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Should I buy gold or silver?

So you have decided to invest in gold and to buy silver bullion, but which one should you choose? Should you choose at all or buy both? Read on for the similarities and differences between the two and the different buying options across the metals. 

Are they the same?

Gold and silver are both precious metals that have been used by humans as both money and in industry for thousands of years. There are many similarities between them. 

  • Long-term investment - Both gold and silver have been used as stores of wealth and currency for hundreds of years. Their intrinsic value, durability and tangibility have long made them favourites as long term stores of value. 
  • Monetary metals - As mentioned above, gold and silver have long been used as currency. Both were used as early forms, as far back as 5,000 years. Still this continues today with the mints of sovereign nations producing legal tender made from these two precious metals. A clear indication that gold and silver are still considered to be forms of money. The ultimate currency in times of economic and political uncertainty. 
  • Safe haven - Gold and silver are both ‘borderless currencies’. They exist outside of the fiat banking system; the populace is not reliant on the central bank for the metals’ supply, demand or price. This allows gold and silver bullion to act as both a safe haven investment and a safe haven currency. 
  • Hedge - Gold and silver bullion are invested in by individuals and large banks alike, as a hedge against a number of factors - uncertainty, inflation, deflation, macroeconomic, geopolitical, systemic and monetary risk.
  • No third-party risk - Currently if you hold a £20 note in your hand, or £2,000 in your bank account, it would account for very little if the central bank decided to debase the pound Sterling. However, a gold or silver coin marked ‘£20’ or £2,000 worth of gold or silver in a secure vault, would continue to go a very long way in the event of the central bank destroying the currency. Even in less extreme events, this sovereignty that comes with gold and silver is a crucial advantage; when you own either metal, either in bars or coins, then it is yours and only yours. Its price is subject to market demand and supply, but it cannot be taken from you, the amount of metal cannot be diluted and you are not at risk of someone making your wealth suddenly disappear. 
  • Diversification - Physical gold and silver’s unique properties demand that they be part of a diversified portfolio that carries other assets such as stocks, shares and property. They act as insurance in times when other assets find their value has dropped, or financial woes elsewhere have impacted various assets’ use or desirability. 
  • Storage - Unlike many asset classes gold and silver are tangible. When you choose to buy gold and silver bullion you may do so so that you can hold it in your hands or to place it in secure storage. You can choose to buy in bars or coins, making both metals extremely accessible with attractive entry points for new investors. 
  • CGT - In the United Kingdom you must pay Capital Gains Tax on gold and silver bullion, excluding that classed as legal tender. However, this is only payable when you sell your bullion and if you have made above that tax year’s CGT threshold. 

You may also like to read: Capital Gains Tax on Gold Bullion

What is the difference between gold and silver

The similarities between gold and silver might lead one to conclude that it does not matter which you choose to invest in. But, the differences between them are not insignificant and so should be considered when deciding if you should invest in gold or silver. 

  • Role in industry - whilst gold is an extremely useful industrial metal, silver is known to be the ‘indispensable’ metal. Over 50% of demand for silver comes from industry and yet it is also a currency and safe haven. This makes silver a double-edged sword, as it will perform well when economies are booming as it will be in demand for industry, but it is also likely to perform well during downturns due to its monetary role. 
  • Silver is easier to ‘spend’ - one of silver and gold’s attractions is that it could be used as physical money in times of extreme geopolitical strife. It is borderless and so could be used as money should you find yourself in need. If you were to buy a 1oz gold coin, this is worth significantly more than a 1oz silver coin. So it is far more practical to spend in silver coins due to their relatively low value to weight. 
  • Silver is a byproduct - the majority of new silver supply comes from mining for other metals such as zinc and copper. This means that a change in demand (either from industry or investors) or an increase in price is unlikely to push up supply. Gold, on the other hand, is produced because of gold mining and so it is relatively easier to affect gold production. 
  • Gold is less volatile  - in some environments, silver investment is not for the faint-hearted. Gold is far less volatile in both bear and bull markets, than silver. 
  • Silver is more expensive to store - It is more expensive to store silver in a high security vault, than it is gold. Consider how much more gold is than silver currently, and then the fact that the yellow metal is a lot more dense. In short, it takes considerably more space to store silver than it does gold. 
  • Recycling - Unlike the more expensive gold, it is hard to justify recycling the small amounts of silver that are used in so many devices around us (phones, laptops, televisions, hearing aids!). This means that the supply of silver is depleting at a faster rate, as so much is destroyed during the industrial process. 
  • VAT - VAT is due on some silver products, but not on investment gold. Silver coins not considered legal tender in the UK are subject to VAT, as are silver bars that are removed from a bonded warehouse.

The gold-silver ratio

As soon as you start to decide if you should buy gold or silver bullion you will be confronted with the term ‘gold-silver ratio.’

The gold-silver ratio is how many ounces of silver it takes to buy an ounce of gold. If you look back throughout history then one could argue that silver is hugely undervalued, relative to gold. At the time of writing the low of the last 25 years has been nearly 31 ounces of silver to buy an ounce of gold, yet today it is over 112 ounces. 

Whether the ratio is worth much concern is something many gold and silver investors are divided over. Those who do not favour it believe it is an arbitrary number and of no more use than comparing gold to say platinum or silver to copper. However, those who do use it, use it as a signal for when they should buy the precious metals. If the ratio is particularly high then silver is favoured as the metal to buy. Conversely, if the ratio falls below the average for (say) the last 25 years then gold would be deemed undervalued. 

Should I buy gold or silver bars?

Both gold and silver are available in a number of different bars, across the GoldCore site. 

Gold bars are easier and relatively cheaper to store. If you want to buy gold bars, you might choose from smaller sized bars such as 1 oz gold bar or 10 oz gold bar or opt for larger bars such as the 100 oz, one-kilo gold bar. There are advantages to buying one type of bar over the other such as storage costs and how liquid the market is. 

Silver bars are produced in different sizes, from small bars up to 1000-ounce silver bars.  The large silver bars are the most popular as they are the best value for investors and more liquid than smaller bars. Smaller investors tend to favour 1oz silver coins rather than small silver bars.

VAT is not due on investment gold however, it is due on any silver bars that are stored in private, at-home vaults. Silver that is stored in GoldCore Swiss vaults is not subject to VAT. 

Should I buy gold or silver coins?

GoldCore offers a range of gold and silver coins, from both the UK and around the globe. 

1 oz 99.99% pure silver bullion coins minted by top sovereign mints such as The Perth Mint, US Mint, and Royal Canadian Mint and The Royal Mint amongst others, are the most popular amongst silver investors. Coins produced by these mints include Silver Britannias, Austrian Philharmonics, Canadian Maple Leafs, US Silver Eagles, and Australian Silver Kangaroos, all of which are available through GoldCore. You can read more about investing in silver coins by clicking here.

Gold coins are also minted by top mints and are very popular amongst investors. gold coins such as the South African Krugerrand, British Sovereigns and Britannias, the American Gold Eagle, Canadian Gold Maples, Gold Australian Kangaroos and Austrian Philharmonics are accepted globally as the most convenient, recognisable and popular gold coins. 

VAT and the amount of coins you get for your money are the two main things to consider when deciding if you should buy gold or silver coins

  • Depending on the gold-silver ratio you will get far more silver coins for your money than gold. 
  • Any coins that are minted by the Royal Mint, in the UK are not subject to VAT. Any silver coins, minted outside of the UK or not by the Royal Mint are subject to VAT. It is not applicable to investment gold. 


How to buy gold and silver

There are many options when it comes to buying gold and silver, both have very similar physical products as well as associated investments such as futures and ETFs. 

We recommend that in the case of both gold and silver you buy physical bullion. Bullion refers to both coins and bars. GoldCore sells gold and silver bullion for both home delivery and for secure storage. 

As explained above, there are advantages to holding each metal as both bars and coins, and for holding them in personal storage or within our secure, segregated vaults around the globe in safe jurisdictions. Many investors decide to hold both gold and silver as part of a balanced portfolio, as their similarities bring a safe haven aspect to your investments but their differences mean you are likely to be well-covered in a number of financial scenarios. 

Also read: Where to Buy Gold or Silver