Silver Coin Bags Are Back. It’s the ’70s Way to Play the Metal.

Old silver dimes and quarters, along with silver half dollars, are often sold in bags weighting more than 50 pounds that cost approximately $38,000 apiece. (Dreamstime)

Key Points

• Pre-1965 U.S. coins, containing 90% silver, are an investment option for physical silver, with silver prices up almost 80% this year.
• A $1,000 face value bag of pre-1965 silver coins, containing 715 troy ounces, costs about $38,000, a small premium to spot silver.
• These ‘junk’ silver bags are considered a more efficient accumulation opportunity than U.S. silver Eagles, which trade at a higher premium.

Back in the 1970s when silver prices were soaring, investors gravitated toward an unusual silver play—pre-1965 U.S. coins that have 90% silver content.

Now that silver prices surging again, those pre-1965 silver coins amount to one of several ways to invest in physical silver besides silver bars and more recently minted silver coins like U.S. Eagles. Silver is up almost 80% this year to $52 an ounce after hitting a record $54 recently

The older silver coins, generally sold as bags with denominations of $1,000 (face value) of U.S. coins or less, trade for a small premium above their silver value. The bags contain dimes, quarters and half dollars. They’re often called “junk” silver by fans of the metal. Pre-1965 pennies and nickels didn’t contain silver.

“Silver bags are by far and more efficient accumulation opportunity in physical silver right now,” says Jonathan Kosares, the owner of USAGold, a precious metals dealer based in Denver. A bag holding $1,000 face value of pre-1965 silver coins—dimes, quarters and half dollars—now costs about $38,000.

There are about 715 troy ounces of silver in each $1,000 bag of coins, meaning investors are paying about $53 an ounce for the silver value of those coins, a small premium to spot silver. There also is some copper value since the coins are 90% silver and 10% copper.

Kosares says the silver bags now are a good value relative to U.S. silver Eagles, one-ounce coins produced by the U.S. mint that now trade around $60 each, a roughly $8 premium to spot silver.

U.S. Silver eagles are probably the most popular way to invest in silver coins. There are more than 600 million of the coins outstanding.

The premium relative to spot silver for silver bags and silver Eagle coins can vary based on demand. During Covid in 2020 and 2021, premiums were high. Silver Eagles regularly traded at a $10 premium to spot silver prices when silver stood around $25 an ounce.

Pre-1965 silver bags have precious-metals and numismatic value. Before 1965, the U.S. government regularly minted silver coins because of the historic usage of the metal in coins. Silver then was relatively cheap, trading below $1.50 an ounce in the 1960s. Silver coins have been used as currency for thousands of years.

At that time in the 1960s, dimes, quarters and half dollars had roughly 0.725 ounces of silver per $1 of coin value. This meant that dimes, quarters and half dollars had the same amount of silver relative to their face values.

The silver value of a pre-1965 quarter is now about $9.50 while the value of a dime is 40% of that of the quarter at $3.80.

When the government eliminated the silver in dimes, quarters and half dollars in 1965, the coins disappeared from circulation, in part because rising silver prices made the metal value of the coins worth more than their face value. Dimes and quarters now are more than 90% copper. It’s not legal, however, to melt U.S. coins for their metal value.

There are problems with holding silver bags and other physical silver investments even with the run-up in price including weight, portability and storage costs. A $1,000 bag of silver coins weighs more than 50 pounds, making it cumbersome to lug around.

Many investors find it easier to get exposure via silver ETFs like the $23 billion iShares Silver Trust.

When silver prices surged in the 1970s and hit a then record $40 an ounce during the Hunt silver squeeze late in the decade, pre-1965 U.S. silver coins became a popular investment—so popular that there were futures contracts on silver bags traded at the Comex exchange in New York, then the major futures market for precious metals.

One investor who correctly anticipated and profited from the government’s decision to remove silver from coins in 1965 was Warren Buffett, who bought silver in the early 1960s when it traded around $1.40 an ounce.

“Thirty years ago, I bought silver because I anticipated its demonetization by the U.S. Government,” Buffett wrote in his 1997 letter to Berkshire Hathaway shareholders. Buffett then described in the letter a new Berkshire investment in silver—more than 100 million ounces.

Berkshire sold the silver holding over the next decade. Buffett noted in the 1997 letter that he had been following the silver market for decades before buying the metal that year—another instance of the Berkshire CEO’s breadth and depth of investment knowledge. Buffett, for instance, had followed insurer Alleghany for about 60 years before Berkshire bought the company in 2022.

Write to Andrew Bary at andrew.bary@barrons.com