Gold vs. Silver as an Investment

Gold and silver are both precious metals with a lot of appeal, especially during bear markets. However, they have slightly different places in investors’ portfolios. In times when inflation is on the rise while the economy struggles to keep up, the stock market often falls into a bear market, and during this time, precious metals often go up in value. This makes them attractive additions to many investment portfolios such as a gold or silver IRA as a way to retain value.

Both gold and silver have innate value and are tangible commodities. This means that, regardless of currency, gold and silver will always hold some sort of value. Many investors choose to keep some assets in gold and silver to keep their portfolios diverse. Others may move to gold and silver in hopes of keeping money safe from whatever the economy may hold. If you’re wondering whether to start investing, you may be debating the two in hopes of choosing the best bang for your buck. Gold and silver both go through cycles of ups and downs, but they do have a few key differences.

Gold is More Expensive

When trying to determine which metal to choose, the first consideration is price. How much money will you be investing? Gold is significantly more expensive than silver. Gold is the rarer metal between the two, which makes it perfect for investing larger sums of money.

Silver is called the “poor man’s gold” because while it is valuable in its own way, it is significantly more common. It will often follow the same trends as gold, so it is a good way to invest smaller sums at any given time.

Consider that worldwide in 2019, just 3,300 tons of gold were mined, compared to 27,000 tons of silver. That’s a little more than 8 times more silver mined than gold during the course of the same year.

Silver is Industrial

A major driving force in silver pricing is the fact that its demand is driven so high due to its utility as an industrial metal. Cars, electronics, medicine, solar panels, manufacturing, and more all rely on silver for several different vital uses. Due to this vitality, silver demands tend to move with the economy. As production increases, silver prices go up. However, if the economy is struggling and production or demand for more expensive items slows down, the price of silver is likely to suffer. This means silver will typically follow similar trends as the stock market.

Gold, on the other hand, tends to surge during times when the stock market suffers. To better illustrate this point, consider the Great Recession, the period between December 2007 to May 2009. During this time, the S&P 500 fell a dramatic 37%, costing people millions of dollars. During this time, gold prices rose 24%.

Investors tend to drive up gold prices during bear markets, seeing it as a safer vehicle for their wealth. Plus, because gold is not widely used industrially, it is somewhat insulated from economic downturns.

Silver is Volatile

The industrial uses silver has are not the only factors influencing volatility. Gold is relatively stable long-term, though short-term fluctuations happen. Silver, on the other hand, has a smaller market size than gold. Yes, silver is more abundant, but let’s consider the two markets by value. Silver is mined 8 times faster than gold. However, gold is currently more than 70 times more valuable when considering individual ounces. This makes the silver market’s overall value significantly lower than that of the gold market.

Silver’s volatility isn’t always a bad thing. This just means that silver and gold will have somewhat different purposes. Gold is great for long-term hedges against inflation. However, if you are looking for shorter-term profits, buying in during a dip in price and then selling at the peak for silver can be a great strategy.

The Bottom Line

Both silver and gold have their appeal as investment vehicles. Gold is perfect for longer-term investors while silver can offer a great way to speculate and profit due to the more volatile price fluctuations. Either way, having a diverse investment portfolio is the best strategy to provide protection and one isn’t inherently a better investment than the other. Do your due diligence, consider your own investment style, and plan accordingly.