Don't Get Ripped Off Buying Silver Coins

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"The cheapest silver bullion coins are privately minted."

During precious metal bull markets, gold usually gets all the media attention, but the biggest gains go to silver.

In fact, silver prices have consistently outperformed gold during bull markets—doubling, tripling, even quadrupling the price of the precious yellow metal. So it should go without saying that a well-diversified precious metal portfolio includes silver.

The cheapest and most direct way to own silver is to invest in bullion coins. The retail market offers a variety of silver coins that will maximize profit. But investors are urged to exercise caution when considering some bullion coins. Here's why. . .

All bullion coins—gold and silver—have a premium included in their price. This premium is an additional cost over spot prices that covers manufacturing, distribution and administration costs incurred by the mint or refiner in making the coin.

The result is paying over silver's spot price. For those coins classified as "legal tender," or those with collectible or numismatic value, the premium is higher still.

A 1-ounce American Silver Eagle, which has a face value of $1, has a much higher premium than a 1-ounce privately minted, non-legal tender silver bullion coin in part because of its legal tender status.

As silver investors, however, we aren't concerned with a coin's legal tender status because—let's face it, what kind of investor would care if their 1-ounce, 99.9% pure silver coin, whose silver value stands at around $14 today, will be accepted at the local store in exchange for a dollar soda?

The same goes for numismatic coins, whose value is not solely dependent on the metal from which they're minted, but rather from their rarity and collectability.

Silver investors care about two things: the value of the metal today, and its prospects for tomorrow.

And with the U.S. dollar losing more might every day, the value of raw silver has never been in greater demand.

The cheapest silver bullion coins are privately minted.

Lacking the status of legal tender, and with little to no collector's value to speak of, these bullion coins maximize the purchasing power of your dollars.

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