 1967 to 1969 ban was temporary.
Why is it illegal to melt down pennies and nickels, but it is legal to melt down pre-1964 silver coinage?
Because silver is not a metal used in circulation with our current coinage. Sure, there is the American Silver Eagle Bullion Coin, or the five ounce $.25 face value America the Beautiful series coins, but we’re talking day-to-day use of coinage that actually circulates at their current face values.
Copper, zinc, and nickel, you see, are still used in our coinage in day-to-day transactions, so as the U.S. Mint puts it, in an effort to not cause a shortage of coinage and therefore adversely affect the monetary base supply, those metals (a.k.a. the penny and the nickel) are basically prohibited from both melting and from exporting.
In regards to silver, however, since 1969, it has been legal to melt down 90% silver coins.
Side note: When was the last time anybody ever received a 90% silver coin randomly as part of their change?
As long as I have known about silver, I have made efforts to use cash in the hopes of receiving one in change, but I never have.
I pull out my copper pennies and set them aside, and even those are becoming harder and harder to find in circulation, at least in my unscientific experience.
Back on track:
The refiner/wholesaler is now melting down 90% silver coinage because the silver is worth more as melt than it is as silver coins sold in the open market!
This is another sign that we’re very close to the bottom.
Let that sink in for a moment: It is more profitable to go through the extra effort to melt-down the 90% and sell it as melt than it is to sell as silver coinage!
I’m a big believer in 90%, and now I’m even more of a believer.
Because all of the pre-1965 90% that has ever been minted is all the supply there ever will be. It is a finite amount. It’s not like a generic round refiner/wholesaler pumping out millions and millions of generic silver rounds to meet demand. Nope. With 90%, what you see it what you get.
So now, the fundamentals are in our favor with respect to 90%. Think about it: Supply has been forever taken off of the market by this refiner/wholesaler.
I have yet to find out if other refiners are doing the same thing.
I was given a dollar amount of pre-1965 silver coinage that has been melted down: $200,000 face value.
No, I didn’t ask if those were Merc Dimes, Rosies, Washington Quarters, or anything like that.
I just let it sink in for a moment, and I suggest you let it sink in for a moment too: Refiners/wholesalers (at least this one) are making more money going through the extra steps of melting down their 90% and selling that melt for wholesale than they are selling the 90% as silver coinage.
I know, so I’m bracing for it now: “But Half Dollar, that’s not a lot of silver”.
You’re right. That’s only 143,000 ounces of silver (each $1 face value contains .715 ounces of silver).
But the amount is not the point. It’s the fundamentals behind it.
It bears repeating (pun intended) because we’re witnessing yet another sign that we’re near the end of this nasty silver (and gold) bear market:
There is now more U.S. debt based fiat currency that can be made in going through the extra effort to melt down the silver coins than there is in selling the coins as silver coinage (which in addition to their silver content have numismatic/collectors value added on).
Here’s a few things to know about 90% U.S. silver coinage.
First of all, it’s usually the first type of silver to “dry up” when the physical market gets tight and silver comes into high demand. You see, private mints can just ramp-up production, and unless we’re talking about limited mintage silver coins like the five ounce ATBs, sovereign mints can just ramp up their production to meet demand as well with regards to their bullion coin offerings.
But when it comes to 90%, availability is all based on the willingness of the owners of the coinage and where they are willing to meet in order to get the coins to the market.
Right now, there is willingness to sell 90% pre-1965 silver coins, and at basically any price. That is the whole point of this article.
When demand comes into the silver space, the premium paid on 90% silver can spike if the holders are unwilling to let go of their silver in a tight market. When Silver Eagles were on ration (called “allocation” by the U.S. Mint, ahh, how nice of them) at the end of 2015 and throughout the first half of 2016, I recall seeing premiums spiking higher on the 90%!
Here’s a chart from goldchartsrus showing this premium increase during the tight market in mid 2015 through mid 2016:
That my second point about 90%. The pre-1965 silver coinage is literally guaranteed to increase in value not just based on the price of silver but also because of the premium. And notice how that premium is historically low right now.
Here in early March of 2018, Constitutional silver can be had right now for very little over spot, but once the market turns, that will not be the case, and investors can enjoy both the appreciation of the silver and the increase in the premium in the 90% silver coinage market.
Finally, we often can look at the 90% market as a harbinger of things to come. Pre-1964 silver coinage is a market gauge. It tells us the health of the silver market.
Right now, 90% is telling us we are at the bottom of the market. Things are about as bleak as ever, especially with regards to sentiment. There is plenty of 90% available and it is dirt cheap.
As a market gauge, we can therefore look to 90% as a leading indicator for when the market is turning and demand is coming back into the sector.
So watch the premiums on 90%.
As demand comes back into the market, the premiums will rise on 90% pre-1965 silver coinage.
If premiums are rising in price spikes of more than $1 by the time dealers are able to restock and resupply their offerings, then we can decipher that the market is getting tight. In other words, there are more buyers of the silver than there are sellers, so the dealers have to offer more in premium to entice the owners to sell to satisfy the demand.
We didn’t even get into the usefulness of pre-1965 silver coinage in a TEOTWAWKI/post-SHTF barter situation.
That’s a topic for another day.
For now, here’s just another sign of a complete and total capitulation in the silver market.
– Half Dollar