As evident in the precious metals markets today, the paper price for gold and silver does not reflect the physical demand and shortages, resulting in high premiums.

The question many people are asking is this: Should I selling my Silver Eagles on Ebay and then go buy a Silver contract on the COMEX to double my position? That was the question I had to ask myself, and I'll fill you in on the research that I did.

First, you must ask yourself what your goal is. Are you looking for maximum leverage? Are you looking for an alternative currency to Federal Reserve Notes? Do you want numismatic coin or simply any silver you can get in any form?

Asking yourself some of these questions should help you in deciding your final move.

Once you have established solid answers to these questions we can move on.

It is also important to know the difference between COMEX silver and Silver Eagles.

COMEX silver is industrial grade silver, including a COMEX mint mark and its weight. Every COMEX bar weighs a slightly different amount, so upon re-entering the COMEX it will need to be re-assayed. Buying COMEX silver is explained in my article titled "How to Buy Physical Gold and Silver."

In contrast, Silver Eagles are unique in that they are U.S. Treasury minted legal tender (currently uncirculated coins), and include a face value amount on each coin of $1. They were approved by Congress through The Liberty Coin Act of 1986 (Section 5112; Subsections (f) and (h), which was then signed by President Ronald Reagan. Note that they are not legal tender for paying government taxes, put in personal transactions they are. However, at this time it would not be wise to use the Silver Eagles in place of dollars as the value of silver will likely skyrocket with the continued collapse of the current financial system over the next 5-10 years. Therefore, in the future, the Eagles will have the possibility to be used as money in transactions rather than trading them for a future money and thus, being subject to capital gains taxes. The only problem that could arise in this scenario is that, at some point in time, commodity prices will peak in comparison to the current circulated currency, so how would one get the full benefit of the price peak without selling the Silver Eagles? Buy a lot stuff? I'm not sure, that is yet to be explored.

It is also important to know that Silver Eagles are a much more liquid investment than COMEX bars. Silver Eagles can be sold on EBAY to the average Joe in very small quantities, and for extremely high premiums. The current spot price on this Friday is $9.40. Today I looked on EBAY, and the sellers are starting single Eagles at $0.99 and they are auctioning off at between $20 and $25, with some of the MS69 graded coins going in the $30, $40 range and higher. The "buy nows" are also around $25, and they are all being bought. COMEX bars can not be easily sold on EBAY. However, in the future, as I see higher demand and major supply shortage, I think there will be a growing market for 1000oz bar holders to become sellers to mints in need of industrial silver to mint numismatic 1oz coins and small 10oz bars. While the coins will hold larger premiums, the 1000oz bars give you more bang for your buck.

I think that it is a good idea to take part in both sides of the coin. I would suggest taking a COMEX contract if you can afford it, but I would not suggest selling all of your Eagles to double your holdings. The COMEX will default in the near future because of an overwhelming majority of long contracts demanding delivery, versus a minority of shorts. On top of that, most of the shorts, at least 20,000 contracts or so, are naked shorts from investment banks trying to drive down the price of spot silver. Once the COMEX defaults, all of the long contracts will be forced into cash settlement and the shorts will be forced to buy back their contracts, resulting in the end of the COMEX as the international silver hub. After this fiasco, the price will most likely be determined in Dubai, currently the second largest precious metals hub in the world.

For this reason, it is important to diversify your silver and gold holdings. Don't become solely dependent on futures contracts that may not hold to their promises. While the contracts, after having taken delivery, can provide some excellent leverage, it is important to continue to hold other stores of metal just in case the delivery does not follow through.

It is hard to say what the future will hold for various forms of silver. All I can say is that I'm positive that silver and gold will both be going a lot higher, especially with the Federal Reserve now promising to print 8 trillion dollars, which will increase our current money supply by 80%. So, the only real store of value must be in REAL things. What kind of real things you decide to store your wealth in is up to you. I choose silver.

Until Next Time,
Sam