Is trading physical silver the same as investing in commodities? I say it’s more like a side hustle, but is it an awesome side hustle? Read on and find out!
Wait, what? Physical silver trading in the 21st century?!
Long John Silver ain’t got s*** on me!
I’m kidding. However, I can confirm that there is in fact a quite big market for bullion precious metals (such as physical silver) in the UK. You heard me: a reasonably significant portion of the UK population own and invest in physical gold and silver coins. It’s not just for pirates!
When you think about it, this makes absolute sense. Silver is quite a concentrated store of value, at around £20 an ounce (well, actually more, but that’ll come later). If you hold it, there’s no counterparty risk when you trade it for the other buyer, as they can see what the metal is, test it if they like, agree a value and hand it over without a middle man. You’d think that cash would be the same, but that’s not technically correct. A £10 note is a promise that the UK bank will award you a value of £10, a value which changes based on relative currency strengths and which isn’t actually backed by anything.
Seriously. Fiat cash – £, $, € etc. – isn’t actually backed by anything but trust in the state having value. By demanding taxes to be paid in £/$/€, the state can demand you use it and enforce its value, but there isn’t anything backing it up. There hasn’t been for some decades now. For that reason, silver afficionados and crypto fans will refer to cash as simply “fiat”.
Talk the Talk, silver tongue!
Physical silver fans call themselves several things, each being slightly different in their focus, but if you don’t learn the language you’re going to struggle with silver trading at all. Here’s some key terms:
- Silverbug – someone who likes buying silver. More of an American term, but a UK audience would probably recognise it. It’s a catch-all term.
- Stacker – someone that buys as much weight of silver/ gold/ platinum as close to spot as possible, aiming to raise a weighty stack of metal for retirement or the end of fiat as we know it.
- Collector – different to a stacker, a collector will look for nice pieces of bullion quality metal that will be more expensive than regular bullion but are rare or decorative. If all else fails, a collector’s item will be worth at least its precious metal content, but hopefully it will appreciate in value to be worth more than that.
- Trader – someone who buys low, sells high.
- Spot price – the globally accepted price of the metal on an international bullion exchange. Assuming that you had a lump of refined metal without any hallmarks, decorations, moulding/casting, it’s worth spot price. This moves by the way, like a share price.
- Paper silver – silver bought on a futures/ commodity exchange. You don’t see it or touch it, but your account says that you own it.
- Bullion – metal that’s refined to at least 90% purity. However, with silver bullion, less than 99% isn’t considered attractive
- Stirling silver/ 925 – 92.5% pure physical silver. Used to be what our money was based on, way back when.
- 999 fine (three nines fine) – 99.9% pure. Generally accepted as good by stackers and traders.
- 9999 fine (four nines fine) – 99.99% pure. Silver doesn’t really get purer than this, but in UK bullion metal trading it’s not really differentiated from 999 in terms of price.
- Brilliant Uncirculated/ Bullion Uncirculated – a coin that’s never been used as money.
- Premium – the difference between spot and the price you actually pay.
- Gold-Silver Ratio / GSR – the amount of silver units to buy one unit of gold.
The basics of buying physical silver in the uk
Phew! Got all that? Here’s a brief guide to how to actually buy and trade physical silver in the UK.
Where to buy physical silver in the UK
You’d think the cheapest place to buy bullion in Britain would be the Royal Mint, wouldn’t you? Unfortunately, this would be a rookie mistake that would see you paying high premiums… normally. At the time of writing, there’s been a dry up of physical silver available from supply, so actually the Royal Mint is surprisingly reasonably priced.
Historically, my favourite websites to buy the shiny metal have been from the EU. This is because silver is taxed at 20% VAT in the UK. Under EU rules, I was able to buy it from Germany where VAT was 5%, then have the same coins sent to my house for trading.
Reputable websites apart from the Royal Mint are Chards and Bullionbypost.co.uk. Usually, they’re both a little cheaper than the Mint, but we live in confusing times I guess!
There is another alternative: the silver community themselves. This brings me on to my next topic, which is where the adventure started to happen for me…
Engaging with the silverbugs
If you want to do a bit of silver trading, you need buyers. Silverbugs. You need to know where to find them and you need to be accepted by them.
Remember that I told you about silverbugs referring to cash as fiat? Well, here’s the thing: a lot of the silver buyers (especially the stackers) have a similar mindset to preppers. A lot of them don’t like fiat. They talk about it a lot, so I’m not offending any silverbugs by pointing this behaviour out, and I’m pretty sure many would vocally agree with me.
I figure that my word isn’t good enough, so here’s a video on YouTube from a prominent silverbug channel (Backyard Bullion in a joint broadcast with Yankee Stacking. They’re usually worth a look at if you’d like to know more) that explicitly talks about the “prepper mindset”. Scroll to about 18 minutes if you want to cut to the stacker-prepper bit.
One of the things you’ll notice is that you will rarely – if ever – see a face to go with a silver stacker’s name. Quite rightly, too. Some of the stackers especially store their silver at home and would obviously not want to make themselves a target for thieves.
The key takeaway point here is that silver trading is a relationship built on trust within a selective community, and community reputation matters. If you want to get into physical silver trading, you need to build and maintain a reputation within the silverbug and precious metals community, or no-one will trust you or your wares. It also means that you need to join in a community.
Where to do physical silver trading
It’s possible to simply buy silver cheap when spot prices are low and sell to a dealer later, but you’re usually best off selling silver privately when it becomes time to crystallise those shiny gains.
It’s possible to sell silver bullion on eBay, but eBay will take its cut and you might not be happy with the level of seller protection. For the most part, your best bet is to join a silver community.
I think that the biggest open community is probably the Silver Forum. Alternatively, there are two links below to one of the Facebook groups that I have used to buy and sell silver (and gold) through. [This image are also hyperlinks to the group page, click at your peril!]
How to sell silver
If you use a closed community, which is recommended, you’ll probably be able to command a much better price than a dealer like Chards will offer you. This is especially true if you’ve managed to pick out a piece that’s in high demand, as the collectors in the community will likely pay the high premium for this rare piece, well about the spot price.
However, you need to remember that these are communities built on trust. Most of the groups include the same people, and they will step in if you’re taking advantage with excessively high prices. Admins will step in if you violate group rules or look like you’re excessively profiteering. It isn’t a free market within a group, there are rules to follow.
Typically, a group will want you to take a photo of any goods you are selling, with your name and the date on the photo. They will want you to negotiate in the comments of a sales post, although the groups expect that you will sort the logistics out in direct messages. You can sell by auction or open offers if you like. Expect to provide references from within the group to vouch for you. This can be a problem when you’re new. I sold my first pieces at £1 less than market rate for each, to reflect the risk of sale. It seemed to go down well.
That’s actually all there is to it!
Pricing
Physical silver prices are made up of the spot price plus a premium. It’s possible to buy physical silver at spot price or lower, but it’s highly unlikely. The premium reflects the costs of refining it, moulding it (which is often important, as it makes it hard to counterfeit and easy to verify) and transporting it. Some rare pieces will also have a higher premium attached. Quite often pieces from the Royal Mint (such as the Britannia 1ozt coin, below, image from the Royal Mint) are sold at a slightly higher premium because UK denominated silver is capital gains tax exempt.
If you want to start silver trading, it’s best to monitor prices for a little while first. In my case, I bought in summer of 2020 when silver was dirt cheap, and I’m slowly selling now.
Yeah yeah, very nice – but is it an awesome side hustle?
Let’s put it to the test: is silver trading an awesome side hustle?
Factor 1: Enjoyment
I quite liked the research into different pieces of silver and the interaction with the silverbugs. YouTube was good here, as was the Silver Forum. Some of the silverbugs have an unusual grasp of personal finances but they’ve generally been a friendly bunch.
For the community vibes, I’m going to give this a sold 4 out of 5.
Factor 2: Variety
Again, like the Uber Eats side hustle, this is a whole different vibe to my normal desk job. I guess it’s computer based, so it’s probably a 3 out of 5.
Factor 3: Scalability
Bullion can be bought at bulk discounts, so there’s a bit of scalability in this hustle. On the whole though, there’s a limit to how much you can scale it without simply creating an online store, as you can only sell what you’ve bought.
I’m giving this a 2 out of 5.
Factor 4: New skills
I learned a fair bit about different tax regimes here, but on the whole it’s quite limited in terms of “skills”. I guess researching coins and market values helps, but effectively it’s selling by classified adverts and choosing the right timing.
I’m giving this a 2 out of 5.
Factor 5: Energy drain
I didn’t find physical silver trading particularly draining. There was a bit of effort to get to the post office after a sale and some negotiations, so it’s not perfect by any means, but that’s about it.
A solid 4 out of 5.
Overall scores
| Factor | Score |
|---|---|
| 1. Enjoyment | 4 |
| 2. Variety | 3 |
| 3. Scalability | 2 |
| 4. New skills | 2 |
| 5. Energy drain | 4 |
| Overall rating (mean) | 3 |
A respectable 3 out of 5. As with the Uber Eats side hustle, physical silver trading struggles with being scalable. It’s also pretty niche: learning to be a better silver trader will only help you in trading physical products based on supply and demand. Marketing is limited, a lot of it is out of your control.
Perhaps my other side hustles might score better!
