Ask The Gold & Silver Broker LIVE

Key Concepts

• Junk Silver: Pre-1965 US dimes, quarters, half dollars, and silver dollars containing actual silver.
• Face Value: The nominal monetary value of a coin or currency.
• Spot Price: The current market price for a commodity, such as silver, for immediate delivery.
• Premium: The amount added to the spot price of a precious metal product, reflecting manufacturing, distribution, and dealer costs.
• Troy Ounce: A unit of weight used for precious metals, approximately 31.1 grams.
• Constitutional Silver: Another term for junk silver, referring to its origin as legal tender.
• Petro Dollar: A US dollar that is used to purchase oil on the international market.
• Federal Reserve Notes: The official name for US currency issued by the Federal Reserve.
• COMEX: Commodity Exchange, Inc., a major US futures exchange for commodities.
• LBMA: London Bullion Market Association, a global authority on the wholesale over-the-counter (OTC) market for gold and silver.
• Foreign Sovereigns: Silver coins issued by foreign governments (e.g., Canadian Maple Leaf, Austrian Philharmonic).
• American Eagles: US Minted silver bullion coins.
• Buyback Price: The price a dealer pays when purchasing precious metals from customers.
• Numismatic Coins: Coins valued for their rarity, historical significance, and condition, often graded by professional services.
• Semi-Numismatic Coins: Coins that have some numismatic appeal but are primarily valued for their precious metal content.
• IRA (Individual Retirement Account): A retirement savings plan that offers tax advantages.
• Precious Metals IRA: An IRA that allows for investment in physical gold, silver, platinum, and palladium.
• Custodian: A financial institution that holds and safeguards assets within an IRA.
• Depository: A secure facility where precious metals held in an IRA are stored.

Junk Silver Calculation and Value

Kaiser Johnson explains the calculation and value of "junk silver," which refers to US dimes, quarters, half dollars, and silver dollars minted before 1965. These coins contain actual silver, unlike modern coinage.

• Historical Calculation: Originally, the constitutional value of $1 in silver was defined by its silver content, which was 7234 troy ounces per $1 face value.
• Industry Standard: Due to wear and tear, the industry standard for calculating the silver content of junk silver is now 715 troy ounces per $1 face value.
• Pricing Mechanism: While priced by the troy ounce, junk silver is sold by its dollar face value. To determine the price per dollar face value, the spot price is multiplied by 715 (the number of troy ounces per dollar face value).
• Example: A $500 face value bag of junk silver contains approximately 357.5 troy ounces of silver (500 x 715). If the spot price is $58 per ounce, the cost of this bag would be around $20,705 (357.5 x $58), not $500.
• Special Offers: The video mentions a recent special where junk silver was offered at spot price, or 50 cents under spot for a $500 face value bag or more. This discount is applied to the premium, not the face value.
• Dealer Practices: Some dealers are melting down junk silver to refine it into bars, which reduces the overall supply and potentially increases its scarcity value.
• Personal Opinion: Johnson believes junk silver remains valuable for its potential use in a currency crisis due to its divisibility and ease of transaction compared to larger bullion forms. He also notes that historically, junk silver premiums have outpaced those of other bullion products during periods of high demand.

Premiums and Buyback Prices

The discussion delves into how premiums and buyback prices for precious metals are determined and how they fluctuate.

• Spot Price Determination: Spot prices for silver are heavily influenced by large financial institutions trading silver as a commodity on exchanges like COMEX, LBMA, and Singapore Exchange.
• Premium Determination: Premiums, on the other hand, are a direct reflection of the physical supply and demand for specific precious metal products.
• Market Conditions: Currently, the market is described as a "buyer's market" with low premiums, even with high spot prices. This makes it a favorable time for buyers to trade or swap metals.
• Foreign Sovereigns vs. Eagles: Generally, foreign sovereign coins (like Canadian Maples) have lower premiums when buying and lower buyback prices when selling compared to American Eagles.
• Historical Example (March/April/May 2023): During bank closures, demand for silver surged. Eagles were selling at $15.50 (50 cents over spot) and being bought back at $12.50 over spot. Canadian Maples were selling at $8-$9 over spot. This illustrates how high demand can significantly inflate premiums.
• Current Buyback Rates: Currently, Eagles are being bought back around spot price or slightly over, while foreign sovereigns are being bought back at premiums of $3-$4 (e.g., Maples at $4.50-$4.75). Junk silver buybacks are around $4-$5 under spot.
• Premium Volatility: The gap between buyback and sale prices widens when the spot price is more volatile.

Gold Coins: Purity and Value

The conversation touches upon the composition of gold coins and their perceived value.

• Gold Eagles and Krugerrands: These coins are not pure gold but are an alloy of gold and copper (91.67% gold for modern Eagles) to increase scratch resistance and durability. They still contain one full troy ounce of gold.
• Pure Gold Coins: The US Gold Buffalo and Canadian Maple Leaf are examples of pure gold bullion coins.
• Market Demand: While Gold Eagles are not pure gold, they have historically been the most popular gold coin in the Americas and globally due to high demand.
• Current Pricing: Currently, Gold Buffalos are trading higher than Gold Eagles, which is an unusual trend.
• Semi-Numismatic vs. Bullion: Gold coins that are not pure and not graded are often referred to as semi-numismatic. Pure gold coins like Eagles and Buffalos are considered bullion.
• "Lipstick on a Pig": This analogy is used to describe the practice of grading modern bullion coins (like MS70 Eagles), as it adds a premium without significantly increasing intrinsic value.

Banking Regulations and Coin Dealers

The challenges faced by coin dealers regarding banking regulations are discussed.

• Cash Transaction Limits: Anti-money laundering regulations restrict cash transactions over $10,000 without filing an IRS form. This applies to all large cash transactions, not just those with precious metals dealers.
• Bank Hesitancy: Banks are often hesitant to facilitate large cash withdrawals or deposits for coin dealers, sometimes requiring intervention from bank managers or regulatory bodies.
• Preferred Transaction Methods: Wire transfers, personal checks, and cashier's checks are preferred by dealers as they create a paper trail and avoid the reporting requirements associated with large cash transactions.
• Miles Franklin's Policy: Miles Franklin does not accept cash transactions over $10,000 to avoid reporting obligations.

Precious Metals IRAs

The topic of Individual Retirement Accounts (IRAs) and investing in precious metals within them is addressed.

• Client Concerns: Some clients are hesitant about keeping funds in government-subsidized accounts and are choosing to pay penalties and taxes to withdraw funds for personal delivery of metals.
• Setting Up a Precious Metals IRA: Liberty and Finance can assist with setting up precious metals IRAs.
• Beware of High Premiums: Many dealers advertising gold IRAs may push clients towards products with unusual weights or graded modern bullion coins, leading to inflated premiums and making it difficult to discern intrinsic value from premium.
• Three Separate Entities: A precious metals IRA requires three distinct entities: a custodian, a broker/dealer for transactions, and a depository for storing the metals. These should be separate.
• No Obligation to Specific Brokers: Investors are not obligated to use a specific broker for their precious metals IRA transactions.
• Recommendations for IRAs: For IRAs, it's recommended to stick with recognizable bullion products that have reasonable premiums, where most of the value is in the intrinsic metal content.

Conclusion and Key Takeaways

The session concludes with a summary of key points and an invitation for further questions.

• Junk Silver: It's a good time to buy junk silver due to low premiums, offering potential for future appreciation and transactional flexibility.
• Premiums: Premiums are driven by physical supply and demand, while spot prices are influenced by institutional trading.
• Gold Eagles: Despite not being pure gold, they remain a popular and valuable bullion coin due to their full ounce of gold content and market demand.
• IRAs: Be cautious of dealers pushing high-premium, graded modern bullion coins for IRAs. Focus on recognizable products with reasonable premiums.
• Future Sessions: The "Ask the Broker" sessions will continue, providing opportunities for viewers to get their questions answered.