Investors have found the white metal alluring for some time now. Due to the potential to make significant gains once prices rise, the popularity of silver is gaining ground. The gold-silver ratio has widened considerably and silver is now more than 100 times cheaper than gold. Investment options and silver include bars of varying sizes and a variety of choice in coins.
There are important differences in buying bars and coins. These include considerations of important investment factors like divisibility, value, variety and liquidity. In this article, we will explore these differences and understand whether it is prudent to invest in silver coins or bars.
Coins are usually a better bet for investment for a couple of reasons. They offer far better divisibility than owning large silver bars, providing flexibility to sell small amounts. If living in the country of issue, they can also be Capital Gains Tax-free. Bars can be slightly cheaper due to lower production cost, but quantity discounts are achievable when buying lots of coins.
It is interesting to know that silver coins are available in 10 ounces and 1 kg versions. One of the compelling reasons for the popularity of silver bars is that they carry lower production costs. This offers investors the opportunity to acquire more silver for their money. However, large coins are almost similar to investing in bars. Additionally, these coins are tax-efficient if they have a face value.
Investing in a variety of smaller coins will enable the investor to spread the value of the investments. This is an important factor as it allows you to take advantage of different price points when the market is good. Investing in a large bar gives you that one opportunity to sell, while smaller coins can be sold bit by bit to maximise profits.
The experience of purchasing a large silver bar is altogether different from acquiring coins. There are large bars available that weigh 1 kg or 5 kg, and they offer an excellent opportunity to acquire more silver at a cheaper price per gram. This is simply because silver bars carry lower production costs and design costs. If the purpose of your investment is simply to acquire a larger amount of silver at cheaper prices, then bars could be the right choice for you. However, you need to bear in mind that large silver bars do not tick the boxes for divisibility, variety and tax efficiency.
Unlike gold, 20% VAT is payable on all silver bars and coins. Needless to say, this escalates your purchase price and eats into your profit margins.
Physical Gold, a well-known precious metals dealer in the country prior to Brexit offered VAT free silver. Sadly this is no longer possible, due to the terms of the UK’s exit from the EU. However, even with paying 20% VAT, the price differential is negligible. This is because:
a) We have reduced our product range of silver products. This means we are buying at highly competitive prices and pass this discount on to our customers!
b) We can also now provide free delivery on silver, as we ship now directly from the UK. Delivery was previously charged for
In addition, we can also supply silver and gold together in the same order now, whereas previously to attract VAT free silver we needed to accept “silver only” orders.
Silver coins that carry a face value, on the other hand, is recognised as legal tender in the country. Therefore, they can be acquired CGT free. While you will end up paying VAT when buying these coins, the profits you make when selling them are tax-free up to a level of £ 12,000 in a single tax year. It is important to be aware of these tax implications when investing in silver to make the right choices when building your portfolio.
Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.