Investing in Silver

 

BDY2018Chard (1964) Ltd is a leading UK coin and bullion dealer (and jeweller) based in Blackpool, England. We have been dealing in coins and bullion for over 50 years and share this guide to help you make the most informed decisions about your investments.

Chard has been voted UK BULLION DEALER OF THE YEAR 4 years running! (2015, 2016, 2017 and 2018)

 

Investing In Silver

Silver is a popular choice for investors looking to buy low priced precious metal. Silver is more speculative than gold. The volatility of the silver price creates the potential for substantial returns on investment in the future. However, the buying/selling spread of silver coins and bars is wider than most gold bullion and investment silver is subject to VAT which is not applied to investment gold. Silver is best seen as a long-term investment, one that you can keep adding to and hold onto for years to come.

Should I Buy Silver Or Gold?

If you are looking to buy precious metals at the lowest premiums, gold is the better option. However, you will need to spend at least £231.51** to buy a sovereign containing 0.2354 t.o. gold or £974.19** for our cheapest one ounce gold coin. Compared to how much you would need to spend to buy one ounce of silver (£16.10**), this is where silver becomes more attractive to many investors. It is easy to buy small amounts of silver bullion cheaply and add to it as and when you choose. As with gold, the larger the weight of the coin or bar and the more that you buy, the lower the price of the item you pay. We would recommend investors to buy both gold and silver as a balance to their precious metal portfolio.

The History of Investment Silver

Silver is a valuable commodity that has been used for thousands of years. In ancient Egypt, Greece and China, silver ingots were used by merchants and officials to pay for trading transactions. It was first used as money in Lydia in the Persian Empire in the sixth century BC. This form of coinage spread around the world and became a common monetary trading facility. Silver coins continued to be used in coinage in Britain until 1946 when it was seen as an unnecessary extravagance in post-war Britain. Other countries soon followed suit and gradually silver coins were replaced by the cheaper and more durable cupro-nickel coins. 

The introduction of one ounce gold coins in the late 1960’s had been welcomed by investors looking to buy investment gold bullion at low premiums above the intrinsic metal value. There had been many other historic coins to choose from, eg. sovereigns and foreign gold coins such as Double Eagles, Swiss 20 Francs and Coronas, but the modern 1oz coins such as the Krugerrand provided investors with coins that were issued in a universal standard weight. However, investment silver was limited to silver bars or old circulation coins. It wasn’t until the US Mint introduced the 1 oz silver Eagle in 1986 that investors were given the option for easily accessible investment silver in the same standard troy ounce weight as gold. Other mints followed suit; the Royal Canadian Mint with their Maple and the Royal Mint with the Britannia. It wasn’t long before all the major mints - excluding the South African Rand Refineries - brought out rival one-ounce coins. Australia’s Perth Mint is probably one of the most respected refineries who is known for their consistently high production standard of bullion coins. In 1999, they introduced their first lunar coin which was available in a variety of sizes. This was the first of several different ranges which have all been hugely successful. These include the Kookaburra, Koala and more recently, the Kangaroo. Silver investment coins are struck once to an uncirculated finish. Mints such as the US Mint and the Royal Canadian Mint keep the same design every year, although they do issue some coins with a privy mark. Some mints, such as the Bank of China and the Perth Mint, alter the design of the bullion coins each year. Many of the earlier silver bullion coins are highly sought after by collectors who will pay higher premiums to add the coins to their collections, particularly if the coins are issued to a smaller mintage.

timeline2

What Is Silver Bullion?

Bullion is a term used to describe precious metals, such as silver and gold, that is bought or sold at or close to its intrinsic metal value. Silver bullion, usually coins or bars, is silver that is sold for investment purposes at a low premium above spot silver price

Generally, the most popular way to buy silver bullion is one kilo bars and one ounce coins. There are lots of other weights, from half ounce to ten kilo, coins and bars. Some sizes attract higher premiums so if you are looking for low priced silver, it is important to buy in the cheapest and most common form; usually one ounce and one kilo.

silverNM1

Best Value coins and bars are usually our lowest priced products. These coins and bars are our choice of date and mint and are usually chosen at random from our strong rooms. They will always be from LBMA approved refiners. Whether you are buying coins or bars, the larger the quantity that you buy, the lower the premium. Investors looking at buying large quantities of coins often look at tubes of coins or Monster Boxes.

monsterbox1

What Is Spot Silver?

Spot silver is another name for the live silver price. There are options to view the live price of silver in GBP £, US$ and Euros €, in troy ounces, grams or kilograms, and a date period from the early 1800s to today. The price is updated every 60 seconds. You can see the live price here.

lives

Live Silver Price          Live Gold Price          Gold:Silver Ratio

Live Silver Price and Market Information

If you’re thinking about investing in precious metals, or have already started building your portfolio, no doubt you will have started to keep a close eye on the spot price and other market factors. The live spot prices are easily available on our website for you to view. This allows you to see what is happening with the prices of all precious metals. It is a good idea to follow the financial markets, as this will often have an effect on the live prices. We are often asked if silver will go up or down. We do not have psychic powers and we will never say it is going up or down, we can only say whether it has gone up or down. If we could predict what will happen, we would be magicians. What we can tell you is to do what we do, watch the factors that drive the price of precious metals. This could be a single element or a combination of the following: Geopolitics, Inflation, Interest Rates, Economic Data, Currency Fluctuations, Terrorism/Wars and Natural Disasters.

So When Should I Buy Silver?

We usually say, buy when the price is low and sell when the price is high. It is important that customers do their research. Watch the live silver price and decide when you feel it is the right price for you to invest. Compare different products to see which gives you the most value for your money

Gold / Silver Ratio

You may read about the gold:silver ratio. Basically, this is how many troy ounces of silver you can buy for the same price as one troy ounce of gold. The gold:silver ratio is obtained simply by dividing the current gold price by the current silver price. What currency you price them in does not matter, as long as you use the same currency for each, and obviously for the same weight, so US Dollars per troy ounce will work just as well as Euros per kilogram or British pounds per ounce. In ancient Greece, the ratio of gold to silver was generally between 10:1 and 13.5:1, depending on the relative proximity of gold or silver mines. In the 1930's and 1940's the ratio reached 90:1 or higher, and in 1991 it peaked at about 98:1, although we have seen one source which claims over 100:1 peak. Other sources state that the gold:silver ratio is no longer relevant in today's markets. We believe it is a worthwhile measure but would stress that it is difficult if not impossible to state what the ratio "should" be. When the gold to silver ratio is high it means that gold is expensive compared with silver, or the converse, that silver is cheap relative to gold. 

It is important to remember though, that investment in precious metals is a long-term game. Please do not expect to invest your money and weeks later have made a large profit. Silver does not fluctuate as noticeably as gold although it is more volatile than gold. Investors use the opportunity. It is easy to panic when you have invested and then the silver price goes down. Of course, investment in precious metals (as with property, shares, etc.) is a gamble, but if you are planning it as a long-term investment, then you have a better chance of seeing a good return.

goldsilverratio1

Which Type of Silver Bullion Should I Buy?

Coins or Bars- If you are investing in silver, the most important question that you really need to ask is ‘Which is the best deal for me?’.

Silver Coins - As with gold, silver bars were once our customer’s most popular choice, these days it is most definitely coins. Silver coins are often more convenient than bars, and can often be bought for lower premiums than bars, weight for weight. There is a wide selection of silver coins from all over the world. As well as the elements of design, buyers may also want to consider whether they would like to buy older or new “bullion” coins. We stock silver coins from all the main mints including the Perth Mint’s Kangaroo, Kookaburra, Koala and Lunar coins, the US Mint’s Eagle, the Royal Canadian Mint’s Maple, the Bank of China’s Panda, the Austrian Mint’s Philharmonic. These are just a small selection of silver bullion coins issued each year. Silver coins are mass produced and are available at very competitive prices compared with similar size bars. Silver coins are almost universally recognised so they are also easy to resell. 

coins2

Silver Coins Continued

Whilst most mints stick to the best-selling one ounce silver coin, the Perth Mint have produced many of their ranges in a variety of weights. The Australian silver lunar series includes ½ oz, 1oz, 2oz, 5oz, 10oz, 1kg and the massive 10kg. Their Koala and Kookaburra series vary between 1/2oz to 1kg. Some sizes are issued to mintage limits which makes certain weights and years very collectable. The Australian Lunar 10kg silver coin is limited to a 150 mintage each year. These coins are highly sought after and allocations are difficult to secure. These are not necessarily the best value coins but certain collectors are prepared to pay the high premiums to ensure they add the coin to their collection.

10kgcoin

Britain’s Royal Mint issues coins such as the Britannia, British Lunar and more recently, the Queen’s Beasts. These coins are exempt from Capital Gains Tax which may be an important factor for UK residents.

3coinmix

All of these mints are competing with each other to produce silver bullion which will capture the interest of both collectors and investors.

Silver Bars

When purchasing silver bars, the main thing to think about is the size you would like to own. One kilo silver bars have a low premium due to their size - 32.15 troy ounces - but the price is not as easy to track as a 1 oz silver bar. Smaller bars, such as fractional kilo bars, and one ounce bars, combine convenient size with reasonably low premiums. These are the various different sizes of silver bars, some are more unusual so we may not be able to provide all of these sizes. You might think that we would advise one kilogram silver bars and one ounce silver coins as the best silver investments, in that order. Our advice can differ with changes in the market and depend on the amount you are looking to invest. One of the main things to consider is whether or not you will need access to your investment.

Do I Pay VAT On Silver?

Yes, if you are buying silver in the UK, you will pay the standard rate of VAT on investment silver bullion. This is currently set at 20%

What Is VAT Free Silver?

You may see dealers selling ‘VAT Free Silver’ – this is for silver that is stored abroad, you do not take physical possession of the silver coins or bars. You will pay VAT when you decide to sell the silver bullion or take delivery. It may look like a good deal, to begin with but by the time you have added storage costs and then paid VAT at the end of the transaction, you will find that the hidden costs outweigh the ‘VAT Free’ benefits at the outset.

Tax Free Silver

The majority of silver bars and silver coins attract VAT in the UK. Silver Britannias, silver British Lunar and silver Queen’s Beast coins, are British legal tender and are exempt from Capital Gains Tax (C.G.T.)

What Is Capital Gains Tax?

According to the British government, Capital Gains Tax is a tax on the profit when you sell (or dispose of) an asset that has increased in value. It is the gain you make that is taxed, not the amount of money you receive when you sell or transfer assets. To avoid paying Capital Gains Tax, buy coins which are British legal tender, such as Britannias, British Lunar and Queen’s Beasts as they are all exempt from Capital Gains Tax.

What Is Special Scheme Silver?

Special Scheme silver is basically second hand silver which we have bought from our customers or other dealers. The British government allows second hand silver to be sold with VAT applied to the dealer’s margin instead of the new silver rate of 20%. You will still pay 20% VAT, just not on the whole price. It is a great way to pay less VAT, legally! This can be a massive saving and is certainly an option that investors should consider. We do not always have Special Scheme silver available, it usually sells fast. So, if you see it, snap it up quickly. If you are interested in second-hand silver we would suggest that you sign up for a Customer Account and add these products to your wish list.

Storing Your Silver

Accessing your investment - you are investing hundreds and thousands of pounds and have plenty in bank accounts, then the chances of you needing to sell some of your silver for an emergency is slim. However, there may be times that you may need you to dip into your investment. In this case, it is can be better to sell a number of smaller coins or bars rather than a one kilo bar or coin. This way you can control your investment and sell as little or as much as you like.

Physical Silver - Most of our customers prefer to physically hold their silver investment. In times of economic uncertainty, it makes sense to protect your wealth by owning silver and gold. When you buy bullion from Chard, you can rest assured that the coins and bars that you buy will be your property.

Secure Storage At Chard - If you ask your insurers about adding your investment silver to your household insurance you will be asked a number of questions including the value and where you will store it. You may be asked to buy a safe and install an alarm system to the insurer’s specifications. We can take away the hassle of secure storage when you store your investment silver - and gold - in our fully insured secure vaults. Our facilities are fully insured and your bullion will be covered at the live metal price, so if the price goes up, you will be automatically covered at the correct amount. For only 0.6% excl VAT, you can store your silver bullion at Chard. It doesn’t matter whether you have bought the coins and bars from us or not. Please ask one of our members of staff for more details or visit our webpage On-Site Vault Storage.

monbox2

Why are Prices Higher than Intrinsic? 

A common question is why is there such a big difference between the intrinsic metal value and the actual price? You will pay a higher premium for silver compared to gold bullion. Generally, mints charge a higher premium on silver than
they do on gold. They also charge a fee to deliver the silver bullion and then, of course, there is the VAT.

Why Are Older Coins More Expensive?

Current years are often available at lower premiums compared to backdated years. This is because they are still being minted. Once a coin stops being minted they can be more difficult to source. This is not to say that you cannot get backdated coins at good bullion prices. If you sign up to our mailing list, we send out secret offers for dated coins when we have surplus stock. Collectors often have a coin of preference. They will buy coins from each year for the design features rather than the intrinsic metal value. Some coins may increase substantially in value - this can depend on the mintage and desirability of the design.

What Is A Silver Round?

Surprisingly, a round isn’t necessarily circular in shape. In fact, a round can be any shape. A round is a term used to describe silver which is sold for investment. Rounds do not have a denomination and are not legal tender. They are often produced by smaller mints who use artistic licence to create interesting pieces of silver that are particularly appealing to ‘collector/investors’.

round

What Are Silver Medallions?

Many mints issue commemorative medallions (often called medals) for the collector market. These silver medallions can be legal tender in the country of origin or can be a piece of silver with numismatic interest. We often buy large collections of medallions which we sell at low premiums above the silver spot price. This can be a great way for investors to own low priced silver with numismatic interest.

silvermedallions

Terminology

AGW - Actual Gold Weight In line with Krause, we usually quote the actual fine gold content of most coins in troy ounces. The price per troy ounce is the most widely quoted price for precious metals. To convert gross weight in grams to actual intrinsic gold content: Gross weight in grams / 31.1035 = Gross weight in troy ounces.


Gross weight in troy ounces x Fineness (alloy) = actual fine content in troy ounces.


Au - Au is the chemical symbol for gold, a yellow metallic element, and comes from the Latin word aurum meaning gold.


Bullion - This is a term used to describe precious metals, bought or sold, at or close to the intrinsic metal value.

Coin - An object, usually a piece of metal, often a flat disc, used as money.


Investment Gold - According to HM Customs & Excise:- Investment gold (other than investment gold coins) is defined as “gold of a purity not less than 995 thousandths that is in the form of a bar, or a wafer, of a weight accepted by the bullion markets”. Our website will tell you which coins are investment gold

Intrinsic Value - The value of the metal contained within the coin.

Margin - The difference between the spot price and the buying or selling price, usually expressed as a percentage.

Premium - The percentage over and above the current gold value at which an item trades.

Spread - The difference between the buying price and the selling price.

XAU - XAU is the ISO 4217 currency code for gold, denoting one troy ounce of gold.

We are not financial advisors and we would always recommend that you consult with one. We can only give advice on what the best deals are from Chard to match your budget and investment portfolio at the time you make enquiries. We try to keep our investment advice very simple. We cannot predict with any certainty what silver, gold or any other commodity or currency will do over short, medium or long periods of time. Because of this, we tend to avoid giving any definite advice or strong opinion. There are some areas where we have considerable experience, and feel we can safely give our thoughts. Some of it may appear obvious but we often find ourselves repeating it