There are several key differences between a bullion coin backed by a sovereign government and a silver round that a government does not back.
Here are a few differences:
| Bullion Coin | Silver Round | |
| Legal Tender | Yes | No |
| Mint | Government Mint | Private Mint |
| Silver Value | Same | Same |
| Backing | Government or Bank | Private Mint |
| Premiums | Higher | Lower |
| Numismatic Value | Higher | Limited |
Should I Invest in Silver Bullion Coins or Silver Rounds?
Which should you collect? This depends on your investment strategy.
If your goal involves long-term planning, consider numismatic value.
To appreciate numismatic value as it relates to a silver bullion coin like the Silver American Eagle, first look at listings for recent year Silver Eagles.
Next, look at 1986 American Silver Eagle listings. Notice the price difference? While some may consider this reaching, it effectively illustrates the way that bullion coins gain value over time.
Nothing intrinsically appreciated in the 1986 Silver Eagle except for the silver weight itself. What makes them different? Demand. As they age, a few things happen.
- Age informs value. While age is not the ultimate factor in determining value, it plays a role in the value of a silver bullion coin.
- Their population sizes shrink. Whether a Silver Eagle is lost in the sock drawer, damaged, or dropped down a storm drain, each reduces the number of circulating coins. These coins are released in limited mintages, so when the population shrinks, the value grows because the coin has become scarcer.
- Age and rarity impact demand. When there is sufficient demand among collectors and few coins in good condition, the coin’s rarity and age can cause the value to compound.
Reasons to Buy Silver Rounds
Silver Rounds Have Lower Premiums
Lower premiums associated with silver rounds mean more silver for your dollar compared to government-backed silver bullion coins.
Silver Rounds are Widely Available
As silver rounds are produced by private companies that may have a greater or more consistent silver supply, they are made in larger quantities and are easier to find.
Reasons to Buy Silver Bullion Coins
Bullion Coins are Recognizable and Trusted
Since bullion coins are easily recognized by their designs and have status as official legal tender, they are seen as trustworthy. Furthermore, government mints employ security features to prevent counterfeiting.
Bullion Coins Have Higher Liquidity
Bullion coins are easier to barter and trade. While they are not as widely available as silver rounds, silver bullion coins’ recognizability as legal tender makes them more readily accepted in barter and trade.
Bullion Coins Have Numismatic Value That Grows
Coins have a numismatic value that can surpass both their face value and the value of their precious metal content. This value is affected by the bullion coin’s condition, age, demand, rarity, and design. As the coin population shrinks, its value tends to grow.
Bullion Coins Might be Eligible for Tax-Deferred IRAs
Many of the bullion coins discussed in this article are IRA-eligible. One of the benefits of Self-Directed Individual Retirement Accounts is that they allow investments of select gold, silver, platinum, and palladium to grow tax deferred. This provides tax savings, compound interest growth, less taxable income for the current year, and an ability to earn greater profit in the following years.
