By CoinWeek…
The market for junk silver, primarily pre-1965 U.S. 90% silver coinage, is currently experiencing an unprecedented liquidity crisis. This disruption is stemming from severe refining backlogs and an associated spike in the cost of financing silver, which has effectively frozen the process by which scrap and less-than-.999-fine silver is converted into investment-grade bullion. The result is a growing disconnect between the spot price of silver and the real-world ease of buying or selling physical metal, placing a strain on both retail and wholesale market participants.
The Refining Bottleneck
The core of the problem lies with the global precious metals refineries. These facilities are essential for melting down less-pure silver, like “junk” coins and sterling scrap, to create the high-purity (e.g., 0.999 fine) 1,000-ounce bars required for large-scale trading on exchanges like COMEX and the London Bullion Market Association (LBMA).
Refiners have been inundated with material, partly due to Americans liquidating silver assets in response to high prices. However, the true breaking point has been a massive surge in silver lease rates—the interest rate paid to borrow physical silver. In normal times, refiners borrow silver or cash at low rates to finance the metal while it is being processed. Recently, these lease rates have skyrocketed from typical single-digit percentages to levels nearing 100% or more. This makes it uneconomical for refiners to accept and hold new material, as the financing costs wipe out any potential profit.
Consequently, many major refineries have temporarily paused or severely limited their intake of scrap and junk silver. This is not just a slowdown; it’s a structural freeze of a critical part of the silver supply chain.
Silver Freeze Impact on Wholesale and Retail Buyers
The silver refining freeze has immediate and distinct consequences for both wholesale dealers and retail investors who deal in junk silver:
Wholesale Liquidity Drying Up
- Dealers Stop Buying: Wholesalers and larger bullion dealers rely on refiners to process the high volume of scrap silver they purchase from the public. With refiners no longer accepting the material or charging prohibitive fees, dealers can no longer afford to buy junk silver at their usual, close-to-spot rates.
- Reduced Offerings: Many dealers have completely halted purchases of 90% silver and sterling scrap, or are offering drastically lower prices, far below the metal’s melt value. This creates an enormous gap between the paper-market spot price and the actual selling price of the physical product.
- Inventory Stress: Wholesalers are hesitant to stock more junk silver inventory that they cannot efficiently offload or convert into refined product, adding to market inertia.
Retail Sellers Face Illiquidity
- Selling Difficulty: For the retail investor, the primary consequence is a sudden and sharp reduction in liquidity. Junk silver is historically popular precisely because of its high liquidity and fractional size, making it easy to sell small amounts. Now, the traditional avenue for liquidation (selling back to a dealer) is choked.
- Plummeting Buyback Prices: Retail sellers who manage to find a dealer willing to buy are receiving offers significantly lower than what they would have expected, creating a sense of loss and frustration.
- Rising Premiums for Buyers: Ironically, for those still looking to buy junk silver, the product may experience an increase in its premium over the spot price. The existing stock held by dealers becomes more valuable as a finished, fractional product, given the difficulty and delay in converting new scrap into refined forms.
The (Likely Short Term) Outlook
Until the refining logjams clear and, critically, the silver lease rates return to sustainable levels, the illiquidity in the junk silver market is likely to persist. This event underscores a fundamental reality in the precious metals space: the value of physical metal is not just its spot price, but its convertibility. A breakdown in the refining supply chain can quickly decouple physical market dynamics from paper market pricing, leading to significant volatility in premiums and a challenging environment for those seeking to liquidate their holdings.
This situation reveals the underlying stress in the physical silver market, where a convergence of high demand, dwindling above-ground stocks, and financial constraints has exposed a critical vulnerability in the global refining infrastructure.
YouTuber Silver Seeker has a fantastic video that explains the state of the market for junk silver and problems sellers face in the current market environment.
Interesting. Explains a lot. Thank you.
Informative article.
Informative article.
This is fascinating!
any prediction when this will get back to normal
Really interesting information about supply and demand affecting individual sellers.
The problem seems to be, as you stated, a backlog of work at the refineries. Presumably this is a temporary problem although it’s unclear how long it will take to get resolved. For those who love junk silver, this could be a great time to buy while the premium is non-existent, or even less than melt.
Very interesting great way to stay informed about coins in general.
Very Informative, I think i will keep my junk silver right now.
I loce all my pre-1965 silver, even the culls. I know many are selling their right now on the spot rise, but can you imagine what it’ll be maybe 50-60yrs for now? Saving mine for my daughter. I’m sure it’ll be a nice suprise for her someday.
Interesting times we are living in…
Still holding! I wish I had bought more gold though!
Will this forever “tarnish” my junk stack’s value if people remember this time where constitutional 90% became basically unmarketable? Or maybe there will be a push to melt all the 90% when once again possible to do so in order to avoid future backlogs that reduce the coins’ liquidity. Pity, because junk coins are really fun to stack.
Seems strange they don’t want junk silver, it’s still silver. Oh well
This really surprised me. But it does make sense. So many people trying to sell junk silver leading to a lack of liquidity. Wonder how long it will last.
Good to know
I’ve been buying and holding most of my life. I fully intend to continue with this strategy.
The article is very interesting regarding a technical aspect of commodity trading not well understood by us laymen.
Very interesting to see what is happening with silver right now
I know a person who bought up every bit of silver he could, now he sits and waits for things to improve
Thanks for the article. It makes sense that when silver prices jump like this, that there’s going to be a spike in the amount of people trying to sell their silver and due to the bottleneck in the processing, this has implications on the the price and demand. Its not as simple as just buying and selling!
As a person holding some bulk silver nickels, I really hope this situation remedies it’s self.
I was thinking to have them refined myself. We’ll have to see what the market does.
Very informative article, as always.
Looks like a good way to get some cold hard cash !
Hope this will past.
Not sure what to make of this long-term, but very informative!
The guy I sell to was telling me the same story.
The same situation occurred in 1980 when the Hunt brothers attempted to corner the Silver market. Near the highs dealers were paying about 60% of melt value !
Great Article, explains why some of my old coins are going for lower prices than I expect.
It’s crazy they’re not taking it cuz they can’t offload it to wholesalers or refiners but they should just offer the retail buyers better prices because there’s plenty of people always buying
This is what I was thinking. If you can’t sell to the refineries (who offer less than spot anyway) sell it to customers who are willing to buy. I’d buy several thousdand dollars a month if it was below spot, but above refiners typical offer.
Still holding onto mine
Very Interesting article.
Reminiscent of the mid eighties. (although that spike had an entirely different cause) I wonder if it will settle
Interesting article – I always wondered how that process worked.
I’ll continue to buy and hold silver. I think it will pay off in the long run.
Still think prices haven’t peaked. Always a good buy.
Still think prices haven’t peaked. Always a good buy.
What isn’t covered in the article which I would very much like to know is WHY silver lease rates have gone from single digit percentages to 100%. That seems to be the driving problem. Can you please explain why that has happened? Thank you.
A well written article explaining what is happening with the current situation with Les than .999 silver. Thanks for the insight!
I was debating about buying some. Debate over. Thanks.
All silver is great to me.
This is an interesting point, one that most people wouldn’t realize. In the meantime, I’ll just keep what I’ve got and add to it as I can.
Nice article! Looks like I’ll keep my silver in a holding pattern at home for the near future.
Didn’t know there was an issue with silver supply.
Still holding on to silver.
Great article. Just wondering where the best is to buy common silver coins right now?
Since we are buying silver for the grandkids and not for us while we are still alive this is not an issue for us. That and I wouldn’t even know how to start to actually re-sell what we have!
When silver was high in 1989 my parents and grandparents were able to buy a new blazer and a pickup truck with the silver they sold. Today the same amount would only be a down payment. Sad.
Informative article.
Hanging on to my sikver!!!
love these expanded background reads..thank you so much..keep up the good work
Good info, I will hold for now.
What will happen if silver gets to $100 an ounce. Will coin shops offer to buy at$50??
I’m glad i bought when I did, Now I am just holding.
Thanks for explaining this. Quite interesting!
Interesting article.
Good article and goos video.
Good to know how this works. Thank you.
Interesting & informative. Thanks!
Not sure what to make of this long-term, but very informative.
Not good news…I’m wondering if the same thing will happen to gold? Hopefully not
As Shawn Davis commented, this might be a good buying opportunity.
Very informative info. Good read!
Wow that is very informative thank you
I never plan on coverting any of my 90% back to fiat currency, even if the backlog situation gets cleared up. Silver is real money!
Very interesting. I’ve been grabbing silver out of coin drawers whenever I find any for decades now.
ok
Very good and timely article.
Very informative
Interesting
Wow, very interesting.
I didn’t know that’s how it worked.
Thank you for this interesting article. This explains perfectly what I am seeing in the market
Great insight
I have recently focused on buying the junk silver instead of the silver eagle and other sovereign mint coins from other nations. I think it is a smart strategy for setting something back for a rainy day.
Just got back from the NH Coin & Currency Expo. So-called “junk” silver is a great way to pay for coins with coin dealers. You can haggle on the price of your coveted coin and then also haggle on face (I was getting 32x or 35x, depending on the dealer.) *Finally* those rolls of silver came in handy.
Good, informative article, thank you.
Silver is excellent collateral for a loan so why are the interest rates high?
This brings a scenario I didn’t even know existed. Never thought there could be a time.when dealers stop accepting or buying from someone who is trying to liquidate their position. In the end, I still think there will always be a safe space for precious metals. In theory, aside trading medals, labor and essentials will be our only bargaining chip if the apocalypse were to be tomorrow.
Many of those who decry this sudden liquidity issue have contributed to its cause by holding 90% for decades while shifting their buying emphasis to .999 ASE, Maples, Pandas, Koalas and other rounds. In retrospect, liquidating the 90% along the way to convert to .999 would likely have averted this “crisis”, but I’m playing Monday morning Q’back.
I think the more important thing that most overlook is the assumption that most junk silver “should” be melted, refined to .999, and made into bullion. Should it . . . Really?
The fact that junk silver fractionalizes the silver medium as a store of value is an advantage that is dwindling with every effort to consolidate the fineness of the world’s silver into .999 and mint full 1, 10, 100 oz and other large pieces for the investment community. A desire for the simplicity of that movement is understandable, but I observe little in the way of minting smaller increments of .999 than 1 ounce to preserve smaller units of exchange in silver.
If the mindset of holders is that a broad-based embrace of silver as “real” money will continue to drive its ascent versus the Dollar, it is unhelpful that with both the increase in price and the increase in the size of unit of exchange, it rises further out of reach for the average citizen. Unwittingly, the marketplace is gradually turning silver into what gold used to be . . . impractical for the common man to use.
Let’s recognize that the retail marketplace is no less responsible for this issue than are dealers, wholesalers and refiners. It is unfortunate, but it is what it is.
Enjoy the run up, bumpy though it may be . . .
I’m glad I stocked up early.
Lies and manipulation!
You don’t need to lease physical silver that’s being offered to you right there and then! If you have the money, you buy it. If you need to borrow money to buy it, then you can borrow money from a bank. THERE IS NO SILVER LEASING INVOLVED IN THE PURCHASING OF SILVER. Silver lease rates only affect SPECULATORS who BORROW silver they don’t have to buy or sell it in the paper markets to gamble on silver’s price direction.
Powerful people are making up nonsensical stories to scare away retail investors from the silver market. Refiners can buy as much silver as they available funds. They can also get credit lines at favorable terms because silver is good collateral.
THINK: if silver is $50 and SELLS for $50 then why are dealers and/or refiners are giving you only $35 for your silver? IT DOESN’T COST $15 or currently 25-30 percent of the spot silver price to refine silver.
The logical conclusion is, the dealers/refiners and the market makers as a whole are 1) price gouging and 2) attempting to DISCOURAGE investment in precious metals, especially silver.
I agree with much of what you say. If bot buying junk silver was true then why buy doree bars from the miners? The purity of doree bars are far less than 90% and contains lots of impurities.it is total bullshit, but you have to control the market otherwise fiat will crash bring down the bond dealers, derivative markets, banks and Stock/Commodity Exchanges. Isn’t that what stacking is all about? When the dollar crashes you’re not going to be looking at the spot price then! Your silver is the spot price!
This is all great inforamtion
Overtime, more shifts are needed at refinerys.
I’m holding my Constitutional silver for the long haul. In time the market will be back to normal.