Silver Bars as an Investment

When most people think of investing in precious metals the first thing that comes to mind is gold, but many experts believe silver is at least as good a choice. Prices per ounce are much lower than gold, lowering the bar to entry, and if you buy sensibly it can be a much more flexible investment. Like gold silver can be bought in a wide variety of forms, from certificates to coins, but the most cost effective way to build up a stock of the metal is to buy bullion bars. The great advantage of bars is their price. Silver coins can be a good investment choice if you know exactly what you’re doing, but the bulk of their value is in the coin rather than its actual silver content; they’re not really a precious metal investment. If it’s the silver itself you want to collect then your aim is to get as much metal as possible for your money, and the way to do that is through buying bullion. The most affordable and flexible form of bullion is bars. Compared to bullion coins like the Silver Eagle, Maple Leaf or Chinese Panda you’ll pay a much lower premium above spot price, and by choosing the right size of bars you can cut that premium to the minimum.

Silver bullion bars are available in a huge assortment of sizes, which is great news for investors. Every size has its advantages and disadvantages but by acquiring a selection they can be combined to make a cost effective and versatile portfolio. There are two main factors affected by the size of the bar, which are affordability and premium over spot. If you have small sums to invest at any one time small bars are much more affordable, and in fact this is a real advantage of silver – with gold even a one ounce bar will cost over $1,300 at current prices, but the same size in silver is around $22. Of course much smaller bars are available in both metals but the premium is proportionately higher – there’s nearly as much work in making a one gram bar as a one ounce one. What this means is that with silver the difference per ounce over spot will be much lower than with gold, maximizing the amount of metal you can afford.

The smallest silver bars start at one gram, and these can be bought for not much more than a dollar, but these can’t be recommended as an investment option; the price is far above spot. The same applies to any of the other sizes below an ounce. With a one ounce bar, however, you can expect to pay around $2 above spot price, making it good value in terms of metal content. Larger bars are also available in a wide range of sizes. Major bullion producers like PAMP have a good selection in both troy and metric weights. In ounces, 5oz and 10oz bars are popular while many European investors favor 50g, 100g, 250g and 500g sizes. All of these remain affordable – 10oz bars cost around $210 – and you can benefit from even lower relative premiums.

A size that’s popular among larger investors is the 100oz bar. This is a manageable size, weighing just under seven standard pounds, but it’s large enough that the premium doesn’t take the price much above spot. A 100oz bar at current prices costs between $2,050 and $2,080. For even larger investments there’s also a Good Delivery standard similar to that for gold. Good Delivery bars follow requirements set by the London Bullion Market Association and are the bar of choice for large trades between banks, governments and major dealers. A Good Delivery silver bar is 99.9 per cent pure, weights between 750 and 1,100 troy ounces (most are 1,000oz) and is stamped with a serial number, hallmark, year of manufacture and weight. As with any precious metal purity is an important factor. Most silver bars are 99.9 per cent pure, or .999 fine, and this is usually known as “investment grade.” Any bullion bar should be stamped with its purity; if you’re investing in metal content you should stick with investment grade. An alternative alloy used in some bars is Sterling silver. This is 92.5 per cent silver, or .925 fine. It’s a common choice for limited edition bars and decorative “art bars,” and for these purposes it does have advantages. Because the silver content is lower the price is reduced, and Sterling silver is harder than investment grade; this helps protect finely engraved designs from damage. However if you’re primarily interested in the metal it’s not ideal as the resale price will be lower.

Art bars are often released to commemorate special occasions, such as the Olympic games, and may be finished to a very high standard. This adds significantly to the premium and if you’re interested in the value of the metal art bars are unlikely to be a good investment even if they’re investment grade silver. If you’re offered damaged bars, or ones in a design which proved unpopular, at close to spot price they may be worth considering, but in general it’s best to stick with bullion bars. Even these aren’t all the same. Several major mints produce distinctive designs, such as PAMP’s popular Fortuna style, and bars from some mints carry a larger premium – up to $30 for a 100oz bar. Some investors have a preference for certain mints but if this isn’t important to you it’s possible to save even more.

Silver bullion bars are attractive because they’re more affordable than gold, and because many experts believe silver is undervalued right now. Only around 5 per cent of available silver is currently in circulation and demand for it is consistently high, especially in the electronics and jewelry sectors, so it has good potential to gain value in the medium to long term. A stock of silver, built around large bars for cost effectiveness with a selection of smaller sizes to allow small sales when necessary, is an excellent way to reap the benefits of precious metal trading.