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Silver as a form of money has been around for centuries and has been occasionally rated higher than gold. Investing in silver is mostly done through the purchase of silver coins or silver bars. Moreover, silver is mainly used in over 1,000 industrial applications and crafts, which in turn leads to a high demand and thus determines the price of silver.
Silver Bars
Silver bars, next to silver coins, are the second option for silver investments. Bars can be bought in weights of up to 15 kg. Silver bars are usually minted from 1 g to 100 g, weights above 100 g are usually cast.
Exceptions are bars below 100g which are cast for customers as these customers prefer the cast and thus more scratch resistant surface. One difference between silver bullion and silver coins is that larger bars have a lower premium.
Furthermore, the surface of cast ingots is not so easy to scratch because it is a little rough. Another visual difference is that cast silver bullion tarnishes faster.
This phenomenon is a normal effect because silver becomes tarnished by the sulfur particles in the air and chemically reacts. The surface then will turn to silver sulfide (salt). Tarnished silver bars have a darker color. Silver as an ore in nature is often found only in black as the silver is completely surrounded by silver sulfide.
Silver Bullion is usually stamped with the weight, the manufacturer and sometimes a serial number. Investors who like the shine of silver with a nice motif should opt for silver coins.
Known manufacturers of silver bullion
The best-known manufacturer of silver bars for the European market are mainly based in Switzerland and Germany.
Manufacturer Country
Argor Switzerland
Cook Island Germany
Degussa Germany/Belgium
ESG Germany
Geiger Edelmetalle Germany
Heraeus Germany
Pamp Switzerland
Umicore Belgium
Valcambi Switzerland
The price of silver coins and silver bars
The price of silver investments consists of the silver price, the premium and VAT. The silver price and premium are affected by a variety of factors, which we will explain in the following section.
Silver Price
Silver is traded on the various exchanges around the world. Supply and demand is the biggest component for the rising or falling price of silver. Furthermore, many other factors play an important role and can significantly affect the price of silver.
To name a few: the dollar, oil prices, the world political situation and mining rates of silver. Mining rates are determined by the major mining companies, shareholders, banks and other industries. Another major factor is the price of silver itself, because at a very low price the mining of silver ore is unprofitable.
The price of silver hit a record high of 49.45 dollars per troy ounce on 18th January 1980, which was caused by speculations by the Hunt brothers.
Premium
The premium represents the costs incurred by the manufacturers and sellers. It also includes the margin on the silver bars and silver coins. Manufacturers have considerable costs in the refining of and production of bars and coins.
The refining and production process involves expensive equipment, which include blast furnaces, punching machines (for rounds), embossing machines, etc, staff, storage, transportation and security, and other corporate costs are also allocated to the products.
With retail silver products the seller also has costs which are included in the premium.
The premium is also influenced by the weight of the silver bar or silver coin. Usually higher weight silver products have a smaller premium because production costs are lower, but this can vary from product to product.
In addition, there may be differences in premium between the manufacturers and thus between the products. The reason for this is the premium is affected by transportation times, the volume of coins or bars that are produced, and the different cost structures within the company.
For these reasons always compare prices before buying silver. However be sure to buy from a reputable precious metals dealer who has a good track record.
VAT
Since 2014, in Germany the full VAT rate of 19% has been payable on silver coins. Silver bars already had the 19% rate. In Germany coins are available under the margin scheme, which in general provides lower total silver prices as the seller margin is taxed with the regular VAT rat. VAT-free silver can be purchased in CelticGold’s Estonian branch at Europe’s guaranteed lowest price.
Advantages and Disadvantages of silver as an investment
The precious metal silver has the great advantage of being in high demand because, unlike metals such as iron and copper, silver is relatively rare. In addition, silver has unique properties. Silver is the element with the highest electrical and thermal conductivity and has the highest light reflection characteristic of all metals. Furthermore, it is very soft and malleable. For this reason silver is used in many unique applications.
All these features make silver indispensable for industry and crafts. Investors buy silver because of its properties, rareness and successful history as money. The price of silver, unlike gold, is much more volatile. Choosing the right entry point into a silver investment is a very important factor.
Another disadvantage of silver, which should not be overlooked, is the fact that silver coins and silver bars attract VAT in most EU countries. The only place for VAT free silver is Estonia.
Silver and its uses
One of silver’s main uses is in jewellery production.
In addition to copper, silver is one of the best alloy components for gold products. Silver in the gold alloy can brighten the finished product and give it more shine. In contrast, a copper gold alloy brings out a reddish colouration.
In industry, silver is used in many ways. Silver is appreciated medicinally because of its antibacterial effect and it is used in endoscopic tubes, wound dressings and stents.
Many other applications such as the production of mirrors for astronomical telescopes make silver very important.
Silver alloys are mainly used in electrical applications.
Another property of silver is that it can be pulled into filigree wires with lengths of up to 2 km and into films having a thickness of only 0.002 mm.
As a catalyst, silver is used in the partial oxidation of ethene to ethylene oxide and other kinetic changes to chemical elements.
In some musical instruments silver is used because of its unique sound properties.
Silver is also used for the production of medals and collectible silver coins.
Tips when buying silver
The most important thing when buying silver is the current price of silver, so investors should know about the pricing before purchasing silver.
Furthermore you should invest in silver carefully because it can have volatile price swings. Gold is historically more stable, therefore a ratio of 80% gold and 20% silver is generally considered a good allocation. The longer the investment term the higher the silver price may rise inside an investment portfolio.
In addition to the silver price the premium also needs to be considered. For this reason it is advisable to compare various silver products.