Should I Buy Gold or Silver?

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Investing in precious metals is a big commitment, and it can be difficult to know which one to choose. We would always recommend a diverse portfolio containing both, covering you for any possible scenario, however, we’re aware that it’s not always possible.

In order to help your decision, then, we have compiled a list of our top 5 reasons to invest in gold rather than silver….

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1. VAT free

Unlike silver or platinum, gold bullion investments are exempt from VAT payments. This can make a huge difference to your investment. While 20% of the money you spend on silver will not be reflected in the value of your portfolio, none of what you pay for gold will be tax.

This is especially useful when it comes to selling your gold. While you need the silver price to increase by 20% in order to make a return on your investment, this is not the case for gold. Although gold is far more expensive than silver, then, the fact that it is VAT free makes it potentially more profitable.

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2. Storage

Another benefit of buying gold instead of silver is that it is a much more convenient metal to store. Given that it is so much more expensive than silver, more money can be stored in a smaller quantity of metal, taking up less space in your home and making it safer and more discrete to store. At the time of writing a 1kg bar is worth around €60,000. A silver investment of a similar value would consist of around 13x 5kg silver bars, or an even larger quantity of smaller denomination bars.

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3. Not influenced by industrial demand- the ideal safe haven

The main reason most people invest in precious metals is their ability to maintain a high value during times of economic trouble. Their relative immunity to the performance of banks, stock markets, and other commodities makes them an excellent store of wealth and a popular safe-haven in difficult times. It makes sense, then, to opt for the precious metal that is the most independent of all – gold. Although it tends to follow the same trends as gold, increasing in value when other assets struggle, silver’s huge variety of uses means that its price is more dependent on industrial demand than gold’s. This has the effect of making it a much more volatile metal than gold. Gold is therefore a much more predictable investment, and it is clear to see why it is such a popular safe-haven in times of economic turbulence.

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4. Gold holds a higher value

This also makes gold a much safer long term investment. Gold’s ability to maintain a very high value, even when its price has dropped, makes it an excellent store of value for the long term. Looking at the 5 years since the two metals peaked in 2011 we can see to what extent gold is a more consistent/ safer store of value than silver. Although they have both dropped far below their 2011 prices, they have not done so to the same extent… gold has decreased by around 23% in that time, while silver has lost around half its 2011 value.

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5. It is the first choice monetary metal

The use of both gold and silver as currency dates as far back as ancient civilisations. However, there has always been an enormous disparity between the two metals’ respective values. The value of precious metals is based primarily on their scarcity, and the simple truth is that gold is much more scarce than silver, making it worth much more.

Although there have been times in the distant past where silver was considered more valuable than gold, this would probably have been due to the availability of either of the metals in a certain geographical location. However, we now live in a far more globalised world, in a time where we know far more about the composition of our planet. It is estimated that the ratio of gold: silver in the earth’s crust is around 15. This means that if all the gold and silver on our planet had already been mined and was in circulation, gold would be around 15 times rarer than silver.

With this in mind it is easy to see why gold has always been considered the best element to be used as money. It is the first choice metal to back currencies, as can be seen by historical examples such as the Gold Standard. Although our economic system has long abandoned completely gold backed currencies, it is no coincidence that central banks and governments will always try to hold a healthy amount of gold. The most striking recent example of this is China, who have been investing heavily in gold in recent years, taking their current holdings to 57.5 million fine troy ounces by the end of February 2016.