The right precious metal for you

Gold and silver both play significant roles in an investment portfolio as precious metals with intrinsic value and a historical use as currency. Despite often being grouped together for investment purposes due to their similarities, it’s crucial to recognize the distinct differences between the two when making decisions about when and how much of each to buy.
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Gold and silver, both precious metals with inherent value and a track record as currency, can be valuable additions to an investment portfolio. However, despite their similarities leading to them often being grouped together for investment, there are several distinctions that should be considered when determining the timing and quantity of each to purchase.

Before selecting a platform (online or physical store) for your purchase, it’s advisable to conduct some preliminary research to ensure their credibility. Look into customer testimonials, client reviews, and affiliations and certifications (such as the Royal Numismatic Society and British Numismatic Society, organizations dedicated to the exploration and comprehension of coins and monetary units).

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HOW TO BUY GOLD/SLIVER

Diversify your portfolio

Gold/Sliver is included in a diverse portfolio of assets to balance out investments that fluctuate. When markets are falling, gold usually rises as investors turn to safe-haven assets, so holding gold long term will not only help increase the value of your portfolio but will provide some protection from volatility in other asset classes.

Long term gold vs short-term silver

The higher value and relative price stability of gold make it a popular choice for safety and security, as it has maintained its value for millennia. On the other hand, silver’s lower cost and smaller market size result in greater volatility, making it more suited for speculative upside. This underscores the differing investment goals of gold and silver purchasers. Gold is typically acquired for long-term value preservation, while silver is often bought for short-term gain.

Tax treatment

Certain gold and silver coins, such as gold and silver Britannias and gold sovereigns, are exempt from capital gains tax as they are considered legal tender in the UK. However, the percentage premium paid over the market price is higher for silver. While the manufacturing cost of a gold or silver coin might be similar, the lower price of silver compared to gold means that the percentage cost relative to its value is significantly higher for silver.

Investment-grade gold has been exempt from VAT since 2000, but silver becomes subject to VAT if it is stored or delivered within the EU, with the VAT rate in the UK being 20%. However, you can opt to purchase silver and have it stored in a secure, allocated vault outside the EU, thereby avoiding the VAT requirement.

A bit of both?

Investing in precious metals doesn’t have to be a choice between one or the other. Gold serves as a crucial buffer against fluctuations in other asset classes, acting as a safe haven and boasting a centuries-long history of long-term growth. Silver, with its lower price point, is often the first step into the world of precious metals investing and can be used more speculatively to potentially capitalize on its more volatile peaks.

Price point

The disparity in price often leads some investors to initially invest in silver as a means of testing the waters in the precious metals market, before eventually transitioning to a gold portfolio.

The industrial question

Silver serves not only as a wealth reserve but also has value in numerous industrial applications, including batteries, semiconductors, solar panels, and medical equipment. This dual value, both as a currency and in industry, can boost demand during periods of economic expansion. Approximately half of the silver produced each year is utilized in industrial applications.

While gold is also used in industry, only about 10% of its demand originates from these applications. The remaining 90% of gold demand is driven by investment, jewelry, and central banks. As a result, industrial growth doesn’t significantly influence gold demand, unlike silver.

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A historic global currency

The enduring value of gold stems from its rarity and unchanging nature. Despite the cumulative global gold production exceeding 200,000 tonnes throughout human history, this amount, when melted down, would occupy only three to four Olympic swimming pools. According to estimates by the World Gold Council, approximately 50,000 tonnes of proven reserves remain in the ground.

This scarcity is a fundamental factor contributing to gold’s value, and it has served as a traded form of currency for millennia. In the seventeenth century, goldsmiths played a pivotal role in shaping the modern banking industry. Presently, central banks and nations are obligated to reserve a specific percentage of their wealth in gold as a safeguard against financial risks.

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