Your crash course in buying silver

I hope Monday’s Right Side article convinced you that collecting silverware could be a fantastic and profitable opportunity. Because there’s a fantastic market out there. You can start with just £10 and work your way up into the thousands and tens of thousands as you please. And why pay the finance industry fees and commissions for something you can get cheaper at the click of a mouse?

But there’s little point in me telling you about this exciting market without giving you a few pointers on how you could play it.

So today I want to give you my crash course in buying silver. Bear in mind, I’m looking at this from a silver investor’s point of view. We’re not looking at aesthetics and collectors’ pieces – that’s a lifetime’s work!

We want to buy pieces selling for less than the value of the silver in them. That is less than their intrinsic worth. If you follow a few simple rules you’ll be one step ahead of most people in the marketplace.

First off, what’s silver worth?

I bet many bidders on the likes of eBay wouldn’t know how much the silver in, say, a silver toast-rack is worth. And that’s fine for antique collectors. But as investors, it’s key. It gives us a way to value the item objectively.

This website gives you not only the price per troy ounce (the standard way silver’s valued), but it also gives you the sterling price per gramme. And that’s what we need.

A word of warning: a troy ounce (31.1g) is not the same as a standard ounce (28.35g) – that’s why I prefer to use grammes!

As I write the price is 68p a gramme. We’ll be using that in a minute.

Let the lion make it easy for you

Most solid silver for sale (and I’m only talking about buying solid silver) in the UK is hall-marked with a lion – it indicates English or Scottish solid silver (or sterling silver). On an English hallmark, the lion is on all fours, and facing left with its head towards you on early pieces, or facing forwards for pieces made after 1831. A lion on its hind legs means it’s Scottish.

There are plenty of other hallmarks that tell us exactly who made it, where and when. But the lion is all you need to know for the minute. Silver is nearly always alloyed (with another metal) to make it more rigid and durable; in the case of sterling, it means it’s 92.5% pure.

That means the current value of silver in one gramme of sterling is 62.9p (ie, 68p x .925).

So now it’s easy. You see a beautiful sterling silver serving spoon listed online, you scroll down the description and see that it weighs 100g; so in terms of silver content, it’s worth: 100 x 62.9g = £62.90

I’d take the postage off that price, then give myself another 10% or 15% discount and place my bid. Let’s say around £50. I place my maximum bid and then I forget about it. I’ll place plenty of bids like this. Most fail, but a surprising amount get ‘hit’ and I win the auction.

 

But it’s not always that easy

Let’s say you see a lovely picture frame you like. The moment you look at it, it’s kind of obvious that it’s not all silver. The back and stand is made of wood, for starters. By all means put a bid in if you like it; but you can’t value it on the basis of silver content.

Other items aren’t quite as obvious. Often vases, candlesticks, or inkwells are weighted. That is, they aren’t solid silver all the way through. Without removing the weight, you can’t assess the value of silver. As an investor, I’d steer clear.

You don’t want to end up paying full whack for a lump of lead!

On a similar tack, watch out for ‘silver handled’ items. Silver isn’t that strong, so for some items the ‘working end’ is made of steel and glued (or soldered) onto a silver handle. Knives (and sometimes forks), shoe-horns, bottle openers… those sorts of things are nearly always silver-handled.

You can estimate the silver content, but you’re always bidding blind on these sorts of items. Until you’ve got a good feeling for the market, it’s probably best to avoid these items.

One man’s scrap is another man’s treasure

I’ll often find myself putting in a cheeky low bid on stuff I don’t like but where there’s good silver content. Maybe I put in a bid at 75% of the silver value. I don’t expect to win the auction, but then again I don’t really care.

But even when I end up with scrap, it’s often surprisingly useful. An inkwell serves as a decent candlestick; a trophy cup as a vase, or rose bowl (just lop off the handles) – I’ve even seen some silver sugar tongs bent into a bracelet.

And don’t be afraid to bid over the value of the silver content if it’s something you really like. Makers like Mappin & Webb, Tiffany’s (not English I know!) and Asprey’s always command a premium over the silver value. The way I see it, when these things were made, they probably sold for five times the value of the silver content. If you pay 25% more than their ‘intrinsic worth’, you’re still getting a bargain and a potential family heirloom.

And if you fall in love with some continental silver, then that’s fine, you’ll often find bargains here. But just be sure that you know what you’re buying – if the silver is hallmarked 830, then that means you’re only getting 83% silver. You need to adjust your calculations accordingly. Also bear in mind that lower grade silver doesn’t have the same lustre and you may end up with a lot of polishing to do!

I hope you enjoyed my crash-course in silver buying. But there’s one thing I left out: I haven’t gone into how to bid at online auctions. That’s a whole science of it’s own. And I’ll tackle that in a forthcoming issue of The Right Side.

• This article is taken from the free investment email The Right side. Sign up to The Right Side here.

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