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THE GREAT SILVER MELT OF 1980...did it really happen?

Story lifted from: The E-Sylum v9#18, April 30, 2006

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?
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Comments

  • DUIGUYDUIGUY Posts: 7,515 ✭✭✭
    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?



    Bar form . image
    “A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly."



    - Marcus Tullius Cicero, 106-43 BC
  • LindeDadLindeDad Posts: 18,806 ✭✭✭✭✭
    Added side note he lost a lot of money on that silver. I heard that on here.
  • cladkingcladking Posts: 26,831 ✭✭✭✭✭
    It did and it didn't happen. The Hunts had a lot of their 160+ million ounces in coin
    form. All the refineries were backed up melting as fast as they could but there was
    a huge backlog of silver as the price eroded through the middle of 1980. After this
    there was little reason to melt and most stopped. So the melt wasn't well under way
    until October, '79 and was mostly over by mid-'80. The number and importance of
    coins melted is often axaggerated.

    There were individuals pulling stuff out of this stream that had numismatic value so
    the real damage done to population were in coins that just happened to have a num-
    ismatic value in the 40 to $50 per ounce range. There was a lot of great collectible sil-
    ver in the form of tea pots and the like. There was just too much of this stuff to pro-
    tect and relatively few who knew the good stuff from the junk. No doubt, the refineries
    attracted people more familiar with some of this material.

    There aren't a lot of refineries and capacity is not high enough to have had a substan-
    tial effect on things like '64-D quarters.

    Be that as it may there were many 55 gal drums of silver coins being processed.
    Tempus fugit.
  • 53BKid53BKid Posts: 2,084 ✭✭✭
    I remember as a teenager, people lining up in the local mall on the weekends to sell their silver--coins, tea sets, picture frames, ingots--you name it. A group of buyers had a table with scales paying people cash on the spot. I traded in several franklin mint international flag ingots and walked away with the cash -- very pleased with my sales.
    HAPPY COLLECTING!!!
  • CoinosaurusCoinosaurus Posts: 9,363 ✭✭✭✭✭
    These are great questions. Someone needs to write a book about all this.
  • SwampboySwampboy Posts: 12,202 ✭✭✭✭✭
    I remember working at a pizza place mid late sixties and girlfrien (wife now) worked at Macy's.
    We pulled silver certificates out of circulation and a dealer gave us a premium but I can't remember why.

  • nwcsnwcs Posts: 13,593
    Great answer, Sam. Makes perfect sense to me.


  • << <i>Added side note he lost a lot of money on that silver. I heard that on here. >>



    You shouldn't believe everything you hear without confirming it. He made a boatload of money on that silver.

    Somewhere in the neighborhood of a 50% gain.
    "Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose."
    John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
  • thebeavthebeav Posts: 3,231 ✭✭✭✭✭


    << <i>

    << <i>Added side note he lost a lot of money on that silver. I heard that on here. >>



    You shouldn't believe everything you hear without confirming it. >>



    Exactly !!
    Check out this thread.....
    Buffett thread
  • I don't think a lot of people had time to melt the silver... they just bought it and turned it over for a profit, or got stuck with it when metals plumetted.
  • roadrunnerroadrunner Posts: 28,216 ✭✭✭✭✭
    Leon Hendrickson of Silver Towne wrote an article that I read not long ago. He said he and his crew worked long hours every day melting silver on the premises. At least that was my recollection.

    roadrunner
    Barbarous Relic No More, LSCC -GoldSeek--shadow stats--SafeHaven--321gold
  • cladkingcladking Posts: 26,831 ✭✭✭✭✭


    << <i>Leon Hendrickson of Silver Towne wrote an article that I read not long ago. He said he and his crew worked long hours every day melting silver on the premises. At least that was my recollection.

    roadrunner >>




    This is the guy who should write the book on the subject. He tells a great story about
    the business at Silvertowne back during the melt.
    Tempus fugit.
  • Lots of coins were minted. Lots of coins were melted. Millions of silver dollars were melted due to the Pittman act but there are still plenty to go around.
  • WoodenJeffersonWoodenJefferson Posts: 6,495 ✭✭✭✭
    Lucky for numismatics that the Carson City GSA hoard was not reduced to plain ole' bars. What is the percentage of bullion melt in silver content... are the other contents removed like copper...what's the percentage like 99% fine, etc.
    Chat Board Lingo

    "Keep your malarkey filter in good operating order" -Walter Breen
  • Probably, when I think about it, alot of the Morgan casino " slicks " ( Binions used real Morgan Dollars for thier chips I hear) might have been melted or in line to be melted. Alot of Peace and Morgan slicks where selling at silver melt around $35 - $40 each back then. Seems crazy, and it was in retrospect, to the younger crowd here that where not around at the time or too young to remember. But, a good number of people bought them at that price and got burned.
  • Someone did write a book on this very subject.

    it's called "The Big Silver Melt" by Henry Merton. it's not a big book, but it's VERY interesting! the author found a big time melter that was VERY active back in the day. this melter was very meticulus in his method. EVERY coin that came in was sorted by denomination, year, mint mark. there was a big sorting board with holes with corresponding dates/marks and the coins were slotted thru the proper hole. this guy was able to track damn near every coin that he melted. he had two furnaces going in 2 places. he mentioned of cars bending in half since the coins were so heavy. he also kept all his records, shipping, Air bills of lading, etc...

    there are also some pictures in the book of the furnaces and bags and bars. this guy would melt the coins and pour into big bars. he would drive the bars to an east coast airport and fly them to London as the silver sold for more in London and it was worth it to fly TONS (literally) of silver over the pond.

    this melters schedule was VERY tight. something like everything that came in that night had to be in bars in the morning for the flights out to London.

    given the info. this melter provided, i have no doubt that he did what he said he did. i think the book states something to the tune that this particular melter was responsible for melting like xx% (i thought like 10%) of all the US minted silver coins (modern, nothing of numismatic value, at least not back in those days).

    try and find the book. my local library has a copy.

    Craig
  • cladkingcladking Posts: 26,831 ✭✭✭✭✭
    The FED probably didn't get much more than 20% in their melt of '68/ '69. It would take
    man years of effort to sort .1% of mintage of the circulating silver coins of that era.
    Tempus fugit.
  • lordmarcovanlordmarcovan Posts: 41,789 ✭✭✭✭✭
    My numismatic mentor told stories of busting up lovely silver Tiffany tea services in the back of the shop, to send it to the smelter. This would've been just a year or so before I started visiting him.


  • << <i>I remember working at a pizza place mid late sixties and girlfrien (wife now) worked at Macy's.
    We pulled silver certificates out of circulation and a dealer gave us a premium but I can't remember why. >>


    Because at that time you could take silver certificates to the treasury building in washington DC and redeem them for either silver dollars (till part way through 1964), or silver bars and granules (1964 through 1968). In either case the silver in the coins/bars were worh more than the face value of the paper money, and some of the silver dollars had numismatic value in excess of the silver value as well. For that reason speculators were willing to pay a small premium over the face value of the silver certificates. After all if you had a five dollar silver certificate it wasn't worth your while to take it to washington to get your five silver dollars (assuming the local back was out) so you sold it for $5.25 to the speculator. He would amass thousands of dollars worth and ship them to a partner in Washington who would then redeem them. Then sell the silver and common dollars to the smelters and the coins with numismatic value to the coin dealers and then wire the money back and start the process all over again.



    << <i>I don't think a lot of people had time to melt the silver... they just bought it and turned it over for a profit, or got stuck with it when metals plumetted. >>


    Oh yes they did. Most of the people buying up silver from the public had it sold before they ever bought it. I worked with a couple of different buyers back then and they had deals with the refiners, at the end of the day, or even several times during the day, they would call up the refiners and lock in a price for the silver they had. So many oz at such and such a price. But you had to get the silver to them by such and such a time for that locked in price to be good. Most of them locked in the price and shipped out everything that same day so there wasn't much time to do any searching for rarities in the stuff. Remember the amount of money the average B&M shop was running through their checking accounts at this time was staggering. It could easily come to more than a million dollars a week! Even more for the larger shops. They only way your typical shop could do that was to get paid by the refiners each day as well.

    The refineries were working day and night melting and refining the material coming in but they still eventually developed a big backlog of material waiting to be melted. As the backlog grew the refiners lock in prices dropped more and more below the spot price because they had no idea what the market would do by the time they got it processed. But they weren't about to get stuck with the silver either in case the market dropped. They might have piles of silver they wouldn't get around to smelting for a couple weeks, but they already had it sold as well. They sold it as futures contracts on the commodities market. Sell the contract now and deliver it in three months or more. So even after the market dropped the smelting of the backlog would continue to produce the bars to satisfy the futures contracts. Selling options would be another possibility as well.



    << <i>The FED probably didn't get much more than 20% in their melt of '68/ '69. It would take
    man years of effort to sort .1% of mintage of the circulating silver coins of that era. >>


    The Federal Reverve had machines at each branch bank that automaticly seperated the silver from the clad coinage. All of the coinage that came back to the Fed was run through the machines. I don't know when they started using the machines, probably not until 1968, before that there wouldn't be enough clad in circulation and the machines would have eliminated almost all of the circulating coinage.
  • Interesting thread. My dad has told me about the Hunt brothers. Wasn't there a gas crisis in the late 70's as well?

    -Amanda
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  • mhammermanmhammerman Posts: 3,772 ✭✭✭
    Many folk reference the price of silver to be at least what it was back then but it was an artificial situation. The Hunt Brothers were trying to manipulate the market and they got in the way of the big boys and that wasn't gonna work. How it worked out is interesting reading.


    Hunt Brothers...and the silver story
  • lkeneficlkenefic Posts: 5,057 ✭✭✭✭✭


    << <i>Interesting thread. My dad has told me about the Hunt brothers. Wasn't there a gas crisis in the late 70's as well?

    -Amanda >>



    Yeah...gas went from about 32 cents per gallon up to 75 cents per gallon before settling back down to 55 cents per gallon after the Arab oil embargo...
    Collecting ... dust

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  • topstuftopstuf Posts: 14,803 ✭✭✭✭✭


    << <i>Someone needs to write a book about all this. >>



    Second that! ESPECIALLY if they cover in detail the government's action in declaring a legal substance illegal to BUY just to save a large commodity broker who was on the wrong side of the trade.

    Selling was okay. Ah, what a great country. Let a couple of patriots hang out to dry because one of the "stalwarts" of the economic community was dumb. Course, how dumb could they be using other peoples' money.

    Rotten to the core.

  • PhillyJoePhillyJoe Posts: 2,640 ✭✭✭
    I remember the metals frenzy when silver was going for $50/oz. and gold went to $800-850. Buyers would set up at hotels and run full page ads offering outrageous multiples for coins. That hoard of '64 Kennedys in your drawer might fetch $10 each. While that is an impressive multiple over face, these gypsies in reality were buying the silver for $30/oz. (Three 90% half dollars have roughly 1 oz of silver). Nothing was safe; film, dental work, spoons, and especially coins.

    Even without the silver frenzy, millions of silver coins were turned into the Mint every year. The Mint calls these "uncurrent" another word for worn or damaged. The uncurrent coins were a significant source of silver which meant the Mint needed less from the open market. While not a significant % compared to the number minted, it's still millions of coins never to be seen again. And yes, they were melted.

    As usual, Cladking and Condor provide very informative posts.

    I have the number and value of silver coins turned into the mint from the late 1930's through the 1960's. For your copy, send 100 ounces of silver to PhillyJoe, Box 1776, Whatsamattau, PA.image

    Actually, since this information is at work, I'll try to post the info next week.

    Joe
    The Philadelphia Mint: making coins since 1792. We make money by making money. Now in our 225th year thanks to no competition. image
  • tychojoetychojoe Posts: 1,332 ✭✭✭
    :eating popcorn;
  • ShamikaShamika Posts: 18,615 ✭✭✭✭

    I was in high school in 1980 and my interest in coin collecting was starting to lag as often happens with this demographic. The father of one of my friends was buying silver from anyone who whould sell. My friend begged me to sell him the silver coins I owned at the time, but I didn't want to part with any of them. In truth, I probably should have sold since I really didn't own anything of real numismatic value.


    Buyer and seller of vintage coin boards!



  • << <i>Yeah...gas went from about 32 cents per gallon up to 75 cents per gallon before settling back down to 55 cents per gallon after the Arab oil embargo... >>


    That was the 1973 oil embargo, there was a second one in 1979 with gas going from 55 cents to over $1.10 before it settled back to the 75 cent per gallon range. For while they thought they were going to have to breakout and start using the gas rationing coupons that the government printed up back in 74 for the first embargo but the 79 embargo didn't last long and the coupons stayed in storage until about 1989 when somehow someone discovered that the portrait of Washington on the coupons could be used to activate bill changing machines. (Considering all of them were supposed to be locked away in the federal vaults somewhere how did they get specimens to test the bill changers and why? No one had them so they couldn't use them to cheat machines, and if gas got so bad that they had to use the coupons people would need them for the gas and they wouldn't be wasting them in the machines. Besides they would be worth more as gas than as money.) So rather than run the risk that someone would use a coupon good for gas at well over a dollar a gallon to cheat a bill changer out of one dollar the government ordered all of them destroyed.

    Collectors at the time begged the government to sell specimens to the collector market but they refused. They did agree to send two sheets to the Smithsonian but ordered the rest of the sheets destroyed. It was windy at the destruction facility though and the shredder they were using wasn't too efficient. A few months after the destruction was completed a few coupons started showing up on the numismatic market. The government did some investigating and I think at least one person was taken in for questioning. I don't know if they ever tried to actively confiscate any of the coupons or not. I would suspect that they would fall into the same grey area as that of the 1933 double eagle 1804 dollar, 1913 V Nickel, and 1974 aluminum and bronze clad steel cents. government property that has been converted for private gain.


  • << <i>Nothing was safe; film, dental work, spoons, and especially coins. >>



    I remember seeing coin and pawn shops advertising they will buy gold fillings. The word was out too that alot of x-ray`s where smelted for the silver content.
  • ElcontadorElcontador Posts: 6,815 ✭✭✭✭
    Just anecdotally, I remember what it was like back then. There were lines of people going onto the street, buying and selling bullion gold and silver at the local shop, with a few armed guards around in case things got out of hand. It was one of the craziest scenarios I have ever witnessed.

    I unloaded virtually everything that didn't have a numismatic premium that I owned; common date Merc and Barber dimes and quarters, war nickels, late date circ. Walkers, etc., because the bullion value of these coins exceeded their numismatic value.

    Re the silver certificates, sometime in 1968, the Federal Reserve Banks no longer would change the notes for their face value in silver. I remember the local newspaper showing photos of lines around the block at one of the Federal Reserves, of people trying to change their certificates for silver right before the final day(s) this was allowed.

    Haven't seen anything close to this level of frenzied activity ever since. The GSA $ sale was outright boring in comparison!
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    "Sou Mangueira......."
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