Gold vs. Silver: Which Should You Invest In? [The Ultimate Guide]

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Gold and silver are two precious metals that have long been sought after by investors.

Gold vs. Silver: Which Should You Invest In? [The Ultimate Guide]

They can help diversify your portfolio and have historically been traded during periods of economic and market instability.

Gold and silver share many features for investors, but which one should you invest your money in?

In this article, we will compare gold and silver on several different points.

Considering these points will help you decide whether you should invest in gold or silver.

Utility And Function

Unlike most other commodities, precious metals such as gold and silver aren’t judged as strictly on their value as a product.

The value of most commodities, such as oil, is often based on the market supply and demand.

If the oil demand is high but there are political factors that reduce how much is available, then the price of oil will increase.

As gold and silver have fewer uses in commercial and industrial settings than other commodities do, their value isn’t influenced by supply and demand. Even other metals, such as copper and iron, are largely used commercially.

However, of the two metals, silver does have more uses in commercial and industrial settings.

Roughly half of all silver that is sold and traded is used for manufacturing items such as cars, solar panels, medicine, and electronics.

In contrast, gold has far fewer industrial applications and is largely only used for jewelry or other decorative items.

This means that predicting the price of silver is easier because you can look at the global economy and the requirements of industry to see if silver will be in higher demand.

Relation To The Broader Market

The value of gold tends to reflect the value of the broader market, however, it moves in the opposite direction.

Gold is considered a “countercyclical investment” so when mainstream stocks and assets rise, the price of gold decreases.

The price of gold isn’t linked to industrial uses so it isn’t affected by a decrease in manufacturing and this makes it a better recession hedge.

Historically, a fall in the stock market usually causes investors to put their money into gold, instead. When the stock market rises, investors pull their money from gold and put it into mainstream assets again.

For many investors, gold is an asset that they keep in their portfolios specifically for market downturns.

The best time to buy stocks is when the market is at its lowest point, such as during recessions.

Selling the gold in your portfolio during this time is an easy way to raise capital so you can buy these undervalued stocks. 

Silver, however, moves with the market more than gold does. The factors that drive down the prices of stocks have a similar effect on the price of silver, too.

Cost And Volatility

Cost And Volatility

Gold is by far the more valuable of the two metals. At the time of writing this article, the current prices per ounce are:

  • Gold – $1,759 per ounce
  • Silver – $20.15 per ounce

These values constantly change but the large gap between the two remains more or less consistent.

If you research the historical prices of gold and silver, you will find a similar story as gold has always been much more expensive than silver. 

This is largely due to silver deposits being far more common than gold. Silver is mined at a rate of roughly eight times as much as gold is.

Silver is also commonly produced as a byproduct of mining for other metals, such as copper and gold, and around 70 percent of all silver is produced in this manner.

The lower price and higher availability of silver make it an easy commodity to invest in. You don’t need as much capital to invest in silver making it easier for a larger number of investors to buy.

This also means, however, that silver is more volatile. The lower price of silver means that only a small change to the price results in a larger fluctuation.

For example, a drop of $2.01 in the price of silver is a reduction of 10 percent. However, a drop of $2.01 in the price of gold is a reduction of only 0.1 percent. 

If you’re looking for an investment that is more stable and less likely to see large short-term fluctuations, then gold is a better choice.

However, if you want to speculate on fluctuations in the short term, then the volatility of silver can make it a more attractive option.

Should I Buy Gold or Silver?

There is no concrete answer to this question as it will all depend on your individual circumstances, your capital, market position, and investment goals.

As a general rule, however, gold is a better investment if you are looking at ways to protect your assets during times when the market struggles.

Gold prices will rise during these times and you can sell some gold to raise funds or to invest in stocks at lower prices.

The price of silver generally follows the ups and downs of the market, however, so it is a better investment if you are looking for an asset that will perform best when the market is doing well.

Silver is a semi-predictable speculation asset and if you follow the markets closely and know when to buy and sell, you can make a tidy profit on silver.

Remember that gold and silver can both be risky assets to add to your portfolio.

This is why if you do choose to invest, they shouldn’t account for more than 10 percent of your overall portfolio.

Silver and especially gold can be an effective hedge and investment during market downturns. 

Final Thoughts

Both gold and silver can be invested in as part of a diversified portfolio.

Silver is more volatile and suited to short-term investment, whereas gold can be a safer bet during economic trouble.

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Luke Baldwin
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