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How to Buy Silver

Five Methods:Preliminary StepsBuying Scrap SilverBuying Silver Coins, Bars, or RoundsBuying Silver without Physically Owning itMaking the Most of Your SilverCommunity Q&A

Silver is a precious metal that has long been used for currency and wide range of industrious applications. Like gold, it is bought it large quantities by investors who wish to trade the commodity or use it as a hedge against economic uncertainty. If you want to get into the silver trading game and need to know where to start, here's a quick primer on all the essential things you'll want to know.

Preliminary Steps

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    Consider what kind of silver you’d like to buy. You can either buy physical silver, including scrap silver and bullion, paper silver, which buys you the rights to physical silver that you won’t actually store yourself, and silver futures, which are a way of investing on what you think silver will be worth in the future.
    • If you want to get your hands on actual, tangible silver, beware of bait and switch techniques where a seller offers papers that claim to secure physical silver held elsewhere.
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    Find a reputable dealer. To avoid scams and other unfavorable buying situations, find a reputable dealer. Probably the most surefire way of connecting with a reputable dealer is finding the list of recommended dealers from the US Mint's website. Type in "coin dealer database US Mint" into your favorite search engine and that should connect you to a page on the US Mint's website where you can search for national and local dealers that have been vetted by the Mint.[1]
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    Assess the market value per ounce. In financial markets, there's something called a troy ounce that shows the price of a precious metal per raw ounce. Look up the current value to make sure the seller is not charging you much more than market price for silver.
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    Negotiate terms of the silver trading. In any sale of silver, there are often specific terms that need to be negotiated between the seller and the buyer. Without considering these issues, you may be selling yourself short when purchasing physical silver from these sorts of vendors.
    • If you are agreeing to a paper silver scenario, figure out how the seller holds physical silver to satisfy your paper-backed precious metals. For example, buyers have reported that commercial banks offer paper that staffers claim to be backed up by physical silver only to encounter frustrating delays and obstacles when they demand to receive the physical silver.
    • Discuss numismatic and raw values for silver. Some sellers offer silver coins as physical silver. In these sorts of transactions, it's key for the buyer to understand how numismatic or coin value may affect their purchases. Without going over this critical detail, you could end up paying entirely too much for your silver holdings.
    • Ask about premium fees. Some sellers, such as banks, charge extra fees for the sale of silver. This results in a silver buyer being underwater on their purchase from the moment they sign on the line. Demand that your seller honor a fair transaction value for silver so that you can recognize gain if the price of silver increases.
    • Ask about buybacks. Some sellers will buy back physical silver that they sell to you and others won't. Keep in mind that without a buyback agreement, you may suffer losses when you try to sell your silver if you cannot find a buyer who will honor fair market values based on the original sale price as well as current market realities.
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    Get cost-basis information for tax filing. Another important step in buying silver or any other precious metal is to get documentation of your sale and the cost of the silver. This is so that you can declare your cost basis when you sell the silver in the future for gain. Without this information, the federal IRS could cause problems with your gold sale when you pass on the precious metal to another buyer.

Buying Scrap Silver

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    Know how to identify real silver. Genuine silver jewelry or silverware will be stamped with the number 800 or 925 or a promise that the silver is sterling (ex. Ster, Sterling, Stg). If you cannot find an identifying mark on your silver, here are three ad hoc, but indeterminable, tests that you perform if you're trying to tell real silver from fake silver.
    • Real silver rings. Either flick the silver coin into the air or tap it with another coin to produce a sound. The sound you should hear in hear silver is a ringing sound, high-pitched and bell-like. If you flip a 1932-1964 quarter (90% silver) and a post 1965 quarter (90% copper), you should hear the difference immediately.[2]
    • Real silver melts ice. Place an ice cube on a block of silver or a silver coin and watch the ice cube melt faster than it would if it were merely left out at room temperature. Silver melts ice quickly because it has very high thermal conductivity.
    • Real silver isn't magnetic. Get a rare-earth neodymium magnet. Angle your silver bar at 45° and let the neodymium magnet slide down. On real silver, the magnet will make a slow descent down the bar. On non-silver materials, it will either stick to the top of the bar or slide down very quickly.[3]
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    Ask friends and family. Many people have broken or damaged silver jewelry that they’d be only too happy to sell it at a reasonable price. Some may even give you things for free.
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    Place ads. Use Craigslist, your local newspaper, or even your local radio station to make it known that you’re interesting in buying scrap silver.
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    Find reputable dealers. Ask around in the community before jumping on the first deal you see. (Online testimonials don’t count.) If a deal seems too good to be true, it probably is. Again using the US Mint's list of recommended dealers is a good starting point.
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    Find your own sources. Look at online auctions, garage sales, flea markets, thrift shops, and consignments stores. Online auctions will generally have higher prices, but the trustworthy ones will also have ways for you to verify that what you’re purchasing is actually silver. That being said, you can often find hidden treasures in the bulk and miscellaneous baskets at second-hand shops – and for a fraction of what they’re worth.
    • In particular, look for thick rings, broken jewelry, and silverware.
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    Get to know local pawnshop owners. While pawn shops aren’t necessarily the first place you’ll want to go to find silver, getting to know the owners can provide you with a lot of valuable insights and possibly set you up with contacts. If you’re lucky, you’ll find a pawn shop that doesn’t have the resources or inclination to deal with scrap silver and will work out a deal to put you in touch with potential sellers.
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    Look for silver in unexpected places. In addition to jewelry, silver can be found in circuit boards, old electronics, mobile phones, circuit boards, photographic plates, and old cameras. Look for dead electronics to take apart in thrift shops and scrap yards or whenever a school or office building is upgrading its equipment.
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    Break your silver down. Take out any non-silver components and collect all the silver pieces in sealable containers.
    • Note that some jewelry will be worth more in its whole form than broken down for scrap.

Buying Silver Coins, Bars, or Rounds

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    Think about investing in silver coins. Silver coins derive their value both from the silver content in and the numismatic value of the coin. In most cases, the numismatic value of the coin is the main determinant of the value. What this means is that the characteristics of the coin — its provenance, quality, etc. — means more to collectors than the actual value of the silver when talking price. For this reason, many investors caution against investing in silver coins if you're not interested in numismatics at all.
    • Because of the collectible nature of silver coins, their prices can be very volatile. In fact, their prices can shift dramatically due to market demands, often for reasons that have nothing to do the price of silver. If you're going to invest in silver coins, be aware of this before embarking on your journey.
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    Try your hand at investing in silver bars. Silver bars are bars of almost pure silver, much like you'd see in the movies. Because of their unique nature, they often trade at above-market price for silver. You can find silver bars at major banks or bullion dealers.
    • Silver bullion is effectively the same thing as silver bars. Bullion coins are made of precious metals, designed to store value instead of being used in commerce. As such, you can buy silver bullion coins if you're not wedded to the notion of having silver bars.
    • Silver bars come in different shapes and weights. 1 oz., 5 oz., 10 oz., 100 oz., and 1000 oz. bars are the standard, although there are certain manufacturers who design even lighter bars. What you need to know when thinking about weight is this: The smaller the bar, the higher the premium you'll pay.[4] If you really want to pinch your pennies, buy bars in bulk!
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    Consider investing in silver rounds. Silver rounds are a cross between a bar and a coin. Like bars and bullion, they have no numismatic value. Like coins, they maintain the same circular shape and usually contain a troy ounce of silver (1/12 of a pound). When purchased from a private manufacturer, they can be minted with a custom design.

Buying Silver without Physically Owning it

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    Consider investing in an ETF. An exchange-traded fund, or ETF, is a security that tracks an index or commodity (like silver) but is traded like a stock.[5] While ETFs are similar to index funds, there is often no commission fee associated with the buying or selling of the ETF, unlike index funds.[6]
    • It's important to remember that when you choose to invest in an ETF, you're not actually buying physical silver or even the right to redeem silver. Normally, you're just making a bet that the price of silver is going to rise.[7]
    • If you're convinced the price of silver is going to go down, or you simply want insurance in case the price of silver drops, you can also short sell with ETFs.
    • ETFs also benefit from having a very high level of liquidity, meaning that they can be cashed quickly without affecting their value substantively.
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    Consider also investing in a mining company for a riskier proposition. If you want to, you can also invest in mining operations in addition to hoarding an amount of physical silver or trading ETFs. If you follow a mining company closely or are bullish about the industry as a whole, this could be an option. Consider these caveats when investing in a mining company:
    • The price of a mining company's stock may go down even though the price of the commodity goes up. Even if silver is on a tear, you could lose money on your investment if the mining company you invest in has bad management or a poor quarter. Investing in mining companies is risky.
    • With greater risk comes potentially greater reward. If you can stomach the increased risk, or if you have an appetite for it, investing in mining operations can yield hefty rewards.[8]

Making the Most of Your Silver

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    Know that owning physical silver is probably more useful than owning a non-physical security of certificate. Physical silver, such as coins, bars, bullion, or rounds, have been and are being used both as currencies and in industrial manufacturing. This makes them more versatile that securities that trade silver commodities, although not necessarily more liquid. If you're planning on investing in silver, start off with the precious metal before venturing off into other, more complex forms of ownership.
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    Use silver as a hedge against economic uncertainty. In a time of economic uncertainty and slow growth, silver is an excellent hedge. A hedge is a strategy that reduces your risk of losses when the market fluctuates, usually by investing in an offsetting position. Silver is a good hedge against currency depreciation and even inflation. That's because if the value of currency ever plummets, precious metals like silver and gold remain relatively stable, if not increase in value.
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    Don't buy on hope and sell on fear. Many buyers of silver and gold approach the investment angle exactly the wrong way around: They buy when they notice the price going up, and they dump when they notice the price going down. Don't be someone who violates the first principle of investing — buy low and sell high.
    • Try to think of things the other way around. Instead of buying when everyone else is fearful and the price of silver is high, buy when everyone else is complacent and the price of silver has dropped or is experiencing a trough.
    • Take a look at a historical graph of silver prices. Over the past 30 years, in normal economic times, the price of silver flatlines at about $5/ounce.[9] If you can afford to wait until silver hits this low, use this as a benchmark and invest then. When economic times are uncertain and the price of silver goes up, unload your silver for a hefty profit or keep it as a hedge against currency depreciation.
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    Know that the silver market is very volatile.[10] If you're not ready for a rollercoaster ride when you invest in silver, perhaps silver isn't the right investment for you. Of course, if you happen to buy silver when it's bottomed out, then most of the volatility will be good volatility. But even then, expect tortuous price fluctuations and dips and turns as consumer sentiment and monetary policy changes.

Community Q&A

Add New Question
  • Is it a good time to invest in silver?
    We don't know what the spot price will be a day or a year from now, so it's hard to say. However, precious metals are often considered a good inflation hedge, so in that sense, it's always a good time to buy silver.
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Categories: Purchasing

In other languages:

Español: comprar plata, Português: Comprar Prata, 中文: 购买银, Русский: купить серебро, Français: acheter de l’argent, Deutsch: Silber kaufen, Italiano: Comprare Argento, Bahasa Indonesia: Membeli Perak

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