Tips for Buying Silver in Switzerland

Silver may not be as popular as gold, but it is the most widely-used alternative for precious metal investments. Buying physical silver remains one of the most popular ways to invest in silver. In this guide, moneyland.ch provides useful information and tips for buying silver bullion.

1. Buy bigger bars

If you want to buy silver at the best price possible, then you should invest in larger bars rather than smaller ones. The rule of thumb is that the heavier the bar or coin is, the smaller the price markup above the actual material value is. However, you should note that holding silver in multiple smaller units gives you more flexibility compared to holding very large bars. The reason is that you have the option of selling smaller amounts of silver as required, rather than having to sell a big amount all at once.

The relation between the sizes of bars and the markups you pay are shown in Table 1. If you want to buy one kilogram of silver, you will pay around 20 percent less by buying a 1-kilogram bar than you would if you bought ten 100-gramm bars.

Table 1: Prices for different weight denominations compared

Prices for LBMA-certified silver bars from Pro Aurum (including the 7.7 percent value-added tax) as per August 16, 2023.

2. Buy bars instead of coins

Compared to one-ounce gold coins, one-ounce silver coins play a somewhat less significant role. The reason for that is the lower material value of silver. One ounce of silver currently costs over 80 times less than the same amount of gold. That said, there are no general disadvantages to buying silver coins, as long as you buy them from a trustworthy dealer.

Silver bars are usually cheaper than silver coins. In the example in Table 2, silver bars are around four percent cheaper than the two investment coins.

Table 2: Prices for one-kilogram silver bars and coins compared

Prices for LBMA-certified silver bars and coins from Pro Aurum (including the 7.7-percent value-added tax) as per August 17, 2023.

Unless you collect rare coins, you should always prioritize widely-used investment coins. These coins are easy to buy and sell, so you can quickly liquidate your investment as needed. Additionally, widely-circulated coins have lower price markups over the silver price than less common coins. Examples of widely-circulated silver investment coins include:

• American Eagle
• Noah’s Ark
• Britannia
• China Panda
• Koala
• Kookaburra
• Lunar
• Maple Leaf
• Vienna Philharmonic

3. Pay attention to LBMA certification

If you want to get an investment-grade asset for your money, you should pay attention to producer certifications when buying silver. One of the most important certifications is the Good Delivery stamp from the London Bullion Market Association (LBMA), which is considered the highest certification and guarantees certain ethical and ecological standards. It also guarantees that you can sell your silver to dealers and banks. Other certifications, like Fairtrade, can also be beneficial.

4. Compare prices

Silver is sold by numerous Swiss precious metal dealers and Swiss banks, so price differences are more or less guaranteed. That is why you should compare prices across multiple dealers, instead of simply buying silver at your bank. Doing that can greatly reduce your investment costs. The comparison platform Gold.ch lets you compare prices across many large Swiss dealers. The downside is that banks are not included in the comparison.

Table 3: Differences in markups between dealers

Prices for LBMA-certified silver bars, including value-added tax, as per August 16, 2023. The LBMA silver price is used for the silver spot price. The LBMA silver price is fixed once a day and is based on the price of one fine ounce of silver. The LBMA is the world’s largest exchange for physical silver, in terms of trade volume.

5. Only buy from reputable dealers

Fraudulent activity exists in the precious metal market as well. You should exercise particular caution when buying silver online. Before you buy silver from private individuals, make sure to first get it certified by an accredited expert.

It is not always easy to determine how trustworthy a dealer is, but clarifying the following points can help.

• Does the dealer only offer bars and coins from certified mints or refineries?
• Are there any negative customer reviews or warnings from consumer protection organizations?
• How is the dealer’s company registered, and in which country is it legally domiciled?
• How long has the company been in business?

If you want to order silver bars or coins and have them delivered to you, then you should check the exact terms and conditions:

• When will the goods be delivered?
• How high are the shipping costs?
• Who is liable in the event of complications like damage or theft?

6. Factor in value-added tax

Gold bullion is considered a store of value, and is not subject to Swiss value-added tax (VAT). But other precious metals, including silver, are classified as raw materials. As such, physical silver is subject to the current Swiss VAT of 7.7 percent. The dealer adds this tax to the net price you pay.

If a dealer’s net price for a 1-kilogram silver bar is 700 francs, you will pay an additional 53.90 francs for VAT. You should account for this when calculating your investment costs and potential returns. Alternatively, you can buy silver which is held in a Swiss bonded warehouse. In that case, you do not pay VAT on the silver as long as it remains in the bonded warehouse, but you have to pay storage fees.

7. Store your silver correctly

Currently, a fine ounce of silver is more than 80 times cheaper than a fine ounce of gold. That means you need much more storage space to store the same value in silver bullion than in gold bullion. That makes having adequate storage space even more important when you invest in silver. Because silver takes up a lot of space, storing it at home in a safe is not possible for many investors. Bonded warehouses provide an alternative to storing silver in a bank safe deposit box, and have an advantage in that you do not pay VAT.

But using bonded warehouses generates costs. You typically pay a storage fee equal to a percentage of the value of your assets. Additionally, many bonded warehouses require you to hold a minimum of several thousand francs worth of assets. If you hold 20,000 francs worth of silver in a bonded warehouse with an annual storage fee of 1 percent per year, your storage costs will be 200 francs per year. These costs should not be underestimated.

But storing silver in a bank safe deposit box or in a safe at home also generates costs. The contents of bank safe deposit boxes normally are not insured. Before storing silver at home, you should understand that household insurance only covers cash equivalents, including precious metal bullion, up to low limits of between 1000 and 5000 francs. Silver stored in a bonded warehouse, on the other hand, is normally insured against fire, burglary, and robbery.

8. Be prepared for price fluctuations

Compared to gold, demand for silver for different industrial purposes, such as semiconductors and batteries, is somewhat broader. The result is that the silver market is particularly quick to react to economic fluctuations. You should understand and be prepared for this volatility. Holding investments over long terms is even more important when investing in silver. Between December 1999, and August 2023, the price of silver grew by more than 300 percent – from around 5 US dollars per fine ounce to around 22 US dollars per ounce. However, the silver price also fell drastically over specific years within that time frame. In 2013, for example, the price of a silver fine ounce fell from 30 US dollars down to 20 US dollars.

Historically, volatility in the silver price has also been higher than volatility in the gold price. One reason for this, in addition to the cyclical industrial demand, is that the silver market is smaller.

9. Understand the advantages of physical silver

The biggest advantage of investing in physical silver is that you are the actual owner of the silver, and can access it freely. You generally are not dependent on a bank or stock broker, and you are not exposed to issuer risk. Those benefits are particularly interesting for investors with exceptionally low risk tolerance. Another advantage compared to other silver investment options is that holding physical silver does not generate brokerage and custody fees or investment product costs.

10. Understand the disadvantages of physical silver

Buying and holding physical silver requires effort and also generates its own costs. The VAT you pay (currently 7.7 percent) is a cost that adversely affects your investment returns.  

Using a bonded warehouse lets you avoid the VAT, but you should not underestimate the storage fees. Additionally, storing silver normally requires a lot of space. Compared to gold, you have to buy much larger volumes of silver to achieve the same value.

Physical silver does not yield interest or dividends, so the only way to profit from your investment is through possible increases in your silver’s value.

More on this topic:
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How to invest in silver: The investment options explained
Tips for buying gold in Switzerland