Where Has All the Silver Gone?

03/25/2014 9:40 am EST

Focus: CURRENCY

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Investing legend Mark Skousen wonders why he hasn't seen any of those silver dollar coins around, and encourages their reintroduction back into circulation.

TERRY:  I'm Terry Savage from moneyshow.com talking with the always fascinating Mark Skousen, who just handed me this.  What is this?  It's a silver dollar, but not one of the old-fashioned kind.  It doesn't feel too heavy.  Mark, what is this? 

MARK:  That's actually a 1-ounce American Eagle silver dollar.  It's legal tender, and 40 million of those were minted last year, and I ask you:  Where are they?  This is the first time you've seen one of these, right? 

TERRY:  Yeah, absolutely. 

MARK:  Yet this is a legal tender coin, and since 1986, when Ronald Reagan signed a bill called the Gold and Silver Act, creating the American Eagle 1-ounce gold coins… 

TERRY:  Those I've seen. 

MARK:  …and 1-ounce silver coins, and 40 million of these beautiful coins that have Lady Liberty on them, the rising sun—Ben Franklin's favorite symbol of America, In God We Trust, the eagle.  It's got everything in there. 

TERRY:  These must be coll—they're an ounce of silver, correct? 

MARK:  That's correct. 

TERRY:  It's alloyed.  It must be. 

MARK:  It'll cost you $25 to buy one of these. 

TERRY:  Exactly.  Based on the price of one ounce of silver. 

MARK:  Right. 

TERRY:  Nobody's going to give this as a tip to the doorman who brings the car around. 

MARK:  Au contraire.  I encourage people in my newsletter all the time to use them as gifts, anniversaries… 

TERRY:  Oh, right.  But not as a dollar. 

MARK:  …when you graduate.  These are wonderful coins that people should hold on as good luck pieces. 

TERRY:  Yes, exactly.  You're just not, in other words, going to buy a dollar's worth of goods with this because it's worth… 

MARK:  No.  No. 

TERRY:  …whatever the price of silver. 

MARK:  That's the problem.  Because of Gresham's law…    

TERRY:  But where are they, Mark? 

MARK:   …we spend the one-dollar, the one-dollar bill… 

TERRY:  The paper, yep. 

MARK:  …and we keep—we put the silver dollar in our pocket… 

TERRY:  Of course. 

MARK:  …or in our safety deposit box, but I am encouraging people to circulate them.  We need to remember these are what coins used to be like.  The silver dollars that used to go in the slot machines in Las Vegas, and we used to all have in our pockets beautiful coins.  Now we have these tinty (SP?) little quarters that nobody wants to carry. 

TERRY:  Yeah, but the point is, if I'm buying a Coke in a vending machine, I'd never put a silver dollar in there. 

MARK:  No, no.  But here's another thing:  These are superior inflation hedges now… 

TERRY:  Okay. 

MARK:  …because this was equal to $1 in 1960 and now in real terms is worth three or four times that, so that's pretty impressive. 

TERRY:  Okay, so where do you—by the way, do you buy these through the U.S. Mint or any coin dealer? 

MARK:  Any coin dealer, right.  You can't buy directly from the U.S. Mint at this time. 

TERRY:  Okay.  There's probably a slight premium to the price of silver. 

MARK:  Yes, there is because silver's at 20, and these are selling for $23 or $24 each. 

TERRY:  So, both the collectability of them and the very fact that it's nice to hold real silver… 

MARK:  It's beautiful. 

TERRY:  …and the fact that silver prices may go up.  Before we leave you:  Gold—ahh!  It's been a terrible bear market for the last year, but it's been a great bull market for a long time.  What do you think? 

MARK:  Well, we gave a sell signal in November of 2011.  That was a really good lucky call because gold has basically drifted downward ever since.  I have not given a buy signal for gold, but I do recommend people accumulate them and squirrel them away and that sort of thing because it is real money.  Who knows what the government's—they're going to inflate more.  Yellen is very much in favor of inflation and waiting for the unemployment rate to drop.  It's unlikely with our generous welfare system and raising the minimum wage is going to put a lot of teenagers out of work.  I'm quite assured that inflation is going to be the number one problem we're going to be facing… 

TERRY:  Down the road. 

MARK:  Yeah. 

TERRY:  At these levels, silver around $20 and gold somewhat over $1200; you're a buyer of coins. 

MARK:  I am, of the coins, but not in my regular IRA portfolio.  I'm not owning any gold or silver at the present time, or even the mining shares, because they're showing weakness as well… 

TERRY:  Oh, more weakness. 

MARK:  …but that could change at any time, so I will be alert to any increase in mining shares. 

TERRY:  Mark, thank you very much.  You can find out more at markskousen.com.  I'm Terry Savage from moneyshow.com