How to Invest in Silver

Invest in SilverMy belief is that everyone should invest in silver. There is a long run bull market in commodities, in particular, precious metals are in a long run bull market driven by the loose monetary policy of governments. Silver has had a correction of late, as I right this it is about 20% off its recent peak, and this could serve as a buying opportunity.

This article looks at the different methods available for the average investor to invest in silver. All the investment vehicles mentioned are openly available and so if you want to invest in silver any of the avenues discussed should be easily accessible to you.

Considerations for anyone wanting to Invest in Silver

Invest in Silver in the UK- Tax Issues

Investing in physical silver in the UK attracts VAT. This means any purchases of bullion bars or coins will attract a 20% tax payment. This is not ideal, and buying in places where it is not taxed such as the Channel Islands will not save you as you will have to pay tax upon import to the UK. There are ways around this though, so if you want to invest in silver without having to pay the tax look at ETF investments. These are discussed further below and serve as probably the easiest way to invest in silver.

Invest in Silver Bullion Bars

If you want to invest in silver by physically buying bullion bars, 1kg is a sensible denomination, reputable refiners include Umicore, Metalor, Heraus and Engelhard. Remember you will have to pay a premium over the spot/current market price (the price is quoted per troy ounze) and because the silver market is small there may be occasions when this premium is quite large ie. greater than 25% due a supply squeeze. However, actually taking physical ownership of the metal is probably the safest way to invest in silver provided you buy from a reputable dealer.

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Invest in Silver Coins

If you wish to invest in silver coins do not be fooled by the market for antique or special issue coins. You should only be interested in the physical worth of the metal in the coin. As a result you can’t go wrong with Silver Eagles or Austrian Philharmonics which will be 99.99% pure, which is what you are after. If the banking system were to collapse, and you invest in silver as an insurance policy against such an event, one troy ounze coins would be a practical size. I note that with the current situation in Greece on a precipice and the impact on European banks being understated, a banking problem like in 2007/2008 is looking increasingly possible.

Invest in Silver ETFs

An alternative to holding the actual metal is ETF’s. An ETF is bought and sold through your standard online borker just like a share. An ETF investment would not attract the VAT and hence could be more cost effective for traders and shorter term investors. A good ETF is LON:PHAG which is denominated in dollars and is backed up by a physical holding of silver in a bank vault. Be aware though, that if you are holding silver as an insurance policy against the collapse of the banking system, an ETF would not be a wise place to put your money and a physical holding would be much more sensible. There are rumours abound that that the amount of claims for silver from ETF’s exceeds the quantity of physical silver available.

Invest in Silver “Perth Mint Certificates”

Furthermore, there is an alternative method of holding silver known as “Perth Mint Certificates”. Basically, you buy silver bullion which sits in the bank  in Australia and you are issued with a certificate showing your holding which you can sell when you desire. This method of investment still has the issue of you not actually taking physical ownership of the silver though, hence there is still the risk of the bank perhaps not quite having the holdings of silver to back up the certificates issued.

Invest in Silver- Summary

Overall, how you hold your silver should depend on your investment objectives. As an example, I hold a significant amount of silver bullion in the form of 1kg bars. I also hold the ETF LON:PHAG which acts as a much more short term vehicle to trade with, should I feel the need to “dance with the devil”, referring the fact that the market is notoriously volatile and difficult to call.

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I hope this article has served as a useful piece of education on how to invest in silver.


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