Seven tips for cheap precious metal investing

Precious metal has a place in many portfolios.  Here's a way to accumulate inexpensively …

Investing in commodities can be part of your investment portfolio.  Precious metals like gold, silver, and platinum behave differently than other investments like stocks, bonds, real estate, and so forth.

Physical metal (as opposed to an exchange-traded fund) can be bought in a number of forms, such as bars, jewelry, or coins.  Some investor-collectors will buy old coins with precious metal content, or new coins in standard weights of silver, gold, or platinum.

In the United States, common coins used to have silver content.  In 1964 and earlier, dimes, quarters, and half dollars were 90% silver.  In 1965 and later, the 90% silver coins were discontinued because the cost of the metal was starting to exceed the face value of the coins.  The Kennedy half dollar had 40% silver content until 1970, and then that was discontinued as well.

When the change in composition happened (from silver alloy to copper and nickel) the designs didn't change.  They all still mostly looked the same, and of course still spent the same at the grocery store.

Precious metal discarded by ignorance or carelessness

These silver coins are now worth quite a bit more than face value because of their precious metal.  A 40% half dollar is about six times face value, and a 90% half dollar is 14 times face value, just in silver content.

Dimes and half dollars still look the same.  Quarters looked the same through 1999 (except for the 1976 bicentennial quarter) at which point the state quarter program began.

This is where there is opportunity.

Someone inherits a box of coins and turns them into the bank without checking them out.  They may be in rolls, which of course conceals them.  Or the person may have rolled the coins himself and not known a silver coin from a non-silver.  Or they may have just been plain lazy and not cared.

They just turned in a bunch of $3 coins or even $7 coins for 50 cents apiece.  The bank just takes them in as directed.  Then the owner loses them.

Invest some time and go on a treasure hunt

A friend regularly withdraws coins from area banks and goes through them coin by coin.  Recently he scored what you see in the picture.

Forty-seven 40% silver halves, and eighteen 90% halves.

This is about 13.5 troy ounces of silver.  At a spot price of $20 per troy ounce, that's $270 worth of silver.  And he paid only $32.50 for the halves, for a profit of $237.50.

He made over two hundred bucks profit just checking some coins from the bank.  This isn't even the first time he's made this kind of score.

My friend is more persistent and does this more regularly than I do.  I tried this once and withdrew nearly $1,000 in halves.  I came up completely dry and spent quite a while trying to spend them.  I finally turned in about half of them back to the bank.

How to find precious metal coins from the bank

Here are some tips if you're looking to try this for yourself:

• Have cash.  Or an account at the bank or credit union.  They won't give you the coins just with your good looks.  Pull out a reasonable number: enough to have a fair chance of finding some good ones, but not so much that you're bank account suffers.
• Consider how you'll return the clad.  The clad are the modern coins that are only worth face value.  Your bank or credit union may have a free coin machine.  Or you can spend a bunch of them.  Half dollars are unusual enough that people might actually like getting them in change.  But if you'll likely have to pay to return the coins, consider this when getting them in the first place.
• Don't advertise.  The fewer people that know you're doing this, the better.
• Decide what you're looking for.  I mentioned dimes, quarters, and half dollars as candidates for finding silver.  Check the dates of the “good” coins, and what they look like.  Each of these types of coins also has special error coins that can be found.
• Decide how best to look for them.  This is where technique comes in.  Silver coins sound different when they're dropped against other coins.  They have a duller ring than the modern coins, so with practice you can go through a bunch of coins fairly quickly by dropping them from one hand to the other.  Another technique is to look at an opened roll on the side.  With practice the silver coins pop out visually.  The dates on the coins are more conclusive, but this takes examining them closer, which takes more time.  (It's also probably better for first-time coin-roll hunters.)
• Don't be a pain in your bank's side.  Banks make money by lending money to people.  Providing services to customers (or members) costs them money.
• Have fun!  Coins, especially silver coins, have an interesting history.  And there is a bit of a rush when you find an old coin.  The worst that can happen is that you break even.