How to buy silver coins cheaply

From buying in bulk to using special online search services, you can probably find silver coins cheaper than you thought online.

1) Buy in bulk. If you want to get the best possible price on silver bullion coins, consider stashing your cash, waiting for a pull-back in prices and buying a bulk lot. Some web sites offer reduced pricing for bulk silver coin purchases. In the image below, I’ve taken a sample of GoldSilver.com‘s bulk pricing rates for Silver American Eagles as of Sept. 6, 2001:

As you can see above, if you purchase 10,000 silver American Eagles, you stand to save more than $20,000. Not bad! If you don’t have the cash to buy silver coins in bulk, consider partnering up with friends or family to place a larger order than you could on your own.

2) Buy direct from third-party sellers. eBay and Amazon have become two of the most popular places for consumers to sell silver coins directly to other consumers. Prices can be hit-or-miss depending on who’s selling when. As of this writing, for instance, Amazon sellers have listed silver American Eagles for as low as $50. That’s pretty high compared to some specialty online coin vendors, so you’ll want to check Amazon and eBay frequently. When sellers list coins at low prices, they get snatched up quickly.

3) Roam your local flea market. While it’s hit-or-miss, you might come across great deals at garage sales, community sales and flea markets. Most flea markets have specialty coin booths that are set up year-round, but you’ll probably find better deals if you stumble across an individual who just happened to set up for the weekend and has a coin or two to sell (along with a whole lot of junk from his or her garage). For most investors, this approach isn’t worth the effort, but if you’re already at a sale, it doesn’t hurt to keep your eyes open. If you stumble across a silver coin you’d like to buy, don’t be afraid to haggle.

4) Do a search on Google Products. I’m always surprised at the number of people who don’t know about or use Google Product Search when doing comparison shopping. The service lets you type in a keyword (like “Silver American Eagle 1 Oz. Coins”), and it’ll show you list prices for that product from vendors around the Internet. It’s a great place to find sellers you might not have otherwise discovered.

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Silver prices in August 2011 look to keep rising

As congress hemmed and hawed over the future of America’s debt, silver prices climbed nearly 18 percent last month, and it looks like that trend is set to continue in August.

As congress hemmed and hawed over the future of America’s debt, silver prices climbed nearly 18 percent last month, and it looks like that trend is set to continue in August.

What’s bad for the economy is good for silver – and the economy doesn’t look great. Cases in point:

 •   The Commerce Department reported yesterday that consumer spending weakened in June despite a 0.1 percent rise in disposable personal income. Consumers spent some 0.2 percent less to kickoff the summer. That doesn’t sound like much, but it adds up to $21.9 billion (source: Bloomberg).

 •   Last week, we learned the country’s gross domestic product grew at 1.3 percent in the second quarter. That was far less than the 1.8 percent economists were calling for (source: Wall Street Journal).

 •   Worst of all: U.S. manufacturing is slumping back toward a recession. We learned yesterday that the Institute for Supply Management’s index of manufacturing tumbled to its slowest pace in two years. The index fell to 50.9 percent in July from 55.3 percent in June. That’s just 0.9 percent away from an officially contracting (i.e. recessionary) economy (source: TheHill).

In July, physical silver ETFs (led by the iShares Silver Trust – NYSE:SLV, which was up nearly 15 percent), outperformed all other ETFs (per IBD).

In an environment where there’s little optimism over economic growth, investors don’t seek out profits so much as they start looking for spots to preserve the capital they’ve already got. Silver and other precious metals fit that bill – particularly in an environment where the returns on bonds are low.

But there may be yet another more insidious factor that could drive silver prices higher in August: namely, the specter of QE3. If the bottom genuinely falls out of the stock market and the economy starts contracting, the Federal Reserve could feel pressure from Capitol Hill to find ways to prop up the ailing economy (particularly as we move toward another election cycle).

Such a move would stoke even more fears of inflation, and could hamper the U.S.’s economic growth in the years to come. It’d be better to take our medicine now, and start working toward a balanced budget, but I’m just not convinced the Fed feels the same.

Seeing Yellow in the South China Sea

Gold spiked to a new all-time record Tuesday on news that the Bank of Korea added more than $1 billion worth of gold to its holdings – the first net increase for the bank in more than a decade.

Apparently, the Bank of Korea has quietly added more than 25 tonnes of gold to its holdings over the past two months (per the LATimes). The dollar’s falling status as a safe haven has left central banks with few alternatives for stashing their surplus reserves. What’s particularly troubling about the news is the fact that the Bank of Korea has been a long-time buyer of U.S. Treasuries. A move into precious metals should be a signal to policymakers in Washington, and – perhaps more importantly – to retail investors looking for ways to protect their capital.

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Silver market manipulation can’t be ruled out

Whenever there’s a rise in a particular commodity, you’re going to get investors with very deep pockets who move into the space. Who’s to say we won’t see a repeat of the Hunt brothers episode in the 1970s.

Often cited as the most infamous example of silver price manipulation in history, the Hunt brothers started accumulating the metal early in the 1970s. By 1979, they held an estimated 100 million ounces of silver. The brothers’ treasure chest is generally regarded as the reason why silver would ultimately peak at $50 per ounce in January of 1980.

Not everyone’s convinced, though. In an interview with the The Daily Crux, Jeff Clark of Big Gold says investors shouldn’t conclude that silver’s price spike was solely due to the Hunt Brothers. He offers three reasons why:

1) Strange timing. Rumors that the Hunts were attempting to corner the market in silver really went mainstream in 1974, Clark says. If the Hunts were genuinely buying enough of the metal to affect prices, silver should have went up even then. In fact, prices declined for the next two years.

2) No love for gold. One of the most damning arguments against the belief that the Hunts were the sole cause of silver’s rise during the ’70s is the fact that gold rose, too. Prices for both metals topped out on the same day: January 21, 1980. The fates of the metals were linked despite the fact that the Hunts weren’t accumulating gold. With or without price manipulation, silver would have likely risen dramatically alongside gold.

3) The media machine. There’s a difference between a market that’s manipulated and a newspaper headline that claims the Hunts had “cornered” the silver market. It was likely members of the media, not institutional investors on the ground, who believed silver’s price surge was solely caused by the Hunts.

Whenever there’s a rise in a particular commodity, you’re going to get investors with very deep pockets who move into the space. “Who’s to say that we won’t see other ‘Hunts’ come along today and try to buy up large quantities of the metal?” Clark asks. “I wouldn’t rule it out.” The Hunts, after all, were buying the metal for the same reason investors are today: the devaluation of the dollar. Until that ends, silver will likely continue its upward trend.

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How to decide when to sell silver bullion and stocks

So long as a clouds hang over the economy, silver will likely retain its shine. Here are a few cues you can look for to help spot a mania-driven top in prices.

Silver’s meteoric rise has a lot of buyers on the sidelines wondering if they’ve missed the boat. Just how high can the precious metals market climb? Silver was up more than 17 percent in the month of February alone. Driven by a falling dollar, political turmoil in the oil rich Middle East and ongoing money-printing by the Federal Reserve, silver’s started off strongly in March, too.

Identifying a top in any market is difficult, but it’s important to look at metals from a historical context when trying to decide when to sell your silver bullion or stocks. The last major bull market in precious metals ran nine years from November of 1971 to January 1980.

“Many people don’t realize this, but silver rose 3,646 percent (during the 1970s),” Jeff Clark, the editor of Big Gold, tells The Daily Crux. “If you were to apply the same percentage rise to our current bull market, silver would climb another 500% from here, and the price would hit $160 an ounce. Those are just numbers, but it shows that we have an established precedent for the price to go much higher.”

Clark argues that fundamentals will ultimately determine the silver price – unless, of course, we enter a precious metals mania. That’s when identifying a top in the market gets particularly difficult. Even in a mania, prices don’t rise in a straight line; they tend to get even more volatile.

Still, there are a few cues you can look for to help spot a mania-driven top in prices. “I don’t think it stops until SLV, the silver ETF, is a favorite of the fund managers… until Silver Wheaton is a market darling of the masses… until Pan American Silver is Wall Street’s top pick for the year,” Clark says. “That’s when I’ll be looking for the end of this silver bull market.”

We’re not there yet. More importantly, the fundamentals for silver haven’t changed. Food inflation’s rampant abroad, the Fed’s still printing money, European banks haven’t found their footing, unemployment’s stagnant and the housing market could fall further before it stabilizes. So long as a clouds hang over the economy, silver will likely retain its shine.

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China silver demand in 2011 expected to spike

China’s silver demand in 2011 could spike as the country is uniquely positioned to grow inflation while simultaneously allowing their currency to rise against the dollar.

China silver demandThe recent pullback in silver prices could be an excellent buying opportunity for investors, as China silver demand could spike in 2011 according to analysts. Dr. Jeffrey Lewis of Silver-coin-investor.com argues that China is setting the stage for “vacuuming” up the world’s silver supply. His logic boils down to two factors:

1) Domestic demand for precious metals in China surged last year – particularly for gold. China shifted from being a net exporter of gold in 2009 to being a net importer. Indeed, Dr. Lewis writes, China’s gold imports grew by some 500 percent during the first 10 months of 2010. China was still exporting silver last year, but the export rate plunged 60 percent during the first three quarters of 2010. Silver mines were finding domestic buyers for silver where they couldn’t in the past, and that indicates that demand for hard assets and commodities are in the midst of a bull rally in China. As China’s middle class starts to expand, the demand for silver as an investment could outpace gold thanks to its lower cost of entry.

2) In general, gold and silver are looked at as alternatives to currency when investors suspect inflation will rise. China’s attempts to curb inflation through monetary tightening seem to indicate fears of inflation will abate there, but it’s easy to forget that China’s goal isn’t to eliminate inflation. They’re allowing their currency to appreciate very slowly and methodically against the dollar.

China is targeting a 5 percent increase in the value of the yuan against the dollar in 2011, according to Dr. Lewis. That’s more than 2010’s rise of 3.6 percent. As the yuan rises, though, purchasing power for commodities also increases. “Each 5 percent uptick in the Renminbi is the inverse decrease of 4.77% in actual commodity prices,” Dr. Lewis writes.

With a rising yuan, silver prices will be relatively cheaper for Chinese buyers than they will for dollar-based silver buyers. Chinese investors will get more bang for their buck with every ounce of silver they buy, and that will push up silver prices for U.S.-based buyers. Both factors (and China’s enormous trade surplus) could drive a spike in silver prices in 2011, particularly since China is one of the few countries in the world that are positioned to grow inflation while simultaneously allowing their currency to rise against the dollar.

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