What is Silver Bullion? Everything You Need To Know
Silver bullion is any piece of highly concentrated silver, typically defined as 99.9% pure. Bullion is usually intended for investment purposes and comes in the form of bars or coins.
The Origins of Silver As An Investment
Silver is one of the most useful elements known to man. It has the best electrical and thermal conductivity of all pure metals. Since ancient times, its superior ability in reflecting visible light has made it the preferred material for making mirrors. But where silver has really shined, so to speak, is as a store of wealth.
The ancient Greeks and Persians were the first people to issue silver coins. The ready availability of these coins put silver in the reach of normal people for the first time. Saving silver coins became the easiest way for common people to store wealth.
Hoarding silver coins accelerated in the mid-20th century as silver prices rose. This forced governments to either reduce the silver content in circulating coins or remove the silver completely. As inflation spiked in the 1970s, silver demand intensified. This led to the introduction of pure silver bullion coins in the 1980s as an investment vehicle.
Silver bullion is silver which derives its value solely from its metal content. There is no artistic or collectible value to silver bullion, unlike in jewelry or rare coins. Silver bullion comes in many shapes and sizes to meet the needs of the investment market. While one troy ounce is the most popular size, you can buy silver bullion in weights ranging from one gram to 10 kilograms!
Silver bullion comes in three basic forms: coins, bars, and "rounds".
Silver bullion coins are made by government mints for sale to investors. Modern silver bullion coins have a purity of 99.9% (.999 fine) or better. Most pure silver bullion coins weigh one troy ounce, which is 31.1035 grams, or 1.097 "regular" ounces. These standards make tracking your silver holdings a simple matter. The number of coins you have, no matter the nation that minted them, equals the total ounces of silver you own.
The most popular silver bullion coin in the world is the AMerican Silver Eagle produced by the US Mint. More than a half-billion Silver Eagles have been sold since its introduction in 1986.
*The Chinese Silver Panda was introduced in proof silver in 1983, but the first 1 oz bullion Silver Panda was minted in 1989. The Chinese Silver Panda was produced in limited mintages until 2010. The move to metric weights in 2016 saw the 1 oz Silver Panda shrink from 31.1 grams to 30 grams. This stunted demand in the West, where investors prefer troy ounces.
**The bullion Silver Britannia was introduced in 1997. The Britannia was originally minted in historically-accurate .958 fine "Britannia silver." Its purity was increased to .999 fine silver in 2012 to better compete in the silver bullion coin market.
Mintages of the Chinese Silver Panda place it in the upper tier of silver bullion coins. Despite that, Pandas have a higher premium that dampens support to some degree. The price of the Silver Panda is comparable to collectible coins, like the Silver Kookaburra and Silver Koala. Like these coins, the Silver Panda features a different design every year.
Larger bullion coins generally carry a numismatic (collectible) value above their silver content. Common sizes are 2, 5, and 10 troy ounces, and 1 kilo and 10 kilos. The 10-kilo coins are usually limited to a mintage of 200 coins or less.
Silver coins carry a face value, also called a denomination, to give them legal tender status. This denomination is a symbolic value, and is far lower than the value of the coin's silver content. As legal tender, the weight and purity of the coins are backed by the issuing government. This also gives tax and import/export advantages in some jurisdictions. Most importantly, the government prosecutes fake legal tender bullion coins under anti-counterfeiting laws, which are much tougher than normal laws. Try making a fake American Silver Eagle, and the U.S. Secret Service will be knocking on your door!
The peace of mind that legal tender bullion coins give the silver investor comes at a price. Government-issued silver bullion coins cost more than silver bullion bars or rounds of the same weight. This is due to the higher premiums, called seigniorage, that governments charge for their coins.
WHAT IS SEIGNIORAGE?
Seigniorage is the profit that a national mint makes. It is the difference between what it costs to make a coin or bill, and its face value. For bullion coins, it is the charge over and above the cost to make the coin, including the value of the bullion.
These seigniorage charges finance the operation of the mint. In fact, mints traditionally collect more seigniorage than needed, sending the excess to the government. This makes a national mint one of the few parts of the government to regularly make a profit!