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The E-Sylum:  Volume 9, Number 18, April 30, 2006, Article 15

THE GREAT SILVER MELT OF 1980

Last week I asked about numismatic gems that turned up in
the buckets of coin and bullion dealers in the silver frenzy of
1980. Dave Lange writes: "I saw quite a few uncirculated pieces
of modest scarcity get processed through counting machines as
just so much bullion, but I never found anything truly rare at
my local coin shop. The best piece retrieved was an 1877-CC half
dollar in choice XF condition (probably AU by today's standards).
I bought this for its melt value which, unfortunately, was not
much less than its numismatic value at the time.

I've always contended that very few of the silver coins cashed
in for their bullion value in 1979-80 were actually melted at
refineries. When one does the math, it simply doesn't make sense
to go to the added expense of having the coins rendered into bars.
They were worth as much in the marketplace in coin form as they
were in bar form, since the extraordinary demand for silver was
not from industrial need but rather from pure speculation. Such
speculators would not have added to their overhead without a clear
financial incentive to do so, and this simply didn't exist.

I believe that these accounts of millions of silver coins being
melted is just a myth perpetuated by those trying to create a sense
of rarity that simply doesn't exist. It seems to be one of those
stories that, told often enough, becomes numismatic fact. It's
revealing that all of these reports are not from end users, but
rather from coin dealers. I'd like to read an account from someone
who actually worked at a refinery and witnessed the coins being
melted before I would accept it as fact."

[Dealers shipped the silver out as fast as they got their hands
on it, for two main reasons:  One, they needed to get the cash so
they could buy more the next day, and Two, because they were afraid
of the price dropping before they could turn a profit.  So who was
left holding the bag(s) when the bubble burst?  Investors who took
delivery of silver bags?  Smelters who sat on the bags?  Middlemen?
Have most of those bags been returned to the marketplace, or are
there still piles of silver coins sitting around in vaults?  Several
years ago investor Warren Buffett bought over 100 million ounces of
silver, and I understand he took delivery of the metal.  Was it in
bar form, or did the purchase include bags of coins? -Editor]

  Wayne Homren, Editor

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