Should You Buy Gold or Silver?

The Spotlight

10 minutes read

Feb 22, 2022

stack of gold bars next to a stack of silver bars on a green background

What’s the difference between gold and silver, and which of these metals should you add to your investment portfolio? Here’s what you need to know.

When the economy is down and inflation is high, investors often rush to safe-haven assets like gold and silver.

Both precious metals have been sought after throughout history and are often a top choice in any portfolio diversification strategy.

While silver and gold have similar boom-and-bust cycles, there are a few key differences you should keep in mind when choosing between buying gold vs. buying silver.

Let’s see what those 4 main differences are.

Difference #1: Silver is more affordable than gold

This looks like an obvious statement because this is one of the first things you will notice when you look at the silver price.

Why silver is less expensive than gold?

Silver is less expensive, mainly because of its bigger supply: nearly 1.74 million metric tons of silver have been mined throughout history, compared with around 198,000 metric tons of gold, the World Gold Council says.

But silver’s lower price actually comes with many of the same benefits you will get with a purchase of gold or other precious metals.

Here are some of the benefits silver has in common with gold:

  • Just like gold, silver works as a store of value and is a hard asset that you can see and touch unlike some other forms of investment (for example, digital investment assets like ETFs, or cryptocurrencies such as Bitcoin, Ethereum, etc.).
  • Silver also has no counterparty risk, which means that you don’t depend on any third parties to hold your physical silver.
  • Like gold, silver is money that can’t be created out of thin air (and thus lose its value) like many paper currencies. Oh, and by the way, history shows that silver has been used as money even more often than gold coins.
  • Finally, silver has never been defaulted on. So if you own physical silver, you have no default risk, which is not the case for almost any other investment you can make.

🤔What does it mean for an investor?

For these reasons then, buying silver offers several of gold’s key benefits but for a much lower and more affordable price.

Silver is roughly 60 times cheaper than gold, which makes it way easier to buy 1 kg of silver than 1 kg of gold.

This affordability is also one of the key reasons why silver can be an easy way to start saving in precious metals, especially for beginner investors with a smaller budget.

Difference #2: Silver is more volatile than gold

While short-term fluctuations in the gold price usually get a lot of attention, gold is relatively stable as a long-term investment compared with silver.

The historic chart below shows that the volatility in silver prices can sometimes be two or even three times greater than that of gold on a given day.

A historic chart comparing silver prices and gold prices between October 1915 and December 2021.
A historic chart comparing silver prices (in orange) and gold prices (in blue) between October 1915 and December 2021.

Why silver is more volatile than gold? 

Simply put, the silver market's small size relative to the gold market makes it susceptible to wild price swings.

While silver is mined in much larger quantities, gold is currently more than 70 times more valuable than silver on an ounce-for-ounce basis, so the entire silver market is worth just a fraction of the gold market.

🤔What does it mean for an investor?

Well, it basically means that on a bad day when markets are down, the price of silver can be down more than the price of gold.

It also means that when prices go up, silver can increase proportionately more for the same reasons.

“That volatility can translate to larger short-term gains, but it often carries the risk of greater downside,” says Nicholas Thompson, who manages Morgan Stanley’s physical precious metals offering for Wealth Management clients.

Therefore, because of its volatility, silver may be more appealing for investors seeking to benefit from short-term price fluctuations.

But, if you are looking for a long-term hedge, gold is clearly more attractive as an investment.

So if you’re comfortable with the higher volatility, buying silver can be like adding an extra shot of espresso to your investment portfolio.

Difference #3: Silver has higher industrial use than gold

A much higher percentage of the silver supply is used in industry. The precious metal has a broad range of uses across many sectors.

For example, silver works particularly well as an electrical and thermal conductor and is used for high-tech scientific equipment such as microscopes, telescopes, and solar panels.

It is also used in many medical applications, renewable energy, batteries, and other areas.

Gold, on the other hand, is not used nearly as much in the industry.

Take a look at the charts:

A Bloomberg and Metals Focus graph showing the global demand for physical silver by sector between 2011 and 2020 with investment, jewelry, and industrial being the main drivers for global silver demand.
Global demand for physical silver by sector between 2011 and 2020. Sectors: industrial, jewelry, investment, photography silverware, de-hedging. The purple line shows the silver price.
Global demand for physical gold by sector between 2014 and 2021
Global demand for gold by sector between 2014 and 2021. Sectors: jewelry fabrication, technology, bar and coin demand, ETFs and central banks.

The two charts above paint a rather clear picture.

Industrial demand for silver represents a much bigger share of the metal’s total demand than it does for gold (with gold industrial demand being mainly in technology):

  • Industrial demand for silver is more than 50% of its total demand.
  • Industrial demand for gold is only around 8% of its total demand.

🤔What does it mean for an investor?

Since much of the demand for silver comes from industry, it can often bemore exposed to the general economic situation than gold, and this has a twofold effect:

  • If industries that use silver are hit hard by any kind of economic downturn, this can potentially lead to the silver price going down.
  • If industrial demand for silver keeps growing, it will likely support the silver price, or even make it go up.

In other words, because it's so important to industrial activity, demand for silver tends to rise and fall with the overall economy. So when production accelerates, silver prices are likely to increase. If it slows, the silver price often decreases.

When it comes to gold, one can say that it is relatively protected from a decline in economic activity because its industrial use is so limited.

That’s why, if you want to be less exposed to economic downturns, gold might be a better investment option. But if you are ready to bet on (and potentially benefit from) the silver price rallying on growing industrial demand, buy silver bars or coins.

Difference #4: Silver requires more storage space than gold

While this may not look like a big problem, at first sight, one thing you should know about silver is that it has a much lower density than physical gold.

Let’s compare the size of a 1 kg gold bar and a 1 kg silver bar:

a 1 kg gold bar with a ruler
A 1 kg fine gold bar from PAMP, available on GOLD AVENUE
a 1 kg silver bar with a ruler
A 1 kg fine silver bar from PAMP, available on GOLD AVENUE

As you can see, although the two ingots are almost similar in length and width (with silver being a bit longer and larger), the silver ingot is almost twice the size of the gold ingot when it comes to thickness!

So you will need a safe that’s about twice as high if you plan on storing silver rather than gold, which can make the question of storage a bit problematic.

The same goes for bank deposit boxes: if you choose to buy silver, you are very likely to pay more for a bigger box, which is already quite pricey.

But there is a solution: if you choose the right precious metals reseller, you can store your gold and silver for free.😉

So should I buy gold or silver?

In short, there’s no “right choice” because everything depends on your investment strategy.

Gold can be more attractive for those seeking a more stable safe-haven investment that is less exposed to market downturns, is a reliable long-term hedge against inflation and economic turmoil, and is easier to store.

Investing in silver, on the other hand, is more accessible to beginner investors who have a smaller budget and who are ready to ride the price wave and potentially benefit from price rallies and growing industrial demand. However, keep in mind that it takes a lot more space to store silver than gold.

Overall, what both physical silver and gold have in common is the fact they are both used as a major store of value and are popular haven investments, which makes them a perfect match in any investment portfolio and precious metals savings.

The idea is that both gold and silver can be good portfolio diversifiers, especially when seen as natural complements to each other, which basically means that gold’s resilience can help balance out silver’s increased volatility.

So if you haven’t added some physical gold or silver to your investment portfolio yet, now might be the right time to do it.🙃


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