The global economic slowdown brought on by the pandemic has reintroduced precious metals as a safe haven investment around the world. Gold and silver prices soared last year–as early as mid-March–when investors attempted to preserve their holdings in uncertain times, but these two precious metals are far from equal.
If you’re looking to trade in gold or silver as an investment, the question then becomes, which of the two is the best to buy, and what are the actual distinctions between them?
Our experts at the Oxford Gold Group share some key similarities and differences between the two, with a specific focus on how they might affect your trading and investment strategies.
When you research the two metals, one of the first things you’ll likely notice is that silver’s spot prices are far lower than gold. Despite the cheaper price, investing in silver comes with many of the same advantages as buying gold or other precious metals. Silver, like gold, serves as a store of value and a hedge against various economic risks.
Regardless of their price, both metals are very secure and private physical assets to own long-term. They are tangible assets in the sense that you can touch and see them, unlike some other forms of investing.
Our Thoughts: When you consider the price alone, silver seems like the better choice for investors on a limited budget. However, other factors might push you to invest in a smaller amount of gold instead, like price volatility and storage requirements.
Silver’s more modest price doesn’t necessarily pose a problem. However, its storage requirements are less practical because of its much lower density than gold.
Simply put, you need a lot more space to store your silver holdings than gold. When buying physical gold, storage is always a major concern. With silver, it becomes an even bigger one. You’ll also need to store your silver in a place with low humidity to avoid any decline in quality.
Our Thoughts: One easy way to bypass this hurdle is to invest in precious metal IRAs. At the Oxford Gold Group, our team handles all of the heavy lifting when it comes to providing storage. We keep all of our clients’ precious metal investments in Brinks Global Services U.S.A. or the Delaware Depository, both of which carry Lloyds of London “all-risk” insurance policies and are IRS approved.
Silver’s annual supply is far more extensive than gold in terms of amount alone. This supply may play a role in future prices, but when it comes to volatility, we must also evaluate the value of the silver market against the gold market at their respective current prices.
Today, the total value of the gold supply to the market is considerably higher than the value of the silver supply, but how does this affect silver’s volatility? Silver’s lower supply value becomes more susceptible to any changes in the market. It also takes less trading action to move prices at a lower value.
Our Thoughts: You can view this volatility both positively and negatively. Silver’s price will likely fall more than gold on a bad day when markets are down. However, it also means that it will proportionally rise much more for the same reasons when prices are up.
Many industries across different sectors use a higher percentage of silver compared to gold. Electronic manufacturers prize silver for its high conductivity. It’s also used in medical applications, renewable energy, batteries, and other areas, but how does it affect you from an investment standpoint?
On the one hand, it demonstrates that silver is far more vulnerable to the general economic climate, as industry accounts for a large portion of demand. Any decline in these industries can be devastating. Such an economic change would likely result in a drop in silver prices, but keep in mind that this isn’t always the case.
Our Thoughts: While silver sees more industry use than gold, the two metals still have one thing in common: you can utilize them both as an essential store of value. Precious metals like gold and silver–as proved in the past and the present–have the potential to gain the greatest in times of economic concern as more investors acquire them to protect their capital.
Governments, banks, and other institutions often hold extensive precious metal stocks. At one point, silver became the leading metal held in reserve worldwide, but this is not the case today.
There is currently much more gold stockpiled by countries globally for various reasons, including that silver is no longer widely used in coin production. Because of this stockpiling situation, silver prices can rapidly skyrocket if there is a sudden, significant demand for the metal due to an industrial or economic need.
Our Thoughts: The bottom line is that supply disruptions or unprecedented silver demand will likely outstrip the supply. This change leads to price increases for a metal that’s already prone to short-term volatility, unlike gold.
Both gold and silver are exceptionally liquid assets that many investors regard as valuable commodities and even as a form of currency by some. So when the need arises, you’ll have no trouble selling some of your metal to online and physical retailers, pawnshops, and private individuals.
However, gold is generally more liquid than silver. While you can readily trade in and out of gold and silver holdings, higher liquidity makes it easier to make significant gold purchases or sales without causing the commodity’s price to move.
Because of the silver market’s lower liquidity, some large-scale precious metal investors may choose gold instead. For anyone looking to trade smaller amounts, the liquidity gap shouldn’t pose a problem.
Our Thoughts: You’ll never have to worry about supply shortages or becoming “trapped” with metal because the gold and silver markets are extremely liquid. If you’re investing in large amounts, gold might be the safer option because of its generally higher liquidity.
Currently, gold and silver account for a very minute portion of the world’s total wealth, so even a small rise can greatly influence their costs. Even more intriguing is that demand appears to be gradually increasing—so much so that mining is unable to keep up!
That means that you may receive a positive return on your investment regardless of the metal you purchase. However, depending on your long-term goals and investment mindset, one might suit you more than the other.
Silver is far more tightly linked to the boom-bust cycle than gold, a metal mostly immune to economic shocks. This connection is because a large portion of silver mined each year is used for industrial purposes, ranging from medicine to electronics and manufacturing.
Industrial demand for silver falls as these sectors suffer from the consequences of the crisis, and the full impact of the recent pandemic on silver demand will remain unclear for some time.
Conclusion: Due to its price volatility, silver does not provide the same level of security as gold. However, the constant fluctuations in value create more opportunities to purchase and sell at a profit. If you’re an experienced investor with a stomach for risk, silver might be a solid choice.
Gold has a well-deserved reputation as a reliable investment option. While silver inventories have declined in recent years, leading international institutions continue to stockpile gold, which is more convenient to store and preserve. With industry accounting for only a small portion of gold demand, the asset is relatively immune to the economic cycle.
Conclusion: History says that gold will likely act as a better, purer hedge against the stock market and economy than silver.
The performance of gold investments might appear more modest than other vehicles, so it may take time for you to see significant returns. However, this stability is exactly what makes gold popular as a long-term form of preserving wealth.
The possibilities are endless whether you choose to invest in silver or gold. Precious metal vehicles give you the peace of mind that your money is being safeguarded by tangible assets that have stood the test of time and have protected investors for centuries.
If you’re still having trouble deciding which precious metal suits your goals, our specialists at the Oxford Gold Group can guide you through the investment process and enumerate all of your options, including:
Whether you’re nearing retirement and looking to get most of your assets into safe havens or in mid-career and looking to hedge a part of your portfolio, we can provide all the advice and information you need to start buying precious metals.
Get in touch with our experts by calling 833-600-GOLD, and start your journey towards safe and effective investments today!
INSIDE THIS INVESTMENT GUIDE YOU WILL LEARN:
• How Gold & Silver can protect your savings & retirement accounts
• Types of Gold & Silver products available for Home Delivery
• How a Gold & Silver IRA can protect your Retirement account