What is “Junk” Silver? A Beginner’s Guide to Investing in Silver Coins

What is “Junk” Silver? A Beginner’s Guide to Investing in Silver Coins

When it comes to investing in precious metals, silver is often seen as an accessible and affordable alternative to gold. While many investors focus on bullion bars and coins, there's another category of silver that can be a great entry point for newcomers: junk silver. Despite the somewhat unappealing name, junk silver refers to pre-1965 U.S. coins that contain silver, offering a unique way to invest in the precious metal.

In this blog, we will break down what junk silver is, how it differs from other forms of silver investment, and why it can be a worthwhile addition to your portfolio.

What is “Junk” Silver?

The term “junk silver” refers to circulated U.S. coins minted before 1965 that contain 90% silver and were originally used as currency. While the term "junk" may sound unappealing, it’s simply a colloquial way of describing these coins due to their circulated, often worn condition. Unlike newer silver bullion coins that are struck with a focus on purity and aesthetics, junk silver coins are typically just older coins that are sold for their silver content rather than their numismatic (collector’s) value.

Types of Junk Silver Coins

The most common forms of junk silver are U.S. coins minted before 1965, which include:

Mercury Dimes (1916–1945)

Washington Quarters (1932–1964)

Franklin Half Dollars (1948–1963)

Kennedy Half Dollars (1964 only)

Each of these coins contains 90% silver, with the remainder made up of copper. Their value is typically determined by their weight in silver, and their price fluctuates with the market price of silver.

For example:

A Mercury Dime weighs 2.5 grams and contains about 0.07234 ounces of pure silver.

A Washington Quarter weighs 6.25 grams and contains about 0.1808 ounces of pure silver.

A Franklin Half Dollar weighs 12.5 grams and contains about 0.3617 ounces of pure silver.

These coins are typically sold in bags or rolls, which are convenient ways for investors to purchase larger quantities of junk silver. A typical bag of junk silver contains $1,000 face value of coins, which is roughly 715 ounces of pure silver.

Why is it Called “Junk” Silver?

The term "junk" is used to describe these coins because, in their original use as currency, they were simply ordinary circulating coins with no collector’s value. Over time, as the U.S. government moved away from silver-backed currency (in favor of fiat money), many of these coins were removed from circulation and melted down for their precious metal content.

Although these coins are still technically legal tender, they have very little numismatic (collectible) value unless they are in exceptionally good condition. The term "junk" is not meant to imply that the coins are worthless, but rather that they are typically worn, scratched, or tarnished due to their circulation. As a result, they are primarily valued for the silver they contain, not for any aesthetic or historical significance.

How is Junk Silver Different from Other Silver Investments?

Junk silver is often compared to other types of silver investments, such as silver bullion coins (e.g., Silver Maple Leafs, American Silver Eagles) and silver bars. Here’s how junk silver stacks up:

1. Price Premium

Junk silver typically carries a lower premium over the spot price of silver compared to modern bullion coins. This is because junk silver is sold primarily based on the market value of its silver content, with little to no added cost for minting or design. Bullion coins, on the other hand, often come with a higher premium due to their purity, collectible appeal, and manufacturing costs.

2. Purity

Junk silver coins contain 90% silver, while modern silver bullion coins generally contain 99.9% or even 99.99% pure silver. For those focused solely on the silver content, junk silver may seem less attractive due to its lower purity. However, for those looking to hedge against inflation or diversify their silver holdings, the difference in purity is not always a major concern.

3. Historical Value

While junk silver coins were minted as everyday currency, many modern bullion coins are designed with collectors in mind. As a result, silver bullion coins often carry higher numismatic value due to their limited mintage, special designs, and condition. Junk silver coins, in contrast, are typically sold for their melt value rather than any collectible appeal, making them a more affordable way for investors to acquire silver.

4. Liquidity

Junk silver coins can be easier to trade in certain circumstances, especially in smaller denominations. Many people may be more familiar with dimes, quarters, and half dollars, making them a practical choice for individuals who may need to buy or sell silver quickly in a variety of denominations.

Why Should You Consider Investing in Junk Silver?

There are several reasons why investors might choose to include junk silver in their portfolios, particularly as a hedge against inflation or as a way to diversify their precious metal holdings. Here are a few advantages:

1. Affordability

Junk silver offers an accessible entry point for investors who want to gain exposure to silver without paying the high premiums associated with bullion coins. Because the coins are generally bought for their silver content, rather than their collector value, they are often less expensive than other silver investments.

2. Hedge Against Inflation

Silver, like gold, has long been viewed as a hedge against inflation. As the purchasing power of fiat currencies declines over time, the price of silver (and other precious metals) tends to rise. Junk silver coins can be an affordable way for individuals to protect their wealth in times of economic uncertainty.

3. Easy to Trade and Use

Unlike large silver bars or high-end bullion coins, junk silver is in small, easy-to-handle denominations. In the event of a financial crisis or societal collapse, these coins could potentially be used as everyday currency, adding a level of practicality to their value. In times of high inflation or economic collapse, silver coins like junk silver may offer a tangible, usable form of money.

4. Historical Appeal

For history enthusiasts and those interested in tangible connections to the past, junk silver coins offer a way to own a piece of U.S. history. These coins are direct descendants of the pre-1965 U.S. currency system, which was still backed by precious metals, making them an interesting way to own silver with historical significance.

Risks and Considerations

While junk silver can be a great investment, there are some factors to consider:

Condition and Appearance: Because junk silver coins are often well-worn from circulation, their condition can vary significantly. Coins with more wear may not sell for as much as coins in better condition.

Market Fluctuations: Like all forms of silver, junk silver’s value fluctuates with the price of silver. While silver has historically increased in value during inflationary periods, its price can also experience significant short-term volatility.

Liquidity: Though junk silver is relatively liquid, selling it may involve transaction costs and require finding a dealer who is willing to buy the coins at a reasonable silver price.

Conclusion

Junk silver offers an affordable and accessible way for individuals to invest in silver. By purchasing pre-1965 U.S. coins, investors can accumulate silver at a lower premium than newer bullion coins, all while obtaining a tangible asset that has served as a store of value for generations. Whether you’re a new investor looking to get into the silver market or an experienced collector wanting to diversify your holdings, junk silver is a reliable and practical option.

As with any investment, it’s essential to do your research and understand the market before diving in. But for those seeking a low-cost, low-maintenance entry into precious metals, junk silver remains an enduring and practical choice.