At Money Metals Exchange, we believe a significant part of our mission is to educate customers and the public at large about the many aspects of the precious metals market.
While our precious metals specialists have the pleasure of addressing on an individual basis many excellent questions posed by our customers, we occasionally take the opportunity to address some of the best and most common questions in a more public way...
What is the spot price?
A: The "spot" price standard is used to report the current base value of the various precious metals. It is set in large Exchanges like in Chicago Mercantile Exchange (the COMEX) where futures contracts, representing claims on very large bars, are traded. Technically the “spot” price is the price of the most recent trade in the nearest active delivery month. It changes from moment to moment while the exchanges around the world are open and trading.
Every precious metals dealer should be using a live spot price that is almost exactly the same at any given time – with the only variation being attributable to a small lag or the particular reporting service being utilized.
Many mints and industrial users buy futures contracts and take delivery of very large bars of gold and silver directly from exchange vaults. The bullion products that Money Metals Exchange and other dealers offer carry a “premium” that is added to the spot price. This premium includes wholesale premiums dealers must pay and/or the manufacturing cost of converting the large exchange-sized bars and other raw inputs into finished coins, rounds, and smaller bars designed for bullion investors to easily hold and trade.
Premiums also include the dealer's profit – so this is the component over which you have the most control. Premiums will vary from company to company and from product to product – but for bullion coins, bars, and rounds, premiums are typically between 4% and 12% over the spot price.
Some of the saddest situations we have encountered involve customers who bought supposedly “rare” coins from a high-pressure sales outfit, paid premiums well above 30% (and sometimes as high as 100%), and later discovered they dramatically overpaid for coins that aren't scarce at all.
Can I exchange my 10 oz silver bars for Gold Eagles (or something else)?
A: Yes! We would treat this as two simultaneous transactions – one purchase and one sale. We would send you a Purchase Order representing our agreement to buy your 10 oz silver bars at the current price, and a Sales Order detailing the simultaneous purchase of the items you want. If the value of what you are selling is greater than the value of your purchase, we would refund any difference. Alternatively, if the value of your sold items is less than the amount of your purchase, you can arrange payment for the difference.
Once pricing is locked on both transactions, you simply ship the silver bars to us. We will ship the items you want in exchange promptly.
You'll get the most for your exchange by taking advantage of periods when silver appears undervalued relative to gold (or vice-versa). Right now – with the gold/silver ratio near its all-time high – swapping gold for silver could make a lot of sense (and we currently offer free shipping on your silver purchase if you do such a swap).
Exchanges can also make sense when premiums on collectible gold or silver coins you happen to own allow you to sell for a reasonable price and buy additional ounces of a bullion product instead -- thereby increasing your precious metal holdings. Because of the transaction costs, we generally do not recommend exchanging one bullion product for another bullion product of the same metal type.
What does the term "Face Value" mean?
A: The term “Face Value” is most often used with regard to pre-1965 dimes, quarters, and half dollars. The silver in these 90% silver coins is worth well more than 15 times the coin's legal tender – or face – value. For example, 10 dimes minted before 1965 have a Face Value of $1.00. That same quantity of these pre-1965 dimes contains .715 ounces of silver, and Money Metals Exchange will currently buy them for about $15.50.
The same is true for a quantity of four Pre-1965 Quarters. Two Pre-1965 Half Dollars are worth slightly more in the market, but again, they contain the same amount of silver.
Pre-1965 coins are sold in increments of the coins' face value, and we start with our Barter Pack of $10 dollars of Face Value -- which costs about $175 dollars at current market prices.
Why are pre-1965 dimes, quarters, and half dollars referred to as "Junk Silver?"
A: The term "Junk Silver" was coined in the 1970s when pre-1965 dimes, quarters, and half dollars were systematically culled from circulation by savvy investors. Far from being junk, the silver contained in this formerly circulating coinage is currently worth well more than 15 times each coin's face value. However, the coins have generally been circulated and come in a variety of conditions. They do not possess any collectible or numismatic premium. So the term Junk Silver refers to these coins which are valued primarily on their silver content and not for their condition or rarity. You can find junk silver for sale by many dealers, including us.
About the Author:
Clint Siegner is a Director at Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.