Beyond Gold: Precious Metal Investment Opportunities

It is worth considering investment opportunities in precious metals beyond gold. Silver, for example, has a history spanning millennia and plays a more significant role in industrial applications. In this article, we help those considering silver, platinum, or palladium alongside gold.

Goldtresor Team

23 January 2020 · 5 min read

Beyond Gold: Precious Metal Investment Opportunities

It is worth considering investment opportunities in precious metals beyond gold. Silver, for example, has a history spanning millennia similar to gold's, and its industrial applications are considerably more significant. Beyond gold, other precious metals are also capable of beating inflation and serving as a safe haven within a savings portfolio.

In this article, we aim to assist those who, alongside gold, are also considering the purchase of other precious metals such as silver, platinum, or palladium.

SILVER AND ITS COMPANIONS: THE FULL PRECIOUS METALS SERVICE PALETTE

The share of silver held for investment purposes has grown significantly over the past 15 years: whereas in the early 2000s less than 10% of silver demand was investment-driven, today that figure stands at around 25%.

Not only investment gold, but other precious metals too can be purchased in person at a gold dealer's shop or through their online store.

What exactly falls within the scope of precious metals services? These include: the buying and selling of gold, silver, platinum, and palladium coins and bars; value-insured custody and storage of precious metals; gold account and other precious metals account management services; and regular gold, silver, platinum, and palladium savings programmes.

WHATEVER YOU INVEST IN: SECURITY COMES FIRST!

Like gold investors, those investing in other precious metals also want to be certain they are always receiving goods of the appropriate quality. A precious metals dealer's premises should ideally be accessible and secure, and personal data must under no circumstances fall into unauthorised hands. It is also important to the buyer that the dealer remains accessible when they wish to liquidate their investment.

In the case of custody services and precious metals savings structures, further security considerations come to the fore: the vault service providers used by the dealer must be well-known and respected within the precious metals storage sector. It is equally important that internal policies and procedures adequately govern who may access the precious metals inventory and under what conditions.

Finally, it is also essential that the precious metals dealer's software and data are fully protected to prevent data loss. The World Gold Council has recently established standards for online gold dealers comparable to banking requirements. This is particularly important for those precious metals service providers who also offer precious metals account management.

WHERE DO WE STORE SILVER, PLATINUM, OR PALLADIUM?

For VAT-liable precious metals, storage in a customs-free zone is the most common arrangement. London is the largest European centre for this. The advantage of customs-free zone storage is that customs duties and VAT obligations do not arise as long as the goods have not entered the territory of the relevant country or the European Union.

The precious metals dealer opens an account with a vault service provider that also offers customs-free zone storage. The dealer stores VAT-liable precious metals (silver, platinum, palladium) belonging to its clients in the value-insured vault of the vault service provider within the customs-free zone. If the goods (silver bars and coins, platinum bars and coins, palladium bars and coins) are removed from the customs-free zone at the client's request, customs clearance must be completed and VAT paid. Using the silver bars, platinum bars, and palladium bars stored in the customs-free zone as backing, the precious metals dealer can maintain a physical silver account, platinum account, or palladium account for clients, in the same way as a gold account.

WHEN IS VAT PAYABLE ON SILVER, PLATINUM, OR PALLADIUM STORED IN A CUSTOMS-FREE ZONE?

VAT is payable on VAT-liable precious metals (silver, platinum, palladium) stored in a customs-free zone only when the precious metals inventory is removed from that zone. Customs clearance can take place in any EU member state. In many cases, precious metals dealers engage the services of a customs agent. If the dealer holds a tax number in the country of entry, they can sell at the local VAT rate; however, if the goods are dispatched by distance selling to another member state, the VAT rate of the receiving country must be applied. This provision, however, only applies if the dealer has already exceeded the shipping threshold between the two countries within that year.

WHAT IS MARGIN VAT AND WHICH SILVER PRODUCTS CAN BE PURCHASED UNDER THE MARGIN SCHEME?

If a private investor wishes to hold their silver investment in their own hands, the best option may be to purchase silver coins subject to margin VAT.

The margin scheme, or margin taxation, applies when a precious metals dealer registered with the Hungarian tax authority (NAV) pays VAT only on the margin between the purchase price and the selling price. As a result, a private buyer pays approximately 2 to 3% VAT embedded in the purchase price rather than the full 27% VAT. From this perspective, the Vienna Philharmonic, Kangaroo, and Maple Leaf 1-ounce silver coins are the relevant options. Although their minting costs are considerably higher than those of silver bars, a private buyer who purchases margin-scheme silver coins rather than silver bars can be up to 10 to 14% better off, obtaining more silver for the same amount of money.

Businesses entitled to reclaim VAT are better advised to invest in silver bars, as their production costs are lower than those of silver coins. In such cases, however, the investor should expect the precious metals dealer to apply a more rigorous client due diligence process, since a business partner reclaiming VAT needs to be more thoroughly vetted than a typical private client.

For platinum and palladium, the low volumes involved mean that opportunities to purchase investment coins under the margin scheme arise only rarely. For private individuals, the most favourable investment is therefore the purchase of platinum or palladium bars stored in a customs-free zone, which is available to clients who choose the Goldtresor Premium account package.

For VAT-reclaiming businesses, it is worth considering the purchase of physical platinum or palladium bars and coins.

Registration and account opening are free and carry no obligation to make a deposit.

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