Silver vs gold investments

Both gold and silver hold their own in an investment portfolio as precious metals with intrinsic value and a history of use as currency. But while the similarities often have them bundled together for investment purposes, there are many differences that must be taken into account when deciding when or how much of each to buy.  

When choosing your outlet (online or retail) do some research first to make sure they are a reputable retailer. Check customer referrals, customer feedback, and membership and accreditation (for example the Royal Numismatic Society and British Numismatic Society, both of which promote the study and understanding of coins and currency units).

Long term gold vs short-term silver 

Gold’s higher value and relatively stable pricing mean it is more often used for safety and security, having kept its value for thousands of years. Silver’s lower price and smaller market on the other hand means it is much more volatile, and more inclined towards upside speculation. This highlights the difference in investment objectives for gold and silver buyers. Gold tends to be bought for long term value retention, and silver for short term profit.  

Price point 

The price difference also means that some investors may choose to invest in silver first as a way to dip their toe in the precious metals market before ‘graduating’ to a gold portfolio. 

Tax treatment 

Some gold and silver coins (gold and silver Britannias and gold sovereigns) are capital gains tax free as they are regarded as legal tender in the UK. However, the percentage premium paid above the market price is higher for silver. While the cost of creating a gold or silver coin may be similar, because the price of silver is so much lower than gold, the percentage cost relative to its value is much higher for silver.  

Investment grade gold has been VAT exempt since 2000 but if you store or get delivery of silver in the EU it becomes liable for VAT, which in the UK is 20%. You can however choose to buy silver and have it stored in a secure, allocated vault outside the EU thereby bypassing the VAT requirement.  

The industrial question 

Silver is not only used as a store of wealth but has value as a component in many industrial applications, from batteries and semiconductors to solar panels and medical equipment. This secondary value in addition to its store of value as currency can increase demand in times of economic growth. Around half of the silver produced annually is used in industrial applications.  

Gold is also used in industry but only around 10% of demand comes from these applications, whereas investment, jewellery and central banks make up the remaining 90% of gold demand. This means industrial growth isn’t a very strong driver of gold demand, whereas it can be for silver.  

A bit of both? 

It doesn’t have to be either/or when investing in precious metals. Gold is an important hedge against volatility in other asset classes, acting as a safe-haven and enjoying a centuries-old track record for long-term growth. Silver is a popular gateway into precious metals investing because of its lower price point, and can be used more speculatively to hopefully ride its more volatile highs.