Gold Vs. Silver: Which Metal to Invest In?
Usually when people think of gold vs silver, they think of a fight between Manny Pacquiao and a lesser challenger. They think it’s a foregone conclusion. They think it’s like a match up between Mike Tyson during his peak and any challenger. Well, if you think this way, think again. Gold is not as hot as you may think it is. And silver may not be as weak as you think it is. When thinking of investing between these two precious metals, keep in mind that gold vs silver may not be as clear-cut as you’d like, or as you’d think. Keep the following discussion in mind.
|**Supreme Storage Capabilities*** When looking for a metal that hold more value while not taking up as much space, gold wins over silver every time.||**Lower Spot Prices*** Generally if you are spending under $1,500 you will see yourself getting more for your investment compared to gold. Silver has a lower premium over spot if you are investing under $1,500.|
|**Popularity in Gold*** Gold has always been the bigger brother of silver when you are talking about the two metals. It is purchased by many central banks including those in Asia and Russia.||**Greater Industrial Use*** Silver has more uses for industrial purposes. This gives silver practical uses other than just investing. However some analysts say this will slow down in the years to come.|
|**Bottom Line: A solid long-term investment for all investors.**||**Bottom Line: Great for smaller investments.**|
Is Silver More Rare Than Gold?
Let’s get this out of the way now, gold will always be worth more than silver. That’s the bottom line. The times are rare in history when the price of silver per troy ounce exceeded the price of gold per troy ounce. It’s extremely rare. In fact, it may not even be existent. That’s how amazing gold is. Gold will always be worth more than silver. This should not be a surprise. Why? When people think of value and valuable metals, the first thing that most people come up with is gold. People just gravitate towards gold, whether in terms of jewelry, industrial goods, industrial raw materials, people think in terms of gold. This should not be a surprise. In fact, throughout human history, anything of value, whether they are religious icons, religious objects, imperial riches, kingly wealth, it’s all in terms of gold. In fact, a lot of the money of the ancient world was measured in terms of gold coins and gold content. Gold is the number-one historical store of value. With that said, the disparity between the value of gold and silver is not constant. Sure, gold will always be worth more than silver. Agreed! The problem is there is also a ratio. If gold is twenty times the price of silver, that ratio can go up and down. Maybe the ratio is twenty in one year and then the next year it’s ten or six. While gold will still always be worth more than silver, the fluctuation between gold vs silver prices can mean tremendous opportunities. If you are looking to diversify your investment portfolio by adding precious metals component, keep track of the disparity between gold vs silver. There may be opportunities where it makes a lot more sense to invest in silver rather than gold. The price differential between gold vs silver can be very very fluid. It is impacted by the amount of silver being mined, political issues and the general state of the global economy.
When it comes to rarity, gold is a rarer metal compared to silver. However this does not discount the fact that silver has a lower spot price compared to gold.
Moreover, another key aspect of gold vs silver price ratios is the fact that certain cultures like India, for example, price silver the same goes with Taiwan and China. While gold will always be worth more than silver on an absolute basis, the disparity between them can shrink due to higher silver demand. Keep this in mind when trying to determine the investment opportunities of the disparity of gold vs silver. It’s not as straight forward as you think. It’s not a slam dunk if you invest in gold because if you invest in gold, you’re joining millions of other people the world over that invest in gold. Whereas if you pay attention to gold vs silver price fluctuations, you might position yourself in such a way that you could make really big short-term gains with silver.
Industrial Consumption of Silver is Going Up
One of the biggest drivers of silvers increasing value in recent years is the fact that there are more industrial goods made out of silver. Silver is actually used in a lot of industrial processes. We’re either talking about electronic parts that have silver in them, or we’re talking about industrial processes that use silver as a component and then use up that silver. In other words, it takes silver and destroys it. This type of industrial consumption of silver is going up, and this impacts the price disparity of gold vs silver. The spread between gold vs silver can get quite tight as industrial consumption tends to push silver prices up.
Silver Availability is Predicted to be Tighter
Since gold has historically been such a crowd pleaser, companies the world over from Australia to South Africa to all points in between have gone out of their way to take gold out of the earth. All these mining companies are just in a mad rush to scoop up as much gold out of the Earth as possible. This has of course increased the volume of gold in circulation and the overall supply of gold in the market. Basic economics kicks in, when supply goes up and demands remain fairly stable, price goes down. This should not be a surprise. However, the reverse dynamic is going on with silver. Silver’s availability due to the fact that it’s often neglected compared to gold is predicted to get tighter with each passing year. In fact, there are few dedicated silver mines. By dedicated silver mines, we’re talking about mines that are dedicated purely to mining silver. This is a key fact to keep in mind when determining the disparity between gold vs silver. Silver is often mined with copper and zinc or lead. In other words, companies would open copper mines or zinc and lead mines and as a by-product, they would mine silver. Silver is an afterthought. Whenever you have a precious metal as an afterthought, the overall supply of that precious metal tends to be lower than if you are just focusing on getting that precious metal out of the ground. This should be a key driver in determining the disparity of gold vs silver in the near future.
Silver is definitely the metal to invest in if you are making a small investing (A few hundred dollars).
Gold is Subject of Paper Speculation
In an ideal world, all global commodities would rise and fall in value based on supply and demand. However, as shown by the sad experience of countries like the Philippines and Caribbean nations that were dependent on sugar in the 1970s and 1980s, even if the supply is fairly low, the price can be depressed artificially due to the fact that there are a lot of paper speculations over commodities. Their future prices don’t normally correlate with their underlying rarity. This is playing out with gold. Gold is subject to a lot of paper speculations, and it’s depressing the price of gold. Silver, on the other hand, isn’t subject to this threat. Keep this in mind when trying to decide the value of gold vs silver. The future midterm or short term value of gold vs silver is impacted by the amount of speculations in these precious metals as well as the factors raised above.