Silver earning good coin

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This article was published 23/04/2011 (5457 days ago), so information in it may no longer be current.

MONTREAL — Canadians are rummaging through their closets and attics in search of old coins, jewelry, candlesticks and tea services, hoping to cash in on soaring prices — but it’s not gold they’re turning in, it’s the metal’s oft overlooked sister, silver.

With silver hitting a new 31-year high, the forgotten precious metal dubbed “poor man’s gold” is gaining new credibility.

“It’s certainly a good time to make some good money quickly, because there’s a lot of value,” says Joseph Iorio of J & M Con & Jewellery Ltd.

He says most people coming to his Vancouver store these days are looking to unload silver instead of gold. Gold continues to shine after briefly reaching a record US$1,506 an ounce. But silver has actually outperformed the other precious metal as it surpassed $45 an ounce in Wednesday trading.

Both metals are benefiting from growing demand by investors seeking a safe haven from the depreciation of the U.S. dollar and euro. Silver is up more than 60 per cent from the lows of late January and is within sight of the record selling price of $50.36, set in 1980.

Many analysts expect the price will surpass $50 and may not quickly collapse as it did 31 years ago, when the price plummeted to $5 an ounce.

“It looks as though the market wants to take it to $50 an ounce and it also appears that it may reach $50 an ounce quite quickly,” said Patricia Mohr, an economics and commodity market specialist at Scotiabank.

Unlike the 1980 run-up that was caused by the Hunt brothers’ efforts to corner the silver market, this year’s increase is closely tied to weak currency and concerns about debt in the U.S. and so-called PIGS countries (Portugal, Ireland, Greece, Spain) in Europe.

The price increase was aided by the dollar’s swift fall after Standard & Poor’s put the U.S. on credit watch.

Mohr has set a $50 target for silver, but was reluctant to say how high the price may go.

Canaccord Genuity believes it will peak at US$47.50 before dropping each year until reaching US$20 over the long term.

Mohr said sellers might want to act before factors such as a hike in interest rates in the U.S. likely causes silver to fall.

“As we approach the $50 mark, which actually looks like it may occur soon, if they are interested in selling their silver holdings, they might want to do some of it anyway.”

The rising price has transformed tarnished flatware and candlesticks that were once favoured wedding gifts into valuable items. So too are coins that were once made from silver. A roll of quarters dating from 1966 and earlier now fetches more than US$190 when sold to dealers. The full silver value is US$258 before commissions and refining costs.

Coins with 80 per cent silver are worth about 20 times their face value. So a dollar can be sold for US$20 and a dime for US$2.

“It’s insane, it’s crazy, but that’s what it is,” said Steven Bromberg of Canadian Coin & Currency.

The professional numismatist said he’s buying 15 to 25 coin collections a day from collectors and their descendants.

“There’a lot of gold coming in, but there’s new attention on silver,” he said from his Richmond Hill store north of Toronto.

People are emptying their safety deposit boxes and cleaning up their basements. At least one family dug up a stash of coins buried years ago for safekeeping. Others turned to dealers after banks refused to accept deposits of old coins.

“They may not realize that they’ve got a little bag of something stuck at the back of a drawer and it might be worth $10,000. It adds up very, very quickly these days.”

Both dealers advise owners to carefully research their coins before selling them for their metal value.

Collectible coins that had small premiums are now trading mainly for their metal value, Iorio said.

“(But) you don’t want to sell everything for the metal value because there are some rare coins that are worth a lot of money.”

Older doesn’t necessarily mean more valuable. A 1920 50-cent coin is just worth the silver value, while a 1921 piece in excellent condition can sell for up to $25,000, Bromberg said. The key is to go to reputable dealers who will first check the collectible value.

No Canadian coins in circulation after 1968 contain silver. Before that date, the amount of silver varied. All coins other than pennies from 1919 and earlier were made of 92.5 per cent silver. Between 1920 and 1966, dimes to dollars contained 80 per cent fine silver.

The last silver nickel was minted in 1921.

Canada’s centennial in 1967 was a transition year. Fifty-cent and dollar coins had 80 per cent silver. The amount of silver in dimes and quarters was reduced part way through the year to 50 per cent. As the coins can’t be differentiated, dealers pay on the basis of 65 per cent silver.

In 1968, dimes and quarters were switched from silver to nickel part way through the year. A magnet will identify the coins made from nickel.

Iorio believes panic buying that marked the 1980 price surge will eventually return as the price climbs to “easily” surpass $50.

“The long-term scenario looks very good because of the currency instability and all the countries that are printing money to no end.”

The price is being pushed up by investors seeking to buy refined, solid-silver bars. However, there’s a shortage of supply that causes most sellers to experience delivery delays.

— The Canadian Press