Questions on buying junk silver coins from local dealer.

[SDMANN]

I have a local dealer that has between 50 to 75 liberty head silver dollars for sale at -5% below spot. Around 20 of the coins have small holes drilled in them, between 1/8 to 1/4 in diameter. He said all of the coins in that lot have things wrong with them making them uncollectable. I am not interested in collecting and am only interested in buying junk coins at this point for there silver content. Does this sound like a good deal, or am I missing something? Am I off of the mark only interested in buying junk silver for silver content? It seems to me that old U.S. Silver coins are the best deal out there as far as buying silver as a long term investment. Again, am I missing something? Thanks in advance for your input.

[Sparky]

It's fine to buy junk silver for silver content, but 1/8 to 1/4 inch holes are large enough that you would be losing significant silver content. I personally wouldn't want them because you're going to have the same issue when you go to sell them some day. However, if I were to buy them, I would be have them weighed, and pay based on computed silver content. I'd also want to know what he's getting for non-punctured junk silver, and make sure I'm getting a discount over that in terms spot price.

[BrewTech]

^^^^ nice reply, excellent advice.

[SDMANN]

Thanks for the advice, I'll stay away from the coins with the holes then and buy the coins he has that are whole.

[big country]

Really silver is silver. If you buy based on weight and not on face value you should be OK. You might have trouble selling to a person who "collects" but someone just looking for silver would take them. Most dealers would take them and all refiners would take them.

If they're -5% of spot based on weight thats a decent deal. Again, if you do buy it do it based on weight, and remember that it is 90% silver only, so make sure it is "weight x .9" for your silver content.

[willie pete]

I'd offer to buy them for actual silver weight, less 5%...that would, depending on how big the holes are, put them around $23-$25 each at current spot

[madfranks]

I doubt the dealer was planning on selling them to you based on weight, he was probably basing his price on the face value of the coins themselves. It sounds like all of those coins were damaged/culls which means each coin is easily going to be 10-15% lighter than a full coin would weigh. So if the coin is 10% light and he's selling it to you for 5% less than spot based on face value, you're still paying 5% over melt for the coins. If he'll sell them to you at -5% spot based on the weight of the coins, do it! Silver is silver when it gets thrown into the refinery, and when you decide to resell, sell it as scrap silver.

And you're right, pre-65 US silver coinage is generally the least expensive way to buy silver; the premiums are usually the lowest.

[Sparky]

I doubt the dealer was planning on selling them to you based on weight, he was probably basing his price on the face value of the coins themselves. It sounds like all of those coins were damaged/culls which means each coin is easily going to be 10-15% lighter than a full coin would weigh. So if the coin is 10% light and he's selling it to you for 5% less than spot based on face value, you're still paying 5% over melt for the coins. If he'll sell them to you at -5% spot based on the weight of the coins, do it! Silver is silver when it gets thrown into the refinery, and when you decide to resell, sell it as scrap silver.

And you're right, pre-65 US silver coinage is generally the least expensive way to buy silver; the premiums are usually the lowest.

I generally agree with this, but it brings up an important point when you say "sell it as scrap silver". How much does scrap silver pay, compared to spot?

Let's say a dealer is selling pre-1965 coins for 10% over spot, and buying it back at spot, i.e. a 10% spread. Now he's letting this damaged junk silver go for 5% under spot. If refiners are paying 25% below spot for scrap like this, does it make sense to pay -5%? Wouldn't you be better off taking the same money to buy at +10%, knowing you could immediately sell back at 0%? My point is, by treating it as "scrap" rather than "junk", you may be paying a 20% spread.

[madfranks]

Very true Sparky, very true. Not all dealers pay the same for scrap silver and "junk" silver coins. I retract my opinion to sell it as scrap; even though they call them "junk" silver coins, they are still true US pre-65 coinage and are on a higher tier than scrap.

[willie pete]

here's a refiner that pays 90% for coin silver

http://www.midwestrefineries.com/silver.htm

[SDMANN]

I sure am learning alot here, thanks for all the info, I will be sure to bring these points up, as far as scrap vs junk goes. I suppose you are talking about old silver spoons and items as far as scrap goes, he does have 50 or so dollars without the holes, I am going to for sure pick those up if figuring by weight. If he sells the ones with the holes also by the weight, as mentioned above, do you think it would be that hard to move the ones with the holes some day as long as they were by weight? Would the ones with the holes be more on the order of scrap, or junk coins? Why in the world would someone drill holes in those old dollars?

[willie pete]

I sure am learning alot here, thanks for all the info, I will be sure to bring these points up, as far as scrap vs junk goes. I suppose you are talking about old silver spoons and items as far as scrap goes, he does have 50 or so dollars without the holes, I am going to for sure pick those up if figuring by weight. If he sells the ones with the holes also by the weight, as mentioned above, do you think it would be that hard to move the ones with the holes some day as long as they were by weight? Would the ones with the holes be more on the order of scrap, or junk coins? Why in the world would someone drill holes in those old dollars?

I don't think it'd be hard to sell them at a future date, of course you would have to discount them just like when you bought them, looking at that refiner and where the POS is now, it wouldn't be a bad idea to buy them and then send 'em in to the refiner, that is IF you can get them for actual weight minus 5%-10% ....I'm guessing the reason they drilled holes in them was to wear them ...I found an 1854-O seated Liberty Half dollar one time, it was in probably at least Fine-Very Fine, $75-$100 coin at the time, BUT, it had a hole in it, someone had been wearing it and that's probably why it was in such great shape, otherwise it'd been worn

[ximmy]

Thanks for the advice, I'll stay away from the coins with the holes then and buy the coins he has that are whole.

Good... Don't exchange your dollars for crap... buy coins that you can easily turn around.

[madfranks]

Would the ones with the holes be more on the order of scrap, or junk coins? Why in the world would someone drill holes in those old dollars?

It's sort of a gray area here. Pre-65 US silver coins are usually referred to as "junk" silver, because most of it is circulated and worn down. However, it is still easily identifiable as a set weight and purity of silver, i.e. one silver dollar contains .77 troy ounces of pure silver. So when you see a silver dollar, without having to weight it, you know immediately you've got around 3/4 oz of silver, give or take a little based on how circulated it is. True scrap silver would be things like broken jewelry or old silverware where it's not immediately clear how much you have. You have to weigh the scrap and identify a purity (usually stamped on the item itself like .925 for sterling silver) to determine how much scrap silver you have in there. This is why most dealers, when selling pre-65 US silver coinage, sell it by a multiple of face value, i.e. as I type this a US Silver Dollar is worth $27.75 in silver content or roughly 28x face. But if you're dealing with really worn down or damaged coins, you're not getting the full weight of the coin and should try to buy it by weight instead, so you know exactly how many ounces of silver you're getting.

It was very common back then for people to use their gold and silver coins as jewelery. It makes sense, why buy an expensive necklace or ring when your money was made of gold and silver? Drill a hole or solder it to a ring and presto! gold and silver jewelery. There are tons of old coins that have been drilled or soldered and have evident damage. It hurts the collector value but not the actual metal value of the coins themselves.

[gunDriller]

it's also possible to repair/ plug a hole and have the plug be invisible.

takes a lot of skill. i've seen a number of skilled machinists do it with other metals.

a lot of trouble to go to for a coin with non-numismatic value, though.

[madfranks]

it's also possible to repair/ plug a hole and have the plug be invisible.

takes a lot of skill. i've seen a number of skilled machinists do it with other metals.

a lot of trouble to go to for a coin with non-numismatic value, though.

I've never seen one where it was invisible after the "repair". I have seen old gold coins that had been soldered on the rim where someone scraped the solder off and then used a knife to score the rim to mimic the reeded edge, but it was still obvious the coin was tampered with.