Storing silver: The advantages and disadvantages of various storage solutions
Summary of the facts and features of silver storage
Storing silver imposes certain demands and requires a lot of space
Investors often rely on silver bars or coins for asset protection and/or portfolio diversification. Compared to gold, white metal has many advantages, such as more varied products and low-cost, entry-level pricing. Yet its lower value density can prove disadvantageous: Investing lots of capital in silver demands plenty of storage space, which will soon exceed classic safe-deposit capacities. The alternative is individual storage in a Swiss duty-free warehouse – with no limits and potential VAT savings.
Duty-free warehouse facilities are offered by private companies such as OrSuisse Ltd, which specialise in the discreet storage of precious metals. OrSuisse negotiable warehouse receipts are a special feature which makes it even easier to trade physical silver investments. For example, they can be used even when the transaction involves no movement of goods. It is also advisable for any investor to compare the various options for storing silver securely in order to find the optimal storage solution for their own white metal holdings.
A comparison of gold and silver products
Because gold is the most dense precious metal on the market, it requires the purchase of significantly less product weight for any given value than an equivalent silver investment purchase. Gold products can thus easily be stored in a bank safe deposit box, even where larger values are involved. However, when purchasing higher-value silver items, investors will soon reach the storage capacity and weight limits of any safe deposit box system.
A quick look at the gold-silver ratio makes the reason for this very clear: This metric defines how the price of gold relates to the price of silver and indicates how many troy ounces of silver (at 31.103 grams each) are required to match the equivalent value of one ounce of gold. Experienced investors use this ratio to help them decide whether current market gold or silver purchase options are undervalued or overvalued, though this indicator represents just one component they consider within an overall investment decision.
Gold is also particularly attractive for many investors because, unlike jewelry products, purchases of pure investment gold bars or coins are exempt from VAT. However, silver and the other white industrial metals like platinum and palladium do not share this same advantage. Full VAT is charged upon white metal purchases – unless they are stored directly in a duty-free warehouse. Thus silver can also be stored inexpensively in this particular context. This background knowledge, together with a little more information about gold and silver, will help you to more easily assess the potential of these precious metals for your own portfolio.
Hoarding silver at home is risky and takes up space
Keeping silver within your own four walls would appear to be one of the easiest ways to hoard a silver investment. Yet storing silver at home involves many risks, and also comes with certain limitations. A sturdy safe must be purchased to ensure adequate theft protection, and will also require professional installation. These measures are necessary if you wish your household contents insurance to cover any loss of your investment. So setting up an investment in this context usually involves high acquisition, installation and follow-up costs. But even all this effort won’t be enough to meet the demands in every home situation.
Those who forget to invest in a spacious valuables safe will soon realise that standard furniture- or wall-mounted safes have a limited capacity. In addition, silver bars or coins take up a lot of space – 50 to 100 kilograms of silver, for example, can soon accumulate, and would be enough to completely fill a home safe.
Safe deposit boxes are not particularly suitable for silver storage
By using a bank safe deposit box, investors save themselves the trouble of installing a home safe. In many cases, such arrangements already meet the security standards which would be required for protection under a household contents insurance. Bank safe deposit boxes are suitable for storing all kinds of assets, including precious metals. However, it should be noted there has been an increase in break-ins at bank vaults in recent years, because their security systems often fail to meet modern standards.
However, regardless of whether you use a bank safe deposit box or choose a bank-independent safe deposit facility, storing investment silver in any safe deposit box is essentially disadvantageous. Not only are the costs comparatively high, there is also a maximum weight limit of around 24 kilograms – which is equivalent to a silver value of around 18,000 Swiss francs. So, if you wish to store investment silver above this limit, you will then need a larger safe deposit box, or a second unit, which usually renders this particular storage option uneconomic.
Silver stored in individual custody in a bank-independent facility
Arranging the segregated storage of valuables outside the banking system is much less problematic than the examples quoted above, because this option carries no capacity or weight restrictions. In addition to the classic domestic warehouses used for larger gold investments, duty-free warehouses (ZFL) in Switzerland (such as those operated by OrSuisse) are particularly suitable for storing investment silver and other white metal holdings. These arrangements also permit the duty-free storage of silver, with no minimum storage fee.
Duty-free warehouses, also known as transit- or interim storage facilities, can be used for the indefinite storage of all kinds of goods. They are located in highly secure buildings which are monitored by Swiss customs. A special feature of such arrangements is that such goods are not considered to have been imported into the country. Provided they remain inside the transit warehouse, goods will continue to remain exempt from customs duties and VAT. This makes ZFL warehousing a particularly attractive option for white or grey precious metals which would otherwise have been subject to VAT when purchased – thus a cost-effective way to store your silver. This same VAT concession also applies whenever silver investments are sold without movement of the goods. Statutory import tax is only due when goods are actually stored out, and thus deemed to be imported into Switzerland. Until this occurs, a ZFL allows you to buy silver ex-VAT.
Instead of standard collective storage, OrSuisse offers its clients individual storage of silver holdings in a duty-free warehouse. This arrangement means investors always retain full title to their original silver products. On retrieval, this ensures they will not just receive items of equivalent value, as is the usual practice under collective custody. Under individual (segregated) storage arrangements, bars are recorded by their serial numbers and coins are assigned seal numbers. This guarantees holdings are clearly assigned to each respective client. These details also form part of the custody agreement drawn up according to the Swiss Code of Obligations.
Silver storage with comprehensive insurance
Individual custody with OrSuisse has other advantages too. Although both bonded- and domestic warehouses provide high-security facilities up to contemporary standards, there is no such thing as 100% security. So in order to provide the necessary protection, even in the unlikely event of a break-in or an extreme weather event, all stored silver is fully insured, with a sum insured determined by the value of the precious metals stored.
This insurance applies, for example, in the event of a burglary or building damage caused by fire or the escape of water. In addition, natural damage caused by landslides, earthquakes or flood is also covered under the contract. To maintain essential client privacy, the insurance contract is concluded between the storage provider and the insurer, which means clients are fully covered but not named. This procedure guarantees client silver holdings remain ultra-secure.
Silver storage – using negotiable warehouse receipts as securities
Another feature of OrSuisse individual (segregated) silver storage is that investors receive tamper-proof storage documentation which acts as certified evidence that the designated amount of bars or coins have been deposited. In accordance with the Swiss Code of Obligations, these negotiable warehouse receipts are also recognised as securities. Thus, they can be used to secure loans or in connection with other forms of borrowing. Such warehouse receipts can also be sold to precious metal dealers or other investors without any requirement to move the deposited precious metals described in the receipt documentation. Transfers of ownership can be effected directly via the warehouse receipt, simply by completing one of the endorsement fields provided on the receipt.
Negotiable warehouse receipts also guarantee the ownership of the precious metals registered upon them, thus facilitating the release of stored goods to the owner of the document. These warehouse receipts can be used for VAT-free transfers of silver, platinum or palladium stored in a duty-free warehouse. The same documents can also be used for transfers of gold held in segregated storage within a domestic warehouse, as well as for any white precious metal holdings subject to VAT and stored in a similar location.
Summary of the facts and features of silver storage
- Today, silver investment is just as popular as gold. This white precious metal offers a broad range of products and cheaper starting prices.
- When compared with gold products, the lower value density of silver means it requires significantly more storage space. Thus storing silver can be quite challenging.
- Depending on the volume of silver to be stored, storage in a home safe or in a standard safe deposit box can be problematic.
- Bank safe deposit boxes are subject to weight limits which rule out the storage of larger quantities. Furthermore, storage fees are comparatively high and there are some security concerns.
- Alternatively, white metals can be securely held under individual (segregated) storage arrangements with no weight restrictions or minimum storage fees. Private providers like OrSuisse Ltd, for example, offer such facilities in Switzerland.
- Silver can be deposited in a duty-free warehouse at a lower cost. This kind of transit warehouse enables the storage of any quantity of white precious metals for an unlimited period, and also facilitates the ex-VAT purchase of investment silver.
- OrSuisse can offer bank-independent storage of silver in individual custody. Owners retain full title of their original silver deposits at all times.
- Clients receive negotiable warehouse receipts for their precious metal, issued in accordance with the Swiss Code of Obligations. This allows silver holdings to be sold or used as a security, without any physical movement of goods. OrSuisse negotiable warehouse receipts can also be easily transferred via a simple endorsement.