Gold vs Silver – Which is Better Option for Investment?

Comparison of gold and silver as an investment option

Gold vs Silver

Amidst the uncertainties in the financial world, investment in precious metals is considered a viable alternative by many investors. Traditionally, gold and silver have proven to be a hedge against economic downturns. When it comes to deciding is gold or silver a better investment, you should look at the unique characteristics of both metals, including appreciation and affordability.

Market correlation – Gold is predominantly used for jewellery and bullion. Only a small percentage of the gold mined goes into industrial use. More than half of the silver mined, on the other hand, is used for industrial and technological purposes. From smartphones and automobile electricals to solar panels, silver has many industrial uses. Thus, its demand is more closely linked to economic conditions than gold. 

Also Read: Silver price today 2 year low. It is wise to invest in silver ETFs or MFs

Returns – Both gold and silver prices have taken a beating in the last 10 years’ comparison. From a price of $41.36 per ounce in October 2012 to $20.13 in October 2022, the degrowth of silver was 6.95%, compounded annually. On the same parameters, gold fell from $2,200 to $1,695, degrowth of 2.57%.  A comparison of compounded interest returns since 1925 –

  • The price of silver is $ 20.12 per ounce, compared to $0.68 per ounce in 1925. The rate of interest generated when compounded annually is 3.55%.
  • The price of gold is $ 1695 per ounce, compared to $20.63 per ounce in 1925. The rate of interest generated when compounded annually is 4.65%.

Thus, gold has had better long-term interest rates and lower degrowth in the last 10 years.

Liquidity – Both gold and silver have massive market sizes and are therefore liquid. However, gold market demand is nearly six times higher than that of silver. The silver market size was recently valued at $4.4 trillion at a time when the gold market size was estimated to be $25.4 trillion. Given their market sizes, both gold and silver have enough liquidity for investment purposes.

Investment Options – If you invest in gold or silver physically, you can liquidate it by selling it off in the physical market. You can invest in silver ETFs or also trade in silver futures by buying/selling e-silver in National Spot Exchange or Multi Commodity Exchange. Gold has a few more investment options that make it more convenient to trade in. Apart from physical gold and derivatives, gold ETFs, gold mutual funds, sovereign gold bonds etc. are other gold investment options.  

Also Read: How have gold ETFs performed last 5 years

Affordability and Storage – At the current market price, gold is nearly 85 times dearer than silver. However, given its lower price storing silver would require more space. Compared to gold, silver needs to be stored in a more regulated environment that is dry and climate controlled.

Volatility – Silver has traditionally been more volatile in the gold vs silver investment volatility comparison. Its high market correlation means that small changes in market demand and supply lead to big fluctuations in its price. High volatility may seem attractive to traders who are looking to book quick profits. Gold, with its better long-term return and lower volatility, is more suited for investors who are looking for an inflation hedge and safe haven investment.

Thus, the choice of gold vs silver will depend on the suitability of their features to your investment or trading goals. Silver has high industrial use, so it is not as well insulated as gold during economic downturns. Citing these reasons, Stable Investor founder Dev Ashish opines that between the two, your silver investment should be 0-30% while gold should be 70-100%.

The tenure of your investment and your risk appetite are important considerations in deciding which is better option for investment for you.

Also Read: IIBX India’s first international bullion exchange will enable financialisation bullion products

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

Amidst the uncertainties in the financial world, investment in precious metals is considered a viable alternative by many investors. Traditionally, gold and silver have proven to be a hedge against economic downturns. When it comes to deciding is gold or silver a better investment, you should look at the unique characteristics of both metals, including appreciation and affordability.

Market correlation – Gold is predominantly used for jewellery and bullion. Only a small percentage of the gold mined goes into industrial use. More than half of the silver mined, on the other hand, is used for industrial and technological purposes. From smartphones and automobile electricals to solar panels, silver has many industrial uses. Thus, its demand is more closely linked to economic conditions than gold. 

Also Read: Silver price today 2 year low. It is wise to invest in silver ETFs or MFs

Returns – Both gold and silver prices have taken a beating in the last 10 years’ comparison. From a price of $41.36 per ounce in October 2012 to $20.13 in October 2022, the degrowth of silver was 6.95%, compounded annually. On the same parameters, gold fell from $2,200 to $1,695, degrowth of 2.57%.  A comparison of compounded interest returns since 1925 –

  • The price of silver is $ 20.12 per ounce, compared to $0.68 per ounce in 1925. The rate of interest generated when compounded annually is 3.55%.
  • The price of gold is $ 1695 per ounce, compared to $20.63 per ounce in 1925. The rate of interest generated when compounded annually is 4.65%.

Thus, gold has had better long-term interest rates and lower degrowth in the last 10 years.

Liquidity – Both gold and silver have massive market sizes and are therefore liquid. However, gold market demand is nearly six times higher than that of silver. The silver market size was recently valued at $4.4 trillion at a time when the gold market size was estimated to be $25.4 trillion. Given their market sizes, both gold and silver have enough liquidity for investment purposes.

Investment Options – If you invest in gold or silver physically, you can liquidate it by selling it off in the physical market. You can invest in silver ETFs or also trade in silver futures by buying/selling e-silver in National Spot Exchange or Multi Commodity Exchange. Gold has a few more investment options that make it more convenient to trade in. Apart from physical gold and derivatives, gold ETFs, gold mutual funds, sovereign gold bonds etc. are other gold investment options.  

Also Read: How have gold ETFs performed last 5 years

Affordability and Storage – At the current market price, gold is nearly 85 times dearer than silver. However, given its lower price storing silver would require more space. Compared to gold, silver needs to be stored in a more regulated environment that is dry and climate controlled.

Volatility – Silver has traditionally been more volatile in the gold vs silver investment volatility comparison. Its high market correlation means that small changes in market demand and supply lead to big fluctuations in its price. High volatility may seem attractive to traders who are looking to book quick profits. Gold, with its better long-term return and lower volatility, is more suited for investors who are looking for an inflation hedge and safe haven investment.

Thus, the choice of gold vs silver will depend on the suitability of their features to your investment or trading goals. Silver has high industrial use, so it is not as well insulated as gold during economic downturns. Citing these reasons, Stable Investor founder Dev Ashish opines that between the two, your silver investment should be 0-30% while gold should be 70-100%.

The tenure of your investment and your risk appetite are important considerations in deciding which is better option for investment for you.

Also Read: IIBX India’s first international bullion exchange will enable financialisation bullion products

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

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