Is it better to invest in Gold or Silver - Gold Well Live
Is it better to invest in Gold or Silver
Investors who want to protect their assets may wonder is it better to invest in Gold or Silver to achieve this Investment objective. Both Gold and Silver have historically protected investors from currency depreciation, Inflation, recessions, and heightened political risks. Economic and political uncertainties will likely accelerate interest in assets like Gold and Silver.
Both assets produce similar benefits for your Portfolio, so it can be hard to identify the superior option. However, there are distinguishing factors to note when deciding whether Gold or Silver is the best choice for your Portfolio.
Table of Contents
- Common benefits of Gold and Silver
- Unique characteristics of Gold
- Unique characteristics of Silver
- Investor preference
- What is the best metal to invest in right now
Common benefits of Gold and Silver
Gold and Silver offer similar benefits to investors, and many investors choose to invest in Gold and Silver for some of the same reasons. Both products can be a solid addition to your Portfolio, especially during economic and politically turbulent times.
Protection from Inflation
Many commodities, including Gold and Silver, tend to offer investors long-term protection from the impacts of Inflation.
Portfolio Diversification
Most investors who invest in Mutual funds have limited exposure to commodities and invest in growth stocks in industries such as tech or healthcare. Gold and Silver provide a natural hedge to your Portfolio to help protect you if Stock markets perform poorly.
Great for Recession Risks and Poor Political Environments
Gold and Silver can perform well during recessions and Inflationary environments, which makes them a great addition to your Portfolio. Furthermore, investors may flee to these assets, instead of Stocks, during risky political environments.
Flexibility of Products
Investors interested in Gold and Silver can invest through multiple vehicles. They can purchase physical bars or Coins, exchange-traded funds ( ETFs), or Gold and Silver Mining companies. Active traders like Gold and Silver stocks because they are much more volatile than physical Gold or Silver (more opportunity for profit).
Although all of the Precious metals products can help protect investors from economic and political risks, it is also imperative to note some of the key differences between these Investment products. Some investors may prefer one over the other or want to invest in both.
Unique characteristics of Gold
Some investors prefer to invest in Gold instead of Silver for a number of reasons. Gold has a long global history of being a means to preserve Wealth. Furthermore, physical Gold has a stronger Investment base, as financial investors, institutions, and Central Banks all purchase physical Gold for Wealth protection. Finally, Gold is much less volatile than Silver because of its history as a store of value.
Gold has a rich history
According to the National Mining Association, people in Eastern Europe began using Gold in 4,000 BC (6000 years ago). The first Gold currencies arose around 600 BC (2600 years ago) in both China and Lydia (now Turkey). Many cultures were captivated by Gold, and countries such as the United Kingdom, Germany, and the United States operated on a Gold standard currency system prior to the 1900s.
Because of Gold’s rich history, many investors view Gold as a safe haven asset that can hold its value during their lifetime. As a result, the price of Gold can increase substantially during periods of heightened economic and political risk.
Gold is widely used by Central Banks
When most people think of investing in Gold, they initially think of consumers purchasing Gold to protect their money from Inflation. However, many governments also hold Gold as a part of their foreign exchange reserves to help with long-term Wealth preservation.
In contrast, the world’s Central Banks do not view Silver as a long-term Inflation hedge, which is why they choose Gold over Silver. Investors can easily track Gold purchases by Central Banks and potentially use this as a sentiment indicator of how Gold could perform.
Gold can be less volatile
Because Gold has a lengthy history and both consumers and Central Banks use Gold, people typically do not view it as a speculative Investment. Consequently, Gold’s price movement is less volatile relative to Silver. According to a recent note by Morgan Stanley, Silver can be 2 to 3 times as volatile as Gold. If you have a greater interest in Wealth preservation and want to avoid taking excess risk, then an asset like Gold is a much safer Investment choice.
Easier storage
The price of Gold is around $1,678/oz, while the price of Silver is currently $19.10/oz. A $10,000 Investment in Gold buys about 6 ounces of metal. The same Investment in Silver buys over 500 ounces of metal. If storage space is an issue then Gold is the obvious choice.
Unique characteristics of Silver
Many investors prefer to invest in Silver, even though Gold has a longer history of preserving Wealth. In addition to having Investment demand, Silver is in demand for multiple industrial uses. Solar panels, EV batteries, and smart phones use Silver and this Silver tends to be thrown away when these devices reach end of life. It isn’t economic to recover the Silver because only a small amount is used in each device.
The combination of Investment and commercial demand for Silver provides the metal with unique value but also exposes investors to cyclical economic trends.
Silver has a lower price
One of the main benefits of investing in physical Silver is that the price per ounce is low. If you want to continue accumulating physical Silver multiple times every year, then Silver is a much more convenient option. The only downside is that you will need more space to store your Silver.
Gold vs Silver price chart
The Gold vs Silver price chart suggests that Silver has the potential to outperform Gold. The Gold to Silver ratio is equivalent to the price of an ounce of Gold divided by the price of an ounce of Silver. A ratio above 80 has historically indicated that Silver is undervalued relative to Gold and consequently positioned to perform well. The ratio reached a peak of above 100 in 2020 and is currently still slightly above 80.
Many Silver investors believe the Gold to Silver ratio will return to its historic level around 16 and perhaps drop as low as 8. This would bring the ratio into alignment with current mining trends where 8 ounces of Silver are mined for every ounce of Gold.
Silver has industrial uses
One unique factor of Silver is that it is used in multiple manufacturing processes, which can be a positive or negative factor depending on your Investment objectives. Practical uses of Silver include electronics, jewelry, Silverware, photography, and other industrial purposes. Many investors may prefer Silver because solar panels and EVs use Silver, and both solar and EVs are poised for massive growth this decade.
A rise in demand for Silver for these products could create a supply deficit if top-producing countries like Mexico, Peru, China, and Russia are unable to meet the new demand. However, this could technically expose investors to economic downturns, as demand for Silver could decline during a recession. Conversely, the price of Silver could still increase during a recession if there is a significant drop in supply in the market, potentially creating a supply deficit.
Silver Provides Balance
Because Silver is used in multiple products and is also an Inflation protection vehicle, it is a more diverse Investment product. It is also a safe haven, like Gold, in the event of a recession or politically risky event. These combined facts can make Silver a relatively attractive Investment on a long-term basis, as both industrial growth and political uncertainty could serve as catalysts to increase the price of Silver.
Investor preference
It is difficult to say whether Gold or Silver is a superior Investment. What is easier to understand is whether Gold or Silver is a better fit based on your risk tolerance and Investment objectives.
In general, investors who are more risk-averse should consider Gold over Silver. Silver has unique factors that may allow it to outperform this decade. However, Gold has a more stable history as a store of value. Furthermore, the price of Gold is less volatile relative to Silver, which is an attractive feature for conservative investors.
Investors concerned about political and economic risks could choose Gold or Silver, but Gold is likely the superior choice in this scenario. This is especially true given that currencies like the Euro and Pound have been depreciating substantially this year. Investors may flock to Gold to avoid the impact of currency depreciation, and Central Banks may increasingly purchase physical Gold to boost the quality of their foreign exchange reserves.
Investors willing to take on more risks and accept volatility should choose Silver over Gold. The Gold to Silver ratio is very high, and Silver demand could be strong this decade. Furthermore, Silver offers similar benefits to investors if there are additional economic and political risks in the coming years.
Silver is also a solid option for investors who want exposure to cyclical economic trends. Investors optimistic about the global shift to renewables may find Silver a superior Investment relative to Gold. Silver supply disruptions could also be an economic catalyst that leads Silver to outperform Gold.
What is the best metal to invest in right now
Gold and Silver are excellent options for investors who want increased Portfolio diversification and protection from economic and political risks. As major currencies continue to depreciate and political risks accelerate this year, investors will likely view Gold and Silver as effective Investment vehicles to preserve their Wealth. Silver does show some potential to outperform based on the Gold to Silver ratio, but Gold is likely the safer bet for risk-averse investors.
What is the best metal to invest in right now depends on your Investment objectives and tolerance for risk. Availability may also be a factor to consider because Silver demand is currently overwhelming supply. Delivery times for physical Silver have risen and premiums have increased. You may have to wait six to eight weeks to receive Silver and it may cost you more than you are comfortable paying. If you want protection without waiting then Gold may be your only option.
About Me.
After the dot com bubble popped I started researching Financial bubbles - how they evolve, how they pop, etc. I quickly realized that Gold is the only real money on planet Earth and in 2002 I bought my first Gold Coin. I've been investing in the shiny stuff ever since - both physical Precious metals and the Mining stocks. I've also studied the Financial markets, trading, Technical analysis, and the endless games that central banks play with fiat currencies. I do my best to share what I've learned with others - that's what you'll find here on Gold Well Live.
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