Gold or silver? Risk, costs and Danish VAT explained

The most fundamental difference between gold and silver lies in what drives demand. The World Gold Council reports that investment demand and central bank buying make up a very large share of annual gold demand, while industrial use of gold, primarily in electronics, accounts for only a smaller portion. Gold is used extensively as a financial asset: a reserve held by central banks, investment funds and private investors, rather than a commodity primarily consumed in manufacturing.

Silver has a markedly different profile. According to the Silver Institute's World Silver Survey, industrial demand in 2025 amounted to over 657 million troy ounces, a significant share of total global silver demand of around 1.13 billion troy ounces. Silver is used in electrical components, circuit boards, solar cells and a wide range of other industrial applications, because it has the highest electrical conductivity of any metal. This means the silver price is more exposed than the gold price to the state of global industrial activity and to specific technology trends such as the growth of solar energy.

The silver market is considerably smaller than the gold market in total market value, even though far more ounces of silver than gold are produced each year. A smaller overall market size combined with a large industrial demand component means the silver price has historically swung more than the gold price, both upward and downward. In its analysis of silver price drivers, the Silver Institute notes that silver is affected by many of the same factors as gold, including the dollar, interest rates and inflation, but that the effect is often amplified because of the market's smaller size and liquidity.

This amplified volatility means silver can appeal to investors seeking potentially larger price movements, but it also carries a higher risk of significant losses in a short period. It is important to understand that an allocation to silver typically requires a higher risk tolerance than a comparable allocation to gold, and that single-day price swings can be considerably larger in silver than in gold.

The ratio between the gold price and the silver price, often called the gold-silver ratio, indicates how many ounces of silver are needed to equal the value of one ounce of gold. In its market analysis, the Silver Institute identifies the gold price as one of the exogenous factors that has historically influenced the silver price, because the two metals tend to move in the same broad direction, albeit with different magnitude.

The ratio is used by some market participants as an indicator of whether silver is relatively cheap or expensive compared with gold at a given point in time, but it is important to stress that the ratio is not a guarantee of future price movements. It simply reflects a historical relationship between two markets that are each driven by their own specific supply and demand conditions, and it should be regarded as one of several analytical tools rather than a standalone trading signal.

Gold is largely mined as the primary product of a mining operation, while a significant portion of the world's silver production comes as a by-product of mining for other metals such as lead, zinc and copper. This means silver supply is less directly governed by the silver price itself, because mining often continues regardless of the silver price level, as long as the primary metal remains profitable to extract.

The Silver Institute's World Silver Survey has documented that the global silver market has experienced a supply-demand deficit for several consecutive years, which has put pressure on above-ground silver inventories. The gold market has not historically experienced comparable persistent deficits to the same degree, partly because a very large share of all gold ever mined still exists as above-ground stock in the form of bars, coins and jewellery that can be recirculated if the price rises sufficiently.

Because silver has a lower price per unit of weight than gold, a given investment sum in silver occupies markedly more space and weight than the same sum invested in gold. An investment of a certain amount in silver can therefore require considerably more space for secure storage, whether in a safe deposit box or a home safe, compared with the same amount invested in gold. This practical factor is worth considering before choosing between the two metals or splitting a holding between them.

Transport costs, insurance premiums and any custody fees can therefore represent a relatively larger share of the overall cost of a silver holding than a gold holding, because such costs are often tied to weight and volume rather than value alone. This is a practical but often overlooked factor that should be part of the comparison between the two metals as part of a physical holding.

One of the most concrete and practically significant differences between gold and silver in Denmark is the VAT treatment. Under Danish VAT law, investment gold is exempt from VAT. This applies to gold in the form of a bar or wafer with a weight above 1 gram and a fineness of at least 995 thousandths accepted by the gold markets, and to gold coins with a fineness of at least 900 thousandths, minted after the year 1800, that are or have been legal tender in their country of origin and are not normally sold at more than 80 percent above the market value of their gold content.

Silver, by contrast, is not covered by any equivalent VAT exemption scheme in Denmark. Purchases of silver bars and coins for investment purposes are subject to standard VAT under the general rules, regardless of the silver's purity. In practice, this means the upfront VAT-related cost of acquiring a given value in silver is markedly higher than acquiring the same value in VAT-exempt investment gold, a central factor to weigh when comparing the two metals as part of a Danish portfolio.

Beyond VAT at the point of purchase, it is relevant to understand the tax treatment that applies when you eventually sell your gold or silver. The tax assessment of a gain or loss on the sale of physical precious metals depends on the specific circumstances of the individual investor, including whether the metal was acquired as a private item or as part of a more systematic investment activity. The rules can differ in practice between gold and silver, because their legal status as an investment item versus a commodity can diverge.

Because the specific tax treatment depends on individual circumstances, it is advisable to seek guidance from the relevant national tax authority or an accountant before making significant investments in physical gold or silver. Clarifying this in advance can prevent surprises when the holding is later sold or realised, and it gives a more accurate picture of total return after tax and VAT.

Because gold is largely driven by investment and safe-haven demand, it has historically performed relatively well during periods of economic uncertainty and financial turmoil, when investors seek assets outside the conventional financial system. Silver, by contrast, has a dual role: the metal can also benefit from the same safe-haven demand, but because a large share of its demand comes from industry, an economic slowdown can simultaneously dampen industrial demand and pull in the opposite direction.

During periods of strong global economic growth, however, silver can benefit from increased industrial activity, faster adoption of solar energy and general optimism in commodity markets, which in some periods has contributed to silver outperforming gold. This dual character makes silver a more complex asset to assess than gold, because the analysis must account for both financial drivers and industrial cycle conditions at the same time.