Premiums on junk silver coins are rising. Rising premiums on gold and silver coins are a red flag. Unusually high premiums indicate an unusually short supply of physical silver and gold.
Reader Comment: “I notice when I check the price of junk silver, it is not as low now as it was previously when silver was slightly higher. I realize that premium is what goes into your pocket, but I also realize that it is what comes from my pocket.” Dick
Purchasing physical silver is much different than purchasing a certificate that represents an unlimited supply of paper.
When you place an order for U. S. 90% junk silver coins,* a dealer shops the market to secure the actual silver coins. A customer’s price is locked in when the dealer purchases the coins. The dealer’s cost includes the coin premium.
Physical silver coins carry a premium over the benchmark “spot price.” Premium is a function of supply and demand. If the supply of junk silver coins is low and the demand is high, the premium gets bid up. Spot prices and coin premiums are constantly fluctuating.
During the 1980 silver short squeeze, silver supplies dried up. Demand for silver overwhelmed the meager supply. The “spot” prices quoted on the exchanges in London, New York and Chicago disconnected from the cost for actual silver. Dealers were paying as much as $10 per oz (premium) over the spot price to fill silver orders.
Coin premium is not a dealer’s
profit. The small commission he adds to his cost
for the coins is what goes into his pocket.
* Junk silver: United States 90% silver dimes, quarters and halves minted before 1965. A full “bag” is $1,000 face value (4,000 quarters, 10,000 dimes, 2,000 halves). Half-bag ($500 face value) Quarter Bag ($250 face value) and Tenth Bag ($100 face value) available.