Tuesday, January 20, 2009

Buy Silver Futures

Sometimes it can be tempting to buy silver futures.

Silver futures are basically betting on what you think silver is going to be worth at sometime in the future. The bet is that the value of silver will have either increased or decreased by a specific amount on a certain date in the future.

This is a precarious issue as the actual value of silver is different to the ‘spot price’ of silver. The silver futures market is reliant on the movement of the spot price of silver rather than the actual value of physical silver which tends to be very stable and on a rising trend.

Physical silver is subject to simple supply and demand and perceived value resulting in a steady rise of the value, whereas the spot price of silver is subject to many other, often hidden, influences including short selling of silver.

Silver coins and bars, on the other hand, have been used and collected by man over many years. To buy silver futures can result in a loss if a wrong call is made but the purchase and ownership of actual silver guarantees that you will have the value of the silver all the time you actually own the silver coins or bars.

If you check the dealers and such places as eBay you will see that the value of silver bullion is on the rise. Investing in early silver coins means that one also has the added bonus of the increase in the value of the coins due to rarity and other factors such as aesthetic appeal and demand for the coins.

An additional important point for some investors, especially when buying large quantities of silver, is that buying and holding actual silver as distinct to ‘certificates’ is the tax considerations.

A certificate of silver as in stocks, shares options or futures may incur some tax considerations. This may also apply to silver ingots which are considered an investment commodity. However silver coins have a face value assigned to them and are classed as legal tender and therefore have no tax issues.
Also the smaller bars of silver generally do not incur any tax except in the UK where some may incur VAT at the point of purchase.

This can be important when buying and selling rare coins that increase in value during the time you hold them.

It is far better therefore to buy actual silver coins and rounds and even silver bars than to buy silver futures.

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