Silver Bullion

Semantically speaking, silver bullion is one of the broader and more inclusive groupings of silver products. Silver bullion includes all types of silver designed for monetary or investment purposes, which includes silver coins, silver rounds, silver bars, and similar products. Other silver products, designed for other purposes, do not count as silver bullion even if they are 99.9% pure silver.

For example, the silver contacts and electrical parts found in high tech devices do not count as bullion. Nor does silver grain – which is close to impossible to assay, and is thus close to useless for serious investing. Silver wire is not bullion, and badly damaged silver coins of the past may not count as bullion, either. Silver grain is used for jewelry and the like, not for money or for bars.

Bullion has changed its meaning since the early days of the word, when it specifically meant silver or gold that had not been transformed into coinage yet. Today, however, the definition could be more accurately said to be the opposite – silver which has been melted down and then cast or struck into an object whose primary function is monetary. Silver bullion is monetized, or at least commoditized, silver, generally of very high purity and formed into an object meant to store or embody value.

Does Silver Bullion Have a Standard Size?

There is no official dictum about how large a piece of silver bullion needs to be made, but there is a nearly universal consensus, based on practicality, that 1 troy ounce is the default size for silver bullion. The reason for this is simple – the international commodity markets trade silver in one ounce quantities for convenience and clarity. The spot price of silver is given as its price per troy ounce. Accordingly, more bullion is made in a one ounce size than any other weight.

Bullion made in a weight of less than one ounce is usually referred to as “fractional silver”. For example, a ½ ounce silver coin is a “fractional silver coin”; a ¼ ounce silver bar is a “fractional silver bar”. Fractional silver was very common in the 1970s, when the Hunt Brothers of Texas managed to drive prices up to astronomical levels through their monopolistic purchasing. Some ridiculously small silver bars were produced, including 1 gram bars (1/32 of an ounce!), which were little bigger than a fingernail.

Today, with spot prices perhaps slightly depressed by the collusive actions of major banking players in the market, there are occasional fractional silver coins (usually ½ ounce) and rounds (as small as 1/10 ounce), but most silver bullion is struck in sizes of 1 troy ounce or larger. Silver bars are also mostly issued with a weight of 1 troy ounce or more.

What Types of Silver Bullion are Available?

Silver bullion comes in one of three different types, generally speaking – anything outside these forms (such as silver grain or wire, silver jewelry, and so on) is not considered to be bullion. The three main categories of silver bullion are:

  • Silver Bullion Coins: silver bullion coins are special collectible silver coins issued by a government. Only governments are legally allowed, in most cases, to strike coinage, which is defined as a silver round bearing marks or other indications of authority as well as a face value. These coins are usually 1 troy ounce, but there are larger ones as well – for example, the 5 troy ounce series of America the Beautiful silver “quarters”.
  • Silver Rounds: silver rounds are bullion products made to closely resemble coins in shape and design. However, these items are struck by private companies and banks from their own stock of silver, and thus rounds have no claim to being legal tender. Makers of the rounds make this clear by omitting any nominal face value. A round with a nominal face value is no longer a round, but a counterfeit. The words on rounds are generally chosen to differ slightly from those found on official government coinage of the appropriate country as well.
  • Silver Bars: silver bars are often produced by private companies such as APMEX, but are also made occasionally by government mints as well – for example, the Royal Canadian Mint occasionally issues silver bullion in ingot or bar form. Silver bars are often the largest pieces of bullion available, with sizes of 50 ounces, 100 ounces, 500 ounces, or even 1,000 ounces not being uncommon.

Uses of Silver Bullion: Investment vs. Inflation Hedge

Silver bullion can be put to financial use in one of two ways. Of course, there are additional possible uses – such as buying a coin simply for the sake of collecting it and looking at it, or buying coins and cutting holes in them to make a necklace – but since these uses either do not obey normal economic laws, or remove the silver entirely and permanently from the market, at least in bullion form, they are not discussed here.

Buying bullion for investment means that you are looking for those types which will accrue a large premium above the spot price or melt value of the silver. Only collectible bullion can be bought realistically for this purpose. Bullion coins issued by governments are the only true collectibles in the silver bullion market. This is why the premium above spot is sometimes referred to as “numismatic value”.

Those struck with proof quality (double struck, lustrous finishes, etc.) are the most likely to rapidly appreciate in value. Special editions, coins with very limited total mintage, those with coloring, inset gems, or other decorations, and so on are even more valuable than their regular counterparts. Both Canada and Australia make a number of coins like this, while practically all coins issued by the Vatican’s mint are vastly prized by collectors due to their high quality, unusual imagery, and extreme rarity.

Other types of bullion have no numismatic value and very seldom command more than a feeble premium above spot. Neither rounds nor bars appreciate much in value, except through changes in the underlying spot price. This means they are abysmal for purchase as an investment collectible, but excellent as an inflation hedge because you can acquire them without paying much more than their current melt value. Each type of bullion has its own use and its own place in the contemporary silver market, and a good portfolio will include some of each kind.

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