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Investors turn to gold and silver as safe-haven assets in times of economic downturn to maintain the value of their investments and combat rising inflation. Precious metals have historical significance as currency and continue to have industrial uses, meaning gold and silver tend to hold their value no matter the market condition.
If you’re opening an IRA or making changes to your investment portfolio, you might ask, “Should I buy silver or gold?” This article will discuss the differences between these precious metals, why they matter for investors, and how you can purchase them for your IRA.
Our team at Oxford Gold Group wants to help you make good investment decisions, so don’t hesitate to contact us with your questions about buying gold and silver after considering the information below.
Differences Between Gold and Silver
Gold and silver share many characteristics as precious metals that are popular for investing but differ in the sectors that hold the greatest share of each metal’s total demand. Physical gold is typically for storing value, while physical silver has practical uses in many industries besides its value as a safe-haven asset.
Keep reading to learn more about the differences between silver and gold and how they affect the metals’ performance in an investment portfolio.
In 2021, the highest demand for silver was for electrical and electronics manufacturing, with 330 million ounces, nearly a third of the total demand. The second-highest demand was 278 million ounces for silver bar and coin investments, while third place went to jewelry with 181 million ounces.
In the same year, 55% of the global gold demand was for jewelry, highlighting the yellow metal’s characteristics as an attractive and valuable asset. Investment took up 25% of the demand, central banks 11%, and technology only 8% worldwide.
Although both have significant demand as investments, the numbers make it clear that gold is much more popular as a physical asset. In contrast, silver has considerable value as an industrial resource.
Silver has the highest reflectivity and electrical and thermal conductivity among precious metals, making it a sought-after resource for solar panels, photography, medical equipment, and more. Silver’s malleability and shininess also make it a favorite for making jewelry.
Supply and Demand
Recycling supplied about 24% of the total gold production in 2021. Silver is often tossed out rather than recycled, meaning mining production is the primary means of meeting global demand for silver. Still, silver production is much higher than gold production, although the value of the total gold supply is much higher due to silver’s lower price.
Gold and silver both have significant demand as a hedge against inflation and high interest rates, but silver’s demand tends to increase when the economy is going strong because of its industrial uses.
Price and Volatility
Since the primary use of gold is for investments, the price of the metal generally fluctuates in response to investor sentiment and significant changes in the global economy. In 2020, at the beginning of the COVID-19 crisis, the gold price jumped by 24%. On the other hand, the lack of industrial demand for silver saw the price tank at the beginning of 2020.
Silver prices directly reflect the state of the economy. Industrial demand increases when the economy is in good shape, but silver prices fall during a recession or deflation. However, inflation tends to impact silver prices the same way it affects gold prices.
In shorter periods, silver has higher volatility than gold because it takes a smaller amount of money to significantly affect the price, which means investors could potentially see solid gains in the short term but risk significant losses.
Many investors leverage physical precious metals, especially gold and silver, to protect the value of their assets in times of inflation. As mentioned in the previous section, inflation has a similar impact on silver and gold. However, silver’s industrial demand falls during high inflation and is offset by increased assets.
Physical silver requires considerably more storage space than physical gold because it has a much lower density, meaning the costs for storage will be much higher for silver. Also, silver can tarnish over time, but gold doesn’t, so it takes a more environmentally controlled space to store silver. If you’re looking for precious metals to store over the long term, gold might be the cheaper option.
Is It Safe To Invest in Gold or Silver?
Buying precious metals, including physical silver and gold, can provide valuable benefits for the following reasons:
- As a hard asset, precious metal is tangible and safe from hacking.
- Silver and gold bullion are currencies that can’t depreciate like paper or digital money.
- Unlike most assets, physical silver and gold have no default risk.
- Gold and silver can be as confidential as you want.
How To Invest in Gold or Silver
Depending on your investment strategy, some investment forms might be more effective than others. Below, we list the most common ways to add gold and silver to your investment portfolio.
Buying silver and gold bullion is one of the most popular investment forms. You can purchase bullion coins or bars from third-party dealers and either store them yourself or hold the assets in a brokerage account. When you hold silver and gold in an account, the metals go into a depository.
Costs tend to be higher when buying physical silver and gold because you have to pay premiums over the spot price and, potentially, recurring expenses for storage and insurance. Despite the costs, some investors prefer owning assets they can physically hold.
Exchange-traded Funds (ETFs)
If you want to skip the extra storage fees and premiums, you can still gain exposure to silver and gold through ETFs. You can purchase shares that you keep in a typical brokerage account, and the account provider is responsible for the costs of handling and storing the assets. However, unlike when you buy physical gold and silver directly, you won’t have access to the underlying securities.
A more indirect way to benefit from silver and gold is to invest in the mining companies that produce the precious metals. You could also choose to put your investment in a mutual fund that includes those companies.
Best Gold and Silver Products To Buy
The products you ultimately buy should align with your investment goals, but the following are a few of the most popular types of silver and gold products investors buy:
One-ounce Silver Bars or Rounds
These products are best for new precious metal investors who want to dip their toes into this type of investment instead of diving in. However, experienced investors might opt for these divisible forms of investment to make it easier to sell and buy smaller amounts.
One-ounce silver bars and rounds are relatively small and stackable, making them easier to store. Also, they have a low premium over the spot price.
Ten-ounce Silver Bars
Ten-ounce silver bars have a lower premium over spot price than bars and rounds, but they’re also stackable and good for storage. Investors who want to buy silver closer to the spot price and hold it long term might choose ten-ounce bars over the more divisible coins and one-ounce bars.
One-ounce Gold Bars
Gold coins and bars are much more expensive than silver metals, meaning one bar is worth significantly more than the equivalent weight in silver. If you have a decent budget for your investment and want to buy gold close to the spot price, this gold bar product might be your best choice.
Can You Hold Both Gold and Silver in the Same IRA?
Yes, you can hold silver and gold in the same IRA, but you should know that you can’t put precious metals in a typical IRA. When buying silver and gold for an investment account, you need a self-directed IRA, which is a type of retirement account that enables you to invest in a variety of alternative assets, including metals, real estate, and cryptocurrencies.
It’s common for investors to buy silver and gold for retirement accounts because precious metals grow over a very long period, which makes them a perfect investment for long-term retirement savings. Adding these metals to your IRA can protect a percentage of your assets, acting as a hedge against inflation and economic downturn.
What Gold and Silver Products Are IRA-eligible?
If you want to add silver and gold to your IRA as an investment, you must purchase approved products. Below, we list some of the most popular IRA-approved gold and silver products, including coins and bars.
Gold Coins and Bars
- American Gold Eagle coins
- American Gold Buffalo coins
- Australian Gold Kangaroo coins
- Canadian Gold Maple Leaf coins
- Valcambi gold bars
- Credit Suisse gold bars
- Johnson Matthey gold bars
Silver Coins and Bars
- American Silver Eagle coins
- Chinese Silver Panda coins
- Canadian Silver Maple Leaf coins
- Silver Britannia coins
- Royal Canadian Mint silver bars
- Johnson Matthey silver bars
- Sunshine Mint silver bars
How Much Gold or Silver Should You Keep in Your IRA?
While investing in gold and silver is an excellent way to diversify your portfolio, you should be cautious about how much you put into your IRA. Many financial experts recommend investing no more than 5% of your retirement funds in precious metals.
Your portfolio should have diversification to lower risk, so investing solely in silver or gold leaves you without protection when gold and silver prices inevitability fluctuate. These prices rise when the market has a downturn but usually return to normal once the market picks back up.
Silver and gold have important value as a way to preserve your assets over the long term, but the returns are typically much lower than traditional stocks, so a lack of diverse assets could slow down your savings significantly.
Gold or Silver: Which Is Best for You?
If you’re preparing to buy gold or silver, you might be debating which is the better investment. The answer depends on your financial circumstances and goals, such as your budget and reason for investing. Both metals are beneficial in a portfolio because they protect the value of your assets when the market crashes, but each has specific factors that determine which is better for your goals.
Silver is more affordable, so it’s better for investors with smaller budgets. For one ounce of gold, you can get almost 80 ounces of silver because of the price difference. Also, when the US dollar falls, silver prices go up as investors try to combat the deflating dollar by buying metals.
Gold prices are volatile, but silver prices can be even more unstable, making it a greater risk to buy silver. When market prices fall, silver often goes lower than gold. If you have the money to spend, gold is often the best for long-term investments, such as an IRA.
Learn More About Investing in Precious Metals
Hopefully, you got your answer to the question, “Should I buy silver or gold?” At Oxford Gold Group, we provide information and services to help investors make solid financial decisions that give them an advantage when saving for retirement. Our specialists can guide you through the process of converting your existing IRA or 401(k) into a self-directed silver or gold IRA.