What are the Benefits of Buying Silver Bars?
12/12/2023Daniel Fisher
Investors often turn to silver when making an entry into the precious metals market. Silver trades around 85 times cheaper than gold, so the price point for a silver bar or some coins is far lower than that for gold. On a historical basis, this gold to silver price ratio is wider now by almost double when compared to the relationship over the past century. That suggests that silver is currently a bargain.
The tempting value of silver is further enhanced by its broad utility across electronics, medical applications and photovoltaics. Silver’s unique conductive and antibacterial properties continue driving industrial demand even as films fade from cameras.
Blending the appeal of owning a tangible asset as a safe-haven with its growing hi-tech efficacy, silver remains an alluring investment for both long-term, buy-and-hold savers and active traders seizing windows of speculative opportunity according to preference. This versatility helps ensure silver stays in vogue across financial eras.
Silver Bullion Bars vs Other Forms of Silver
A growing number of investors are choosing to buy silver bullion as an affordable portfolio diversification and inflation hedge with the lack of correlation to the volatile stock market. Silver coins and bars can be purchased from reputable dealers online at reasonable premium markups.
In the realm of silver investments, the choice between various forms of silver can be as crucial as the decision to invest itself. Each form of silver comes with its unique characteristics and appeals, catering to a spectrum of investor preferences. It’s very possible that a blend of the different silver investment options may be the best approach to create a balanced approach. But for others, the simplicity and raft of advantages of buying silver bullion bars may satisfy investment objectives.
Our exploration will unravel the unique benefits that silver bars bring to the table, from cost-effectiveness to ease of storage, liquidity, and beyond. By understanding why silver bars stand out in comparison to their counterparts, investors can make informed decisions that resonate with both financial prudence and the enduring appeal of precious metal investments.
Large silver bars provide better value for money
Here’s a quick look at the different forms of silver investments that we’ll evaluate. For the sake of this investigation, we’re only comparing forms of silver buying that gain direct exposure to the silver price. This omits the more complex nature of investing in silver mining shares, futures and options, which represent a different risk profile.:
Silver Bars: Coveted for their tangible nature, silver bars offer cost-effective investment options with varying sizes and weights, providing flexibility for both seasoned and novice investors.
Silver Coins: Possessing historical charm, silver coins are not only an investment but also popular among collectors. They come in different designs and sizes, offering a fusion of aesthetic appeal and investment value.
Silver Rounds: These coin-like silver discs are known for their affordability and ease of acquisition. While they lack legal tender status, they are valued for their silver content and can be an accessible entry point for investors.
Silver ETFs (Exchange-Traded Funds): For those seeking a more indirect investment approach, silver ETFs offer exposure to silver prices without the physical possession. It’s a convenient option for investors who prefer a hands-off strategy.
As we navigate through the intricacies of silver investments, understanding these diverse forms empowers investors to tailor their portfolios according to individual preferences and financial goals.
Comparison Table: The Benefits of Buying Silver Bars vs Other Forms of Silver Investments
Aspect
Silver Bars
Silver Coins
Silver Rounds
Silver ETFs
Cost-Effective
Lower premiums for larger bars
Higher premiums, especially for collectibles
Variable premiums
Low margins, but may involve fees
Resale Flexibility
High Liquidity
Variable liquidity
Moderate liquidity
Market liquidity
Tangible Appeal
High
Relatively High
Moderate
None (Paper-based)
Counterfeiting Risk
Lower risk
Moderate risk
Moderate risk
No physical risk. Buy cyber risk
Storage Convenience
Easy to store and stack
Moderate storage needs
Moderate storage needs
No physical storage needed
Cost-Effective Investment
The primary benefit of buying silver bars is the lower cost per gram when compared to smaller silver coins. Investors therefore take on less implicit costs relative to the raw market value of metal obtained. Silver bars can be bought in large sizes such as 5kg and 100oz, and yet still be affordable due to silver’s low price. When buying a bar, therefore, you can acquire a larger volume of silver for the money you invest, suiting the practical buyer on a budget.
The cost saving on silver’s premium is achieved in a few ways.
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Simpler Production Cost
Fabrication costs are comparatively modest since bars involve basic minting rather than elaborate coin pressing with intricate designs demanding artistic skill. Specialised processes are required to create the high-tech anti-counterfeiting features becoming increasing popular and demanded on silver coins. In contrast, silver bullion simply needs to feature basic weight, purity, mint, and serial number details.
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Economies of Scale
While silver bullion is widely available in small sizes like 1oz, it’s far more common for shrewd buyers to focus their investment on larger denominated bars. With around 32 ounces in a kilo, it makes sense than the cost of minting 32 x 1oz silver coins is higher than producing 1 x single 1 kilo silver bar. While they would both contain the same amount of silver, the overall time, manpower, and energy costs needed to manufacture many individual pieces of silver is greater.
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Consistent Mass-Production
Silver bars are mass-produced and abundantly available in the market, with common denominations being 1 kg and 5 kg. While their price fluctuates with the underlying silver spot price, premiums are generally consistent and predictable with supply steady.
Premiums on coins are already higher due to inflated production costs but can also vary considerably with demand. Limited issue silver coins or those minted to commemorate events command even higher premiums due to their appeal to the collector’s market.
Are All Silver Bars Just as Cost-Effective?
While a cost saving is inevitable when buying silver bars, not all bars are equal when it comes to value. A huge number of different silver bar brands, types and sizes are available. The general rules of thumb on price when buying silver bars are;
- Premiums reduce as bar denomination increases. If you’re able to buy a huge 5 kilo bar, the markup may be 10-15%. Meanwhile a 5-gram silver bar may only cost £15, but that’s a premium of more than 300%!
- In the same way as most products, different brands command a range of prices, for basically the same thing. A premium brand such as Pamp will cost considerably more for the same weight bar as a less fashionable brand.
- Pre-owned silver bullion can be picked up at even lower prices. Availability may be sporadic as it relies on holders willing to sell their silver. But if investment and value are your priority, then patience can pay dividends to avoid paying the ‘new bar premium’.
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Resale Flexibility
Being able to sell your silver exactly when you want and at an optimum price, is just as impactful on your investment as paying low prices when choosing which form of silver to buy. Gains are only ever realised when your silver is sold at a profit as owning silver doesn’t pay any interest. If difficulty in selling is experienced for one reason or another, market opportunities to maximise returns can be missed.
Silver bars check the boxes investors and bullion dealers seek in easily verifiable precious metals ideally suited to appeal to the widest possible buyer pool. These attributes combine to enhance market depth when aiming to liquidate metal holdings.
Here are the main reasons why silver bars offer strong liquidity when selling:
- Contain verified fine silver – Silver bars have their purity certified through an assay process, which gives buyers confidence in the quality and weight of real silver content. This makes them easily resalable.
- Uniform shapes – The typical rectangular silver bar designs allow for convenient stacking and storage. This means dealers have the option to sell them to refineries to easily melt down.
- More retail buyers – Basic generic silver bars have no elaborate designs, logos or custom shapes that would limit interest to certain buyers. Their simple forms appeal to wider markets.
- Lower dealer spreads – Without collectable premiums charged, dealers can buy and sell plain silver bars at smaller bid-ask price spreads as they know they can sell them on quicker, benefiting individual sellers.
- Commodity pricing – Trading as a uniform commodity product rather than unique item allows silver bars to be valued fairly based on prevailing spot silver rates.
- Bulk appeal – Large heavier bars draw industrial and manufacturing buyers wanting wholesale volumes of pure silver, expanding potential demand.
- Branded options – Reputable mints like Metalor and PAMP retain trader confidence in authenticity, enhancing marketability of their branded bars.
The Appeal of Silver Bars
Silver bars stand out for their undeniable appeal and the satisfaction of owning a large slab of silver. Their tangible nature allows investors to physically hold and possess their wealth as opposed to the digital ownership of a silver ETF or mining share.
While buying silver coins or rounds also ticks the box for investors desiring a tangible connection to their investment, their diminutive size is less satisfying. While the design and detail of silver coins holds its own appeal, the familiarity of holding coins as part of everyday currency means they feel less special.
Silver bars come in various sizes and weights, enabling buyers to own substantial denominations of silver bullion. The unique reassurance and gratification of their weight separates the tangible appeal of silver bars from other forms of silver.
Low Counterfeiting Risk
One of the biggest risks when buying precious metals in their physical form is ensuring you’re purchasing authentic products which meet the stated purity and weight. Anything less will not only impact the asset’s value but also the ability to resell the silver. In this respect, buying silver bars, especially from a reputable dealer, provides peace of mind when compared to sourcing silver coins or rounds.
Quality Assurance Through Hallmarks
Reputable mints and dealers often imprint hallmarks on silver bars, serving as a quality assurance stamp. These hallmarks not only validate the authenticity of the silver but also provide essential information about its purity and origin. By choosing silver bars from established sources, investors significantly mitigate the risk of falling prey to counterfeit schemes, ensuring the integrity of their precious metal holdings.
Easy Storage and Portability
Undoubtedly, the ease and convenience of buying silver through digital means presents its own appeal. There’s no cost or need to arrange storage of your electronic silver ETF! However, when comparing ease and flexibility of storage between the various physical silver forms, silver bars hold a distinct advantage.
Convenient Home Storage
One of the significant advantages of choosing silver bars as an investment is the simplicity of storage, especially in a home setting. Silver bars, with their compact and stackable nature, allow investors to store substantial value in a relatively small space. This convenience is particularly appealing for those who prefer having direct access to their physical assets. Whether kept in a secure home safe or a designated storage area, the manageable size and weight of silver bars make them an excellent option for those prioritizing accessibility.
Professional Vault Options
For investors seeking an extra layer of security or dealing with larger quantities of silver bars, professional vault storage is a viable solution. Many reputable vault services offer secure and insured storage options, providing peace of mind to investors concerned about the safety of their precious metal holdings. This alternative not only ensures the physical well-being of the silver bars but also addresses concerns related to theft or damage, making it a practical choice for those who prioritize the highest level of security for their investments.
Whether at home or in a professional vault, the easy storage and portability of silver bars cater to the diverse preferences of investors, offering flexibility and convenience in managing their tangible assets.
Get in touch with Physical Gold to buy silver bars
If you’ve enjoyed the simplicity and cost-effectiveness of silver bars, then why not share your experiences in the comments.
Physical Gold is a highly reputed precious metals broker with a team of silver experts. You can call physical gold on (020) 7060 9992 to discuss the most appropriate buying opportunities in silver bars. Likewise, you can also contact the team online and discuss everything related to your silver purchases and build a strong and robust portfolio.
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View productsRelated Silver Bar Questions
Why should I choose silver bars over other forms of silver investment?
Silver bars offer cost-effective investment options due to lower premiums, easy storage, and high liquidity. Their tangible nature makes them a preferred choice for those seeking a physical asset with flexibility.
How do I verify the authenticity of silver bars?
To verify authenticity, look for reputable hallmarks on the bars. Use trusted dealers and consider testing methods like the magnet test or specific gravity test. Purchasing from established sources minimizes the risk of counterfeit bars.
What are the tax implications of investing in silver bars?
In the UK, investment gold bars are exempt from Value Added Tax (VAT). However, capital gains tax may apply when selling. It’s advisable to stay informed about tax regulations and consult with a financial advisor for personalized advice.
Can I sell my silver bars easily?
Yes, silver bars are highly liquid, and selling is typically straightforward. Reputable dealers, online platforms, and auctions are common channels. Keep an eye on market trends for optimal selling opportunities.
How should I store my silver bars securely?
Secure storage is crucial. Options include professional vaults, safe deposit boxes, or secure home storage. Ensure proper insurance coverage and follow recommended security practices to safeguard your investment.
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