You’d like to buy some precious metals, but do you buy silver or gold? Is there really much difference between them other than the price?
Both are “precious” metals, meaning their occurrence in the earth’s crust is rare. But when it comes to investing in gold vs. silver, there are 5 important distinctions to be aware of. These differences can supercharge your portfolio—or make it a victim.
This article outlines the five differences to know about gold vs. silver, with special emphasis on investment implications…
1) The Silver Price is More Volatile
The total supply of new silver each year is close to 1 billion ounces. Annual gold supply is around 120 million ounces.
This makes it seem like the silver market is 8 times bigger than gold. But just the opposite is true, because of the huge difference in their price. Silver’s lower price makes the value of annual supply much smaller than gold’s.
At current prices, annual gold supply is almost 9 times bigger than silver.
2) Silver is More Affordable
This seems like an obvious statement, but the reason it’s important is because silver has many similarities with gold…
If you buy physical silver—not ETFs, certificates or futures contracts, which are paper investments—you can capture the same benefits that gold offers.
Silver’s advantage over gold is that you can capture all these same benefits but at a much lower cost. Your financial insurance just got more affordable. It’s why silver is called the “poor man’s gold.”
Last, silver’s greater affordability makes it more ideal for gifting. Want to give some precious metals as a gift? Silver just made it more affordable to do so.
So, silver is ideal for investors with small budgets, and also for any small financial needs that may come up in the future. Gold is better suited for larger purchases.
3) Silver Requires Much More Storage Space
All those affordability advantages we just outlined come with a catch: it takes a LOT more space to store silver than gold.
At current prices, the same investment will get you roughly 70 more ounces of silver than gold. On top of that, most silver is a lot less dense than gold—pure silver is 84% larger in volume than pure gold. Add those two facts together and it means that silver takes up as much as 128 times more space than gold for the same value!
4) Silver Has Higher Industrial Use
About 12% of gold supply goes to industrial uses. But due to silver’s unique characteristics, a whopping 56% of its supply is used in industry. Silver has so many applications that believe it or not, you don’t go one day without using a product that contains it.
From electronics and medical applications, to batteries and solar panels, silver is everywhere, whether you see it or not. Silver is thus more susceptible to economic booms and busts.
5) Silver Stockpiles are Falling, Gold’s are Rising
This difference may not seem to have immediate importance to an investor, but it’s a behind-the-scenes development that could potentially have big consequences in certain circumstances.
Governments and other institutions used to hold large inventories of silver. Today, however, most of them no longer have stockpiles of the metal. In fact, the only countries that warehouse silver are the US, India, and Mexico.
The primary reason governments don’t hold a lot of silver is because it’s no longer used in coinage. But as we outlined above, silver is used in industry to a much greater degree now… so if future industrial needs rise, or the supply chain were interrupted, governments will be ill-equipped to support those needs.
In contrast, central banks hold almost 30,000 tonnes (96.4 million ounces) of gold in official Reserves. And on a net basis, they continue buying every year. These ongoing purchases contribute to the overall demand for the metal.
While this source of demand for gold isn’t present for silver, it does put the silver market in a precarious position. If the need for physical silver were to suddenly increase—a monetary crisis, a shortage in industrial supply, a spike in investment demand—governments won’t be able to meet these needs with such tiny stockpiles.
This scenario would have a great impact on the silver market—demand would spike, and the price would skyrocket.
This scenario may or may not play out, but it’s a delicate position that could have a deep and immediate impact on the silver market.
While all of the above are just speculations, investing in Gold is never going to be a bad idea. To start investing into Gold for as low as Rs 500 a month, call us on 1800-2222-69 (Toll-Free) and enrol in our Bachaoo Kamao Gold Scheme!