VAT – Nemesis of Euro zone silver investor
By silverbob On June 23rd, 2010With the Chancellor announcing a hike in VAT to 20% in the new year, this will make investing in physical silver bullion only for the really committed. The spread (the difference between buying a piece of bullion and selling the same piece to a dealer) is already very high for silver, and is now set to go further.
e.g. spot = £400/kg, dealer buys at 98% of spot £392, dealer is selling at approx £550 including mark ups (and about £80 vat) so the spread here is £550-£392 = £158 about 39% of the spot price!! So if you buy a kilo of silver today, just to get your investment back, the price is going to have to move up about 39%.
Now all that might seem like a good reason not to invest in silver! but over the last year silver has risen 38% and over the past 5 years it has risen 161% !!! (check out http://silverprice.org/silver-price-history.html) So even in the face of continued government onslaught, silver bullion has been, and in my opinion, will continue to be an excellent way to save and accrue wealth.
Here at W Y Argent we will continue to bang the drum against vat on silver, and do our bit to show silver is money, as it has been for about 5000 years.
When you see it on “paper” 39% does sound like a colossal amount for the silver spot to increase, but as Bullionben pointed out at the beginning of the year “Silver at the moment is still very low in comparison to where it should be.” and the fact that it has risen 38% in the last year alone is encouraging despite the new, extortionate, VAT which can easily scare off anybody who is considering either investing or using silver as an alternative to gold as a storage of wealth. This is exactly what they want, but in my opinion because silver is SO undervalued it is still an excellent long term investment opportunity. I think there is only so long this can go on for, especially since demand already exceeds supply and has done for quite a few years now. I believe that there is no other way for the price of silver to go but up, so get on the silver train while you still can I say!
SilverBull
You are right SilverBull, it is amazing that the price of silver is still very low, even though silver seems to be trickling in as dribs and drabs. That is a good piece of work Silverbob, informative and simple to grasp. I think this type of explanation helps people to realise the naughty government mark up on real money and why it still should not put them off exchanging paper for metal at such low prices.
It is quite something to see that if I carry one ounce of fine gold in my wallet, it takes up less space than £833.73 (AM London gold fix), that is, 41! £20 notes, 1 £10 note plus about an ounce and a half of some base metal floating about in the pouch. It would be interesting to see an ounce of fine silver have that type of presence within my wallet one day.
Press on silver soldiers!
Bullionben.