Expert: Neil S Berman - 11/1/2008

Question
Thank you for taking my question.  I notice that the silver content melt value of a 90% pre-64 US coin today is worth quite a bit less than the comparable value of the junk coinage itself; presently 200 silver dollars selling at 11 times face ($1,100) would only fetch $700 melt value (each coin having a melt value of roughly $3.52) this puts the spread ($400 difference) at what I would think would be at near-historic highs.  I would think that investment in junk silver at this time would be more than usually risky to the downside if prices for silver were to fall AND availability of junk silver coinage were to increase.  
Do you happen to know of a reference chart or some historical measure of this price difference to better guage our present exposure to pricing risks?
Thanks in advance,
ddamon

Answer
You are confusing two different prices. Junk silver US coins consist of war nickles, and pre 1964 dimes, quarter dollars and half dollars. Pre 1935 silver dollars are not included in this group. The price is based on the price of silver and the premium over silver. All precious metals carry a premium over the metal if you want to buy them because they have to be fabricated into something that you can buy. Today, spot silver is $9.83, so a dime melts for $0.71, a quarter dollar melts for $1.77, and a half dollar $3.55. I buy them at 6 times face, under melt and sell them at 8 times face, over melt. The difference over spot is the premium, which is set by supply and demand. The availability goes up and down, but they stopped making silver coins, for all practical purposes, in 1964, so the supply can not go up, on the other hand, they are common, so the price is set by demand. Neither the price of silver nor the premium is anywhere near historic high. Silver hit almost $90.00 and the premium was higher as well.