Investment in Silver Bullion Bars
Silver Bars: Investment Basics – How, What and Where
Why Invest in Silver Bullion Bars?
If you’ve made the decision to invest in silver, why would you choose to buy silver bullion bars over bullion coins or rounds?
A key factor in the decision-making process is no doubt price. Larger silver bullion bars will generally have a lower premium than bullion coins, especially when it comes to cast (poured) bars as these have the simplest manufacturing process out of all bullion products.
Bars are truly universal and can be bought and sold at close to premium anywhere in the world. With the obvious exception of 1000oz good delivery bars, silver bars are compact, easy to carry and store, easy to hide if required and at the end of the day there’s something deeply satisfying about holding a weighty silver bar in your hand.
Bullion bars are available in the widest range of sizes, from fractions of an ounce all the way up to giant good delivery bars – with larger bars offering some of the best value silver available to investors.
Bars are easy to stack and efficient to store without the “wasted” space associated with circular coins and rounds – and lets face it when we think of the word bullion, most of us picture bars.
Cast or Minted?
When buying silver bullion bars there’s a choice between cast and minted – and different buyers will have a preference for one over the other.
Where cast bars are simply molten metal poured into a mold which is then struck with a makers mark and other legal details, minted bars are made in a multi-step process:
First carefully measured blanks are made from a large sheet of silver, or cut from a long thin extruded or cast bar. These blanks are then fed into a stamping or pressing machine, forcing the blank between two negatively engraved formers which imprint the blank with a pattern, edging, and a display of fineness and makers mark. Patterns can be simple or ornate and flat areas typically have a polished smooth appearance. Bar serial numbers are either engraved or stamped after minting.
Some minted bars can be truly beautiful featuring ornate designs with UK Britannia bars (pictured) and Swiss PAMP Fortunas carrying two of the most elaborate engravings – verging on collector quality.
Ornate bars, especially from such prestigious mints will normally carry a higher premium in comparison to plain cast generic silver bars from workaday refiners.
Although the purpose of investing is usually buying as low as possible, premium manufacturers bars will typically be easier to resell in any market than generic and command a higher price due to their desirability, often higher than spot. Dealers will seldom offer anything at spot or higher for generic bars.
Home “stackers” who gradually buy whatever bar is available at the lowest price will quickly develop a wide collection of varied designs and sizes, something which can make the investment process more fun and almost addictive – as hundreds of YouTube videos will attest to.
Secondary market (pre-owned) bars are as can be expected typically closer to spot than new bars offering investors some significant savings when buying at quantity.
A Word on Damage
Scratches and scuffs are inevitable and on cast bars these can be significant without reducing values – and in fact there are buyers who love collecting “vintage” bars for the patina they may carry.
Genuinely vintage silver bars can go for significantly higher premium than modern silver, with tarnish patterns and blooms all adding to the value. Never polish a vintage bar!
For minted bars on the other hand, damage can detract from value, because damage spoils the appearance in quite an obvious way, so even bars from premium manufacturers will only ever resell to dealers below spot.
Of course as an investor, rather than a collector, all you’re really interested in is silver content – and if you buy direct from dealers and vault with them – silver bars will be new and can be resold to the dealer at any point almost instantaneously. Because the dealer knows the bars and their full secure chain of custody they will often pay more at buyback than any other dealer and this is one of the main benefits of dealer vaulting.
Buying silver bullion bars is silver investing at it’s most basic – a simple and relatively affordable process where you can own a safe and solid investment at the lowest possible cost.
Is Investing in Silver Bullion a Good Idea?
As we’ve established, silver bullion bars are easy to buy, easy to sell and will typically offer the lowest premium out of all weight-for-weight bullion products. Their ease of stacking and efficient footprint can make vaulting costs lower for bars than for coins, especially at higher dollar values.
Given silver’s use as a store of value and a protector of wealth, it makes sense to take the most efficient and cost effective route to that investment – silver bars.
In our book that makes investing in silver bullion a very good idea.
Are there any negatives to silver bars?
In some jurisdictions silver coins and more specifically legal tender silver coins can be exempt from Capital Gains Tax. This means when silver rises significantly in value and you come to resell you will avoid a tax bill. Not so with silver bars (there are exceptions – but legal tender bullion bars are uncommon)
Although capital gains tax exempt coins can save you significant sums when you make a large gain on resale, their initial purchase price can be 10-15% higher than an equivalent generic bar, so you need to weigh up savings at purchase versus anticipated savings at sale.
If silver investing carries capital gains tax advantages where you line, this is something to bear in mind.
Are Silver Bars a Safe Investment?
Silver is regarded as a safe if volatile investment and silver bars are one of the most widely traded and universally accepted forms of physical silver – therefore silver bars are definitely safe.
But that’s not to say all silver bars are as they seem.
Fake silver bars are on the rise. Although major criminals are much less likely to concentrate on making perfect replicas of silver bars than gold, given material costs are the same as for fake gold and yet resale prices are comparatively lower – that’s not to say it’s not happening.
There are a growing number of fake silver bars coming onto the market and catching investors out.
While most are laughably obvious Chinese copies of popular silver bars like PAMP Suisse, Scotiabank and Royal Canadian Mint – there are others which can fool even the most hardened investor.
The biggest risk in silver fakes is at the 50oz and 100oz end of the market. These ultra-realistic bars usually start off as genuine bars, which then have their core drilled out and the space filled with lead or a lead alloy. This filler has a similar weight to silver and so these can be very convincing both in terms of look, feel and weight.
Good fakes like this are only really capable of being detected with a professional XRF or x-ray scanner, or by destructive cutting/drilling, although specialists may spot signs of the repair plug where drilling originally occurred.
What to Look Out For
Be especially wary of good deals. Silver bars seldom sell at spot let alone below spot – so unless a well known dealer is having a loss-leading offer to bring in new customers, beware.
Because silver is in such demand, even a seller in a hurry will be able to get close to spot at any number of coin or pawn shops.
If a silver bar is available on sale to the public at more than 5% below silver’s market price then it’s in all likelihood a fake or a fraud
To be absolutely sure that your silver bars are a good investment it pays to only buy from a reputable source like Goldco – choose a major precious metals dealer, buy direct from the refiner or through a professional silver investment company.
It’s not worth taking the chance to do otherwise.
How Much do Silver Bars Cost?
Silver bars are a special investment commodity and in order to be treated in a tax advantaged way they need to be priced close to the spot price of silver.
In reality legitimate silver bars will always sell for more than spot due to the cost of mining, refining, minting, assay, certification, packaging, storage, insurance and transportation plus a small profit for the wholesaler. Once at the retailer or bullion broker there needs to be an allowance made for business and marketing expenses and another small profit.
These built in costs and expenses per bar are more or less the same for large bars as they are for small and so when investing in silver bullion bars you will typically find the premiums on small bars are higher in relation to their unit price than on large bars. It’s basic math.
Further price differences can be found between the silver bars from different mints with some of the most respected mints carrying a higher premium on a like for like basis than those from smaller, less well known mints or on generic unbranded bars.
A 1kg bar from the UK’s Royal Mint is going to cost more than one from say Sunshine Minting in the US or a refinery like the Istanbul Gold Refinery (IGR).
Finally the costs in mining, producing and marketing a silver bar are nearly the same as those for a gold bar. In relation to the price of the metal this can be considerable, especially for smaller bars. This means silver premiums can be significantly higher than gold.
How does this translate into the real world?
The overall premiums on silver bullion bars can range from as little as 2.0% over spot for giant 1000oz good delivery bars all the way up to 500% on small 5g bars.
Dealer premiums can often be reduced further by ordering multiples of an item allowing the dealer to share some of their wholesale discount with you due to economies of scale.
On the subject of premium brand and generic bars – premium branded bullion is typically easier to resell and can command a higher price than generic or unknown brand bars in the secondary market due to trust and the higher demand of known bars. If you are following the self-buy and home storage route, this is something to bear in mind for when it comes time to resell.
The following chart shows price premiums per bar size and across different brands from generic to premium – taken as an average price across 5 major dealers for comparison:
Average Premium By Bar Size for Branded, Generic and Bulk
| Bar Size | Premium Branded | Generic Bar | Bulk Buy |
|---|---|---|---|
| 5g | 622.0% | 506.7% | 225.2% |
| 10g | 310.2% | 197.1%: | 167.0% |
| 1/2oz | 165.1% | 98.9% | 83.6% |
| 1oz | 127.2% | 18.2% | 13.1% |
| 100g | 71.7% | 38.2% | 22.6% |
| 5oz | 66.1% | 18.3% | 13.1% |
| 250g | 58.6% | 40.3% | 23.9% |
| 10oz | 30.6% | 14.2% | 12.0% |
| 500g | 29.6% | 20.9% | 13.2% |
| 1kg (1000g) | 25.2% | 13.4% | 8.6% |
| 50oz | – | 10.0% | 4.5% |
| 100oz | 12.4% | 8.2% | 6.6% |
| 1000oz | – | 2.8% | 2.2% |
As can be seen buying silver bullion comes with a much wider premium range than gold.
Key takeaways:
- Fractional silver bars, especially from high-end brands should be considered as little more than novelties.
- Premium-branded bars often come at double the markup to generic.
- Bulk buying generic 1oz bars offers the lowest premiums across all smaller sizes, but still more than that of a single generic 50oz.
- For gold-like premiums, investors should look to 50oz, 100oz and 1000oz bars.
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What are Popular Silver Bar Sizes?
The most common sized bar for large scale bullion investment is the 1000oz good delivery bar. This is the silver bullion bar held by governments, national banks, institutional investors and the most wealthy.
Although offering the lowest premiums and the most concentrated form of wealth silver can offer, these are hardly practical for most investors and at nearly $20,000 per bar this makes selling your investment in smaller dollar increments far more difficult than you’d find with smaller sized bars.
For most investors there’s a preference for a range of more practical smaller bars – the choice of which varies from country to country.
In the US the most popular sizes bought and sold by investors are the 1oz, 5oz, 10oz and 50oz bullion bars, although the 1000g or Kilobar (32.15 troy ounces) is growing in popularity thanks to it’s low premium and international appeal especially by investors with at least some offshore presence.
European Investors more typically buy silver bars using the metric system (with an exception being the ever popular 1oz and 10oz bars) and the most commonly traded bars are 5kg (5000g), 1kg, 500g, 250g and 100g bars alongside the 1oz and 10oz.
China’s most popular silver bars are the kilobar and 5kg bar
The Middle East and India also prefer the kilobar and other larger metric sizes. Unlike gold, silver is no longer bought and sold in Tolas – with only vintage silver bars still being available in Tola-weighted sizes.
As can be seen the most universal bar, popular with silver investors across the world is the 1000g/ 1kg kilo bar packing a good 32.15 oz of fine silver into a small, highly portable and easily stored unit.
What are Popular Silver Bar Brands?
Much like bar sizes, silver bar brand popularity varies by country although most investors in the West will be aware of the major brands across the US, Canada and Europe. Some European brands tend to carry a higher premium in America due to shipping costs and their comparative rarity.
APMEX
APMEX, Inc., are based in Oklahoma City, Oklahoma, and are the world’s largest online retailer of precious metals, having sold over $10 billion in precious metals since being founded in 1999. As well as being a bullion dealer selling a wide range of branded bars, APMEX produce their own popular range of minted/struck silver bars in ½oz, 1oz, 5oz, 10oz, 25oz, 1kg, 50oz and 100oz weights at 0.999 fineness (99.9% pure silver).
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Is There Tax on Silver Bars?
The tax investors pay on silver bars depend on which state the bar is bought and stored in as each of the 50 states can set it’s own level of sales tax.
While some states are zero-rated on investment grade bullion, other states can charge up to 10%. This basic state-wide tax is in addition to any local county or city sales tax.
Some states will only tax bullion products under a certain value, others tax platinum and palladium but not not silver and gold
This gives some US precious dealers and metals investors a big advantage over others based on their location.
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Capital Gains Tax on Gold Bullion
In America the IRS considers bullion to be both a Capital Asset and a Collectible, so Capital Gains Tax (CGT) will be payable on any gains made when bullion is sold, and this is set at a maximum of 28% (collectibles).
In reality the actual rate paid will vary depending on a number of factors including the seller’s income and the length of time the assets have been held. To discuss specific CGT liabilities you should speak with a licensed accountant or tax specialist.
Can Silver Bars be held in an IRA?
The IRS now allows specific grades of investment bullion to be held in an IRA allowing for silver bullion to be bought in a highly tax-advantaged way.
As can be expected from the IRS there are strict rules governing what metals can be bought and where they should be stored which we cover in detail in our Silver IRA section.
Silver bars for IRA use must meet minimum fineness requirements and be manufactured by a NYMEX or COMEX-approved refiner/assayer and should be ISO9001 Certified. The minimum purity for silver inside of an IRA should be .999 fine (99.9% pure silver) or greater.
Examples of qualifying silver bars:
- Royal Canadian Mint .9999 fine bars
- Sunshine Mint .999+ fine bars
- Ohio Precious Metals .999+ fine bars
- Engelhard Hand Poured .999+ fine bars
- Golden State Mint ISO9001 .999+ fine bars
For more details on Silver IRAs including specific advantages, rules and regulations click here
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About Tim Schmidt
Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He's also a published author, and his views on investing have been featured in USA Today, Tech Times, The Huffington Post, Nasdaq, and many more.
