Investing in physical silver is a very interesting option. Silver offers plenty of upside potential and can add diversification to our investment portfolio and lifestyle. We will discuss how to buy physical silver, how to understand their prices, and analyze the best silver coins available to investors.
- Where to Buy Silver Coins
- The Price of Physical Silver
- Drivers of Physical Silver Premiums
- Best Silver Coins for Investing
Where to Buy Silver Coins
For those who are considering investing in silver coins, the first question that comes to mind is where to buy them. Although that may seem complicated, it is in fact very straightforward.
There are many places where we can buy silver coins. Both physical stores and online. In fact, chances are your city has several bullion dealers selling silver coins.
The other alternative is to buy silver coins online. There are very reputable sites that sell precious metals. They are official distributors of the world’s sovereign mints. Therefore, you should not worry about not received the silver you bought.
The Price of Physical Silver
One thing we must understand about buying silver coins is that we will have to pay a higher price than what we see as the official silver price, known as the spot price. There are many reasons for that.
In general, the price we pay for silver coins can be broken down into three parts: silver price, premium and taxes.
The price of the metal, known as the spot price, is driven completely by financial markets. Silver is traded through futures contracts, which are financial derivatives that allow investors to buy and sell silver in large quantities for future delivery. The spot price is what we will refer to when we speak about the price of silver.
Second, we will also have to pay a margin on top of the spot price, known as premium. After all, whenever we hear people talking about the price of one ounce (31.1035 grams) of silver, they are referring to futures contracts for delivery of thousands of ounces. The price for smaller denominations of silver will be higher.
This is because silver coins and small silver bars need to be melted and produced. This carries logistical, energy and production costs. Similarly, we the precious metals dealer has to charge a margin in order to cover their expenses and run their activities.
Hence, there is a commercial margin associated with the production and distribution of silver coins. This premium fluctuates heavily over time. It can be as little as 5% on top of the spot price of silver, or as high as 50%. Under normal circumstances, it will be between 10-20%.
In the following section, we will analyze the things that influence how high or how low silver premiums are.
Finally, the purchase of physical silver is also subject to VAT or sales tax in many countries. This happens in countries that do not consider silver coins and bars investment products. Consequently, make sure you know whether any VAT or sales tax is being charged to you before you buy silver.
Drivers of Physical Silver Premiums
All silver coins for investing, including the best ones, are subject to a surcharge on top of the spot silver price. Several drivers have an impact on how high this premium is:
Silver Coin Denominations
The most common size for silver coins is one troy ounce. That corresponds to 31.1035 grams. These coins are the standard size and weight but not the only ones available.
It is also quite normal to find silver coins of 2, 5 or 10 ounces. In fact, we can even find silver coins of 500 grams and even 1 kilo, therefore larger than some silver bars.
Because one-ounce silver coins are the ones most often produced, they tend to have the lowest premiums. Higher denomination coins, being rarer, tend to have more expensive premiums.
Therefore, it is generally better to buy two one-ounce silver coins than a single two-ounce coin. We will get more silver for our money.
Number of Silver Coins we Buy
Another thing to consider, especially if we buy silver coins online, is that the more coins we buy, the lower the unit price is going to be. This means paying a smaller premium.
For this reason, it may be interesting to place relatively large orders, since we will receive more silver for our money. That is especially true when we one-ounce silver coins from the world’s largest mints. They make it easy for us by offering boxes containing hundreds and even thousands of those coins.
The year in which the coin was minted also has an influence on its premium. Some of the most popular designs for silver coins are hardly ever updated. But every year will have its own edition.
In general, silver coins of the current edition tend to be a bit more expensive than coins from older editions. This is because there is higher demand for them and, thereby, command a slightly higher resale price.
Available Stock of Silver Coins
Another very important aspect for determining the premium for physical silver coins is the level of stock that mints and bullion dealers have. In fact, this is especially relevant in times of high demand or supply chain issues, as we can end up in a situation of real silver scarcity for investment products.
When demand for silver coins is high, and producers are unable to source the metal to mint the coins, delivery times increase and premium rise rapidly.
In other words, the investing public assigns a very high premium to immediate physical delivery.
Level of Exclusivity
In the same way that there are silver coins of denominations other than one ounce, of which less are produced, pushing premiums higher, there are also one-ounce silver coins with less common designs.
These coins are often produced by sovereign mints to commemorate special occasions. But some private silver coin producers are active in the business. In general, the fewer silver coins produced of a certain type, the higher the premiums and the less silver we will get for our money.
Silver Collector Coins
Additionally, some silver coins are produced specifically for collectors. In this case, the premiums can be very substantial. From an investment perspective, these coins are a hybrid between physical silver investing and collectibles investing.
Silver collector coins are delivered in a nice box and include a certificate of authenticity. These coins command higher resale prices if we need to sell them in the future. However, it will be very difficult for us to get enough of a premium when we sell to make up for the premium we paid when we bought the coins.
If you are looking to invest in silver for the value of the physical metal, it is usually better to avoid collector coins.
Best Silver Coins for Investing
Next, we will analyze the best silver coins available for those interested in investing in physical silver:
Krugerrand (South Africa)
The South African Krugerrand are some of the most popular gold and silver investment products in the world.
When it comes to their silver coins, the Krugerrand is produced with one ounce of South African silver and a purity of 99.9%, which is known as 0.999. On it we can see a gazelle, the national animal of the country, and Paul Kruger, who was president of South Africa for almost two decades.
The Krugerrand has no monetary face value. Its name is derived from combining the surname of Paul Kruger and the South African currency (the rand).
Vienna Philharmonic (Austria)
The Austrian Mint produces one of the most famous silver coins in the Eurozone: the Vienna Philharmonic. On it we can find, as expected, the famous building in the capital of the country. On the reverse we see several musical instruments.
The Vienna Philharmonic made of silver weighs one ounce and is considered legal tender, with a face value of €1.50.
This coin has been minted since 2008 and is produced with silver of a purity of 0.999.
Britannia (United Kingdom)
The Britannia is the famous silver coin minted by the British Royal Mint. It was the first investment silver coin to be introduced in Europe in 1997. It contains one ounce of silver with a purity of 0.999.
On it we can find the goddess Britannia as well King Charles III. In addition, it is legal tender in the United Kingdom with a face value of £2.
For tax residents in the United Kingdom, profits from Britannia coins are exempt from Capital Gains Tax.
American Eagle (United States)
The US Mint, the official mint of the United States, produces the famous American Eagle silver coins.
With one ounce of silver and a purity of 99.9%, this coin features Lady Liberty, the personification of freedom, as well as an eagle, one of the symbols of the United States.
It is also legal tender in the United States, with a face value of one U.S. dollar. Due to the high demand for precious metals in the United States, the American Eagle is one of the most famous and liquid investment silver coins.
Maple Leaf (Canada)
North of the United States, Canada also mints its own silver coins. Canada is a major producer of both silver and gold.
The Canadian Mint produces the famous Maple Leaf silver coins, of one ounce and 99.99% purity. On them we can see a maple leaf, the national symbol of Canada, and a portrait of the British Queen Elizabeth II, who is Canada’s head of state.
The Maple Leaf is legal tender in Canada has a face value of 5 Canadian Dollars.
Launched in 1993, silver coins from the Perth Mint, the Australian mint, are also very popular. Of one ounce and made with silver with a purity of 0.9999, these coins are legal tender in Australia with a face value of A$1.
On them we see a kangaroo, the national animal of Australia, and a portrait of Queen Elizabeth II, monarch and head of state of the country.
China, as major producer of precious metals, also mints its own silver coins. The Panda silver coins feature a panda, one of China’s most famous animals and Beijing’s Temple of Heaven building.
Unlike most other silver coins, since 2016 the Panda follow the metric system. Therefore, their denomination is no longer one ounce (31.1035 grams) but just 30 grams.
Silver Panda coins are legal tender in China with a face value of 10 Yuan.
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And if you are also interested in the best gold coins for investing, check out this link:
Best Gold Coins To Invest In