If you're thinking about investing in precious metals, silver bars are a great option. They're tangible assets that can play an important role in protecting or improving your wealth. Also, they offer certain benefits over other forms of silver investments. Learn more about silver bars to determine if they're a suitable investment option for you.
What Is a Silver Bar?
A silver bar refers to a flat and rectangular piece of silver purchased for investment or wealth protection. Produced at a private or government mint, a silver bar is usually 99.9% pure or purer. It comes in a wide range of weights to suit different types of buyers. Most retail silver collectors prefer 1-ounce, 5-ounce, 10-ounce or 100-ounce bars, while banks and exchanges usually buy 1,000-ounce bars [1].
If it's made or sold at a reputable refinery or dealer, a silver bar typically has a stamp on it. This stamp includes information such as the name of the refinery or dealer, content, purity, weight and a serial number.
How Much Is a Silver Bar Worth?
The value of a silver bar is based on the current spot price of silver and a premium mark-up. The spot price of silver refers to the price at which silver is currently trading on the market. Make sure you check the spot price before you buy any silver bars. This figure changes frequently, sometimes a few times a day.
A silver bar typically comes with a premium mark-up of 10%. The mark-up may vary depending on the size of the bar and whether it's an art bar with an image stamped on it or a plain bar that bears only the refinery's stamp.
Why Should You Buy a Silver Bar?
Silver bars are one of the most preferred forms of silver investments for the following reasons:
- They're tangible money: Unlike silver bars, financial products like cash, stocks and bonds are essentially digital promissory notes. As such, they're prone to depreciation as a result of actions like printing money. Similar to other types of commodities, silver bars are also vulnerable to market fluctuations, but they won't crash completely because they have real, inherent value.
- They're less expensive than silver coins: Compared to silver coins, silver bars require less time and effort to produce. Since they're mostly poured or cast, they're more cost-effective to produce than coins, which need minting or striking. As a result, silver bars generally have a lower mark-up than silver coins [2].
- They offer high returns: Due to increasingly limited supply, silver has been seeing growth in its value recently. In early August 2020, the precious metal reached $29 per ounce, which was a seven-year high [3].
- They're easier to store than coins: Silver bars take up less storage space than silver coins because they stack easily and don't need packaging. Therefore, they can help you save money if you have to pay for storage.
What Should You Look for When Buying a Silver Bar?
Selecting the right silver bars to buy can be challenging, considering there are so many options available. Take the following factors into consideration to make the right choice:
- Size: Typically, you'll pay a lower premium when you purchase larger bars. Nevertheless, you can also buy smaller bars in a large quantity to avoid a high premium.
- Mint: The mint where the silver bars are made can also have an impact on their premiums. Bars produced at recognized mints come with slightly higher prices, but they also allow you to receive top-dollar price bids when it comes time to sell them.
- Stamp: As mentioned earlier, silver bars from reputable mints have a stamp showing their place of origin, weight and purity. It's recommended that you avoid buying bars that don't display such information.
- Price: Getting a good deal on silver bars is easy if you know the spot price of silver. If a dealer prices its silver bars above the current spot price and a reasonable premium mark-up, you should look elsewhere.
What Are Some of the Special Terms About Silver Bars You Need to Know?
It's essential to understand certain terms that are commonly used among sellers and buyers of silver bars so that you can avoid confusion that may cause you to make the wrong buying decision. Some of these terms include:
- Assay: This is a test conducted to determine the purity and quality of a silver bar. It's a guarantee from the assayer that the bar contains the specified amount and purity of silver.
- Buy/sell spread: This refers to the difference between a particular dealer's buying price and selling price for a silver bar. Ideally, the spread should be kept as low as possible.
- Divisibility: This is the ease of piecing out or distributing the fixed weight of silver bars. For example, one 5-ounce silver bar is less divisible than five 1-ounce silvers bars.
- Gold-silver ratio: This ratio is the quantity of silver you can acquire in exchange for 1 ounce of gold. It is based on the current spot prices of silver and gold. For instance, with a gold-silver ratio of 50, you can get 50 ounces of silver with just 1 ounce of gold.
- Junk silver: A silver product with a silver content of less than 90% is called junk silver. Usually, such a product contains 30% to 90% silver.
- Liquidity: This is the ease at which a silver bar is bought or sold. For instance, 1-ounce silver bars are highly liquid because there's a large active base of buyers and sellers for them.
- Spot price: This refers to the live, current price of silver, which results from the latest trades on futures and over-the-counter markets.
Buying silver bars is a great way to diversify your investments and secure your wealth. As the price of silver continues to rise, you can find many opportunities to sell your silver bars at a higher price to make a profit.
Article Sources:
1. Demonocracy. 'Silver – Visualized in Bullion Bars,' https://demonocracy.info/infographics/world/silver/silver.html. Accessed September 20, 2020.
2. U.S. News & World Report. 'How to Invest in Silver,' https://money.usnews.com/investing/investing-101/articles/how-to-invest-in-silver. Accessed September 20, 2020.
3. CNBC. 'As silver trades near seven-year highs, here's why investors continue to pile in,' https://www.cnbc.com/2020/08/14/why-investors-are-piling-into-silver.html. Accessed September 20, 2020.
