Talk to me about 'melt weight', specifically silver

[macrocoin]

I hear a lot of folks talk about selling bullion coins 'at melt', or in some cases 'less than melt' (which sounds suspect to me). I assume that by 'melt weight' they mean what the raw coins are worth to someone that will melt them down to reclaim the silver content. The easy part to figure out is how much the silver content is worth according to the spot price. What isnt so clear to me is, the cost of the labor to actually melt down and seperate the silver from the slag.

 

Lets take a walking liberty half for example...

 

The raw coin weighs 12.5 grams.

Silver content is 90% - which yeilds 11.25 grams of pure silver.

11.25 grams = 0.3617 troy ounces

At $9.50 per troy ounce spot, this yeilds...

0.3617 x 9.5 = $3.44 worth of silver in each raw coin.

 

But, the 'melt weight' still can't be $3.44 unless someone is willing to perform the task of melting down the coin and reclaiming the silver for free. Assuming that labor is factored into the 'melt weight', what is the real bullion value of the coin?

 

I am able to find a lot of silver locally that well below the calulated spot value of the silver content....this leads me to believe that the going 'melt rate' is actually much lower than most folks realize. Either that, or I have been finding great deals!

 

Thoughts?

[Hoot]

Junk silver sells for $1000 face ~ 712 Troy oz. pure silver. So, take the face and multiply by .712, then multiply the product by spot to get a "sell" value. Typically, dealers and silver brokers buy up to 30% back of spot for junk silver. This depends on the quantity that you have to sell. If you have a single ounce to sell, then you can expect anywhere from 15-30% back of spot. If, on the other hand, you have $1000 face to sell, then you can expect roughly 10-15% back of spot.

 

Pure silver (.999 fine) sells (client to dealer/broker) closer to spot, usually in the 10-15% back range, no matter the quantity, and some forms garner a premium (like silver eagles), which is usually a flat rate. Dealers/brokers will pay only a percent of the premium, typically 33%, and will sell at full premium.

 

1 oz. pure silver rounds and bars are your best bet for buying silver for the sake of sacking away silver as a long-term investment. However, junk silver is only second to that, insofar as I can see, but you need to have it in lots of $1000 face to maximize your liquidity.

 

These are just my personal observations and opinions and should not be taken as "advice."

 

Hoot

[macrocoin]

Two questions.....

 

Where does the .712 multiplier come from?

Is this based on a specific coins silver content?

Looking at some random values, I get between .72 & .77 depending on coin.

 

What would be considered "junk" silver?

Cull morgans?

Average circ walkers?

 

 

Thanks for your input!

[Hoot]

I don't know the exact origin of the .712 multiplier, but it has to do with the average weight of circulated silver, $1000 face. Circulated coins are, of course, lighter than uncirculated coins, and when there's a bag of them, then the bag will have a rather substantial wieght loss. Basically, the .712 multiplier is representative of a 1.5% weight loss due to wear.

 

Now, if you can ever score a "junk" bag of peace or morgan dollars, then you will have done well, on average. Those coins were proportionally heavier (0.77344 Troy oz. per dollar) than junk silver of later denominations(0.72339 Troy oz. per dollar). (Junk silver is usually Roosevelt dimes, Washington quarters, Franklin and 1964 Kennedy halves, and sometimes walkers. Occasionally it will include SLQs and barber coinage, but those are almost always dateless and substantially worn - thus, less valuable by weight standards.) So, when buying junk silver, it's sometimes beneficial to consider the average wear and the denominations.

 

Remember, when you are buying junk silver, you are buying an "average" amount. If you have a home smelting operation, you want to carry your scale with you and buy "heavy" bags.

 

Have fun.

 

Hoot

[Beijim]

You're absolutely correct regarding the definition of the phrase "at melt." It's the "clean room" theoretical value of the 100% fine silver content at the current spot market price (ignoring for purposes of this discussion the spread between bid and ask prices).

 

The "Coin Vault" guys are quite fond of crowing about how your first stretch payment gets the coins "goin' out tuya" at below melt.

 

Beijim

[pawnee101]

Here is good reference page, not trying to advertise these people at all but if gives you a good idea of what the prices are for several metals.

buy prices

[cladking]

Silver coins will sell at a premium to melt. This premium has ranged as high as about 25% over to about 10% under melt over the past forty years. Other common forms of bulluion will have their own premium and these vary over time. The highest premium now is on silver eagles and is about 20%.

 

It is generally not wise to pay steep premiums when buying metal for the long term. It is impossible to predict what the premium will be when it's time to sell. For short term buys it may make sense to pay the premium since it will be more easily liquidated quickly and much of the premium will be returned to you.