Will Silver Coins Go Up in Value?

Spotting an investment opportunity in precious metals can be lucrative if you buy early. Silver is currently very low-cost compared to gold so is seen as a bargain, providing more likelihood of future gains. The current gold-silver price ratio is 76:1. It’s interesting to note that this ratio has averaged 47:1 over the past century.

In other words, the relative spot price of silver when compared to gold, has fallen significantly over the years. Of course, as with any asset who’s price can fluctuate, there is always a possible downside risk of investing in silver. The present price of silver is around £19.50 per ounce. So, is there a risk involved in buying silver coins?

Silver is in great demand all over the world. As the most conductive of all metals, silver is the preferred use in technological goods, so analysts predict demand to continue rising. Silver continues to remain the preferred metal for conductivity in photovoltaic cells, which is an integral part of solar panels. As the world moves toward sustainable energy solutions, the production of solar panels is likely to keep rising. Silver is also used in all electronic products like mobile phones, laptops and tablets. As our world becomes increasingly connected through technology, the demand for silver will rise.

Here at Physical Gold, we benefit from seeing the real day-to-day demand for buying (and selling) silver coins and bars. While retail interest in buying silver coins was a tiny fraction of our overall business 15 years ago, now it contributes more than a third of our orders.

This demonstrates the increasing uptake and demand for silver coins amongst UK retail investors. Silver is no longer a fringe asset within precious metals. A majority of customers we speak with want to discuss the possibility of adding silver to their portfolio. The growing retail demand for silver and its ‘network effect’ will likely increase silver coin prices over time.

Many investors like the idea of owning both gold and silver. We usually describe gold investment as an asset to ‘reduce risk’ as it tends to perform inversely to the general economic markets. Meanwhile we describe silver investing more as ‘taking risk’ as it can also benefit greatly from rising industrial demand and is more volatile. Of course, with higher risk, silver also provides higher potential returns.

So much of the time, the two precious metals will compete for the same customer money. Is an investor seeking to reduce risk with gold or take more long-term risk with silver.

The Covid pandemic, invasion of Ukraine and subsequent high inflation has left many investors to seek safety from 2020 onwards. This has inevitably led to more investment going into gold than silver, increasing the price ratio between the two metals.

However, we’re starting to see that dynamic change going into 2023 and beyond. As the cycle of interest rate tightening eventually recedes, we’re likely to see a higher proportion of investment coming into silver, pushing up silver coin prices. The sequence of silver ‘closing the gap with gold’ after gold has acted as a safe haven is one we’ve seen repeated over many years of economic downturns.

Electric cars are soon becoming the obvious choice for land transportation. With petroleum and diesel passenger vehicles expected to be phased out from Europe between 2030 to 2040, electric cars will occupy the lion’s share of the market. Silver is a critical component for e-mobility and the overall demand is expected to shoot up due to the above factors. On the other hand, there has been a significant drop in the production of silver from the world’s largest producing countries like Peru, Mexico and China. So, on the basis of supply and demand, we can reasonably expect prices to go up eventually.

First of all, silver coins provide divisibility to any precious metal portfolio. Many investors prefer to purchase silver bars. However, when selling back into the secondary market, bars (such as a 1 kilo silver bar) give you only one chance to sell. Coin investors, on the other hand, benefit from holding a variety of denominations. They can sell small parts of their silver holding as and when the price is right.

Silver coins (such as the silver Britannia) also provide a tax-efficient avenue for investment. Many silver coins are considered to be legal tender in the UK since they have a face value. Investing in these coins can provide an attractive CGT exemption.

The value of silver coins can be volatile. They can go up and down in the short term. Over the long term as a precious metals with limited supply and increasing demand, they are likely to rise in value. Premiums on collectable silver coins can rise quicker than the market price of silver due to interest from both collectors and investors.

So, we can surmise that the downside risk involved in buying silver coins is minimal. Coins, in particular, can deliver good returns over a period of time while maintaining tax efficiency for your portfolio.

The investment team at Physical Gold are always helpful in guiding buyers to make the right choices when it comes to silver coins. Contact the team on (020) 7060 9992 and you can benefit from advice, as well as guidance in buying the right silver coins that can provide great value.

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