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Gold Vs Silver: Which Is The Better Investment
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Gold Vs Silver: Which Is The Better Investment

Should you buy gold or silver

If you’d bought 1ounce of gold 10 years ago you would have paid less than $300, today's gold price is over $1600. In 2006 1ounce of silver would buy over 4 gallons of gasoline, today it will buy over 10 gallons. It seems evident that both metals are holding up to their reputation as a means of wealth preservation, but should you choose one over the other, is it better to hold both and if so in what proportion.

Why do people buy gold

1 Gold is considered to be safer than silver in terms of price volatility. Rising consistently over the last 10 years it has been less prone to the price swings associated with silver and is generally viewed as the safe haven in an uncertain economic climate.

2 Gold is often seen in terms of its relationship to the dollar. As the dollar rises gold tends to fall, as the dollar falls relative to other currencies gold tends to rise. It’s therefore seen to be effective against dollar weakness and protection against fluctuations in the value of other asset classes that drop in value as the dollar drops. Silver on the other hand does not enjoy such a close relationship.

3 Gold is relatively easy to store at home. More wealth can be concentrated in the form of coins than the cash equivalent of silver and stored more discreetly.

Why do others prefer silver

1 Those who buy silver do so for the same reasons others buy gold, they see it as a means of wealth preservation. Those on a smaller budget see it as a more affordable option. The current gold silver ratio (how many ounces of silver it takes to buy one ounce of gold) is around 50:1

2 Many believe that silver will eventually outperform gold and see it as a long-term investment opportunity in addition to wealth preservation. They believe that the gold silver ratio will drop over time because silver is currently undervalued. They’re hoping to make the same long-term gains as those who bought gold 10 years ago, although this of course cannot be guaranteed.

3 Silver is an industrial metal and has numerous uses in industry. As demand for the metal increases from growth economies, so will the demand for silver unless an alternative is found.

4 Measured in terms of above ground investment grade gold and silver available, silver is rarer than gold. More silver is being consumed due to constant industrial demand whereas gold considered to be a monetary metal is either stored or used in jewelry.

5 Some look at silver as a means of either buying or bartering for small items such as bread should the worst case economic scenario play out. In addition to silver bullion coins they have a store of junk silver coins; dimes quarters and half dollars as this would be more cost-effective than trading gold.

Gold or Silver

Opinions differ widely on whether or not gold or silver makes the better investment and many investors believe both metals will yield profits in the future, however in terms of protection from long-term debasement of paper currencies gold seems to be the preference due to its long history as a monetary metal and relative stability compared with silver.

Some choose to diversify a portion of that into silver based on forecasts that it will outperform gold over the long-term and also as a way of gaining benefits from holding both metals.Those that are holding metals as the ‘safe’ part of their portfolio tend to prefer a higher allocation of gold to silver.


Street Talk

Hi Penny, I sold a Krugerand a few years ago (needed the cash) for 400 euros but probably made a mistake by doing so. That's life!

Reply
  about 8 years ago

Hi Kim, thanks for stopping by and commenting. Not necessarily a mistake if you needed the cash for something worthwhile at the time. You have a great website design, very relaxing, I almost wanted to step inside one of those cottages!

Reply
  about 8 years ago

Well thankyou very much Penny for your compliment!

  
  about 8 years ago

Penny, Thanks! I don't understand about metals markets. Though I was happy to be able to sell gold jewelry for melt values higher than retail paid years earlier. Selling as in the past few years for so much. Wondering? If silver now is considered as being undervalued? Than doesn't that mean silver is a better choice for today? blessings, Cynthia

Reply
  about 8 years ago

That's a good question Cynthia, yes some certainly do consider silver to be a better choice today with respect to it's potential for long term growth. While silver today is currently around $31 many precious metals analysts estimate the true value for 1oz to be in triple digits How long it will take to assert it's true value though is difficult to say which is why people talk about long-term rather than short term potential, it assumes increasing industrial and investor demand. If there was a severe economic downturn for example, demand would likely fall and so would the price for silver for a period of time. The primary reasons people tend to buy gold or silver though is to protect the value of their savings against currency devaluation and personally I think there are distinct advantages to owning both. Thanks for the comment Cynthia

Reply
  about 8 years ago

You're welcome -- my pleasure. Hmm. Guess I don't follow the logic. If there's a severe economic downturn (a term which no doubt has changed meaning the past number of years!) then why would silver drop? Wouldn't currency devaluation protection lead to a higher valuation? thanks -

  
  about 8 years ago

Hi Cynthia, thanks for the follow up question it gives me the chance to try to explain in a little more detail. Let's say you buy a 1oz Silver Maple Leaf coin at Apmex today, you would pay $43 The current spot price for silver is around $31 so you have paid an additional $12 premium over the spot. price, but you now have a 1oz silver coin. Let's say you put that away in a box and at the same time put $43 paper dollars in another box. Let's say for arguments sake that gas prices rose over the next 2 years. Rising gas prices would push up the cost of food production and transportation causing food prices to rise, so you now find yourself in the position of having to pay both higher gas prices and higher food prices. You remember that you put away $43 in a box 2 years ago and pull it out. When you go out to spend it on food you realize that the $43 cannot buy the same amount of food that you bought 2 years ago. In other words its value has dropped. You then remember that you have the silver coin from Apmex. If you sell back the coin you may be able to get the same amount of food as you did 2 years ago because the price has risen and when you sell the coin back you will get more pieces of paper than you originally paid out You could then swap the paper for the same amount of food as you did 2 years earlier. This is what is meant by protection from currency devaluation. However a price rise for silver in the short term is not necessarily guaranteed. It may be that the rise in gas and food prices has caused people to cut back their spending on things like computers and other consumer goods which use silver. This could be combined with a drop in demand from China if their economy slows. Manufacturers who use silver could find they no longer have the same requirements for it due to a drop in consumer spending, so they stop buying more because they already have enough stockpiled. In these circumstances the price of silver may fall because there is more silver that people want to sell than want to buy. So you look at your coin, decide not to sell it today but to put it back for another 5 or possibly 10 years. When you pull it out years later the likelihood is that you will be able to swap it for far more than the $43 you paid for it today. Why is this? This is because the long term trend demands for silver look good to many analysts. Regardless of what happens in the short term they see increased demand from growth economies over the long term combined with a scarcity of silver . They also anticipate more money printing, like anything else the more money that is in circulation the less value it has. They also anticipate that more people will start to understand their money is loosing value and want to buy gold and silver to own something with intrinsic value which a piece of paper doesn't have. These factors combined (with others) they say, will push up the price. Again Cynthia, it's worth pointing out that the favored metal to offer protection both long and short term is gold and always has been because it is seen primarily a monetary metal and has historically been viewed as a safe haven. I hope this has given you a better understanding, if not visit Mike Maloney's site he has some very good educational videos on both gold and silver. Penny

Reply
  about 8 years ago

Penny, Aha! Brilliant explanation. You could write that into another article, Penny. I doubt I'm the only one who did not understand the concept. That's exactly why my gold jewelry was worth 3x+ what I bought it for. I put it away (lock box mostly:-) and then when I sold it there were more dollars but they probably didn't buy as much food for example because food prices went up. Thanks for answering! Hope you'll find a use for doing so by catching search engine attention with another article. Hmm. Or a series, actually. Maybe you could go like the 30 days gardening of 30 days. Except do it by explaining one concept a day with examples since metals don't grow like planters and seeds. blessings, Cynthia blessings, Cynthia

  
  about 8 years ago

Thank you Cynthia, I'm pleased it made things a little clearer. I'm sure you're right, if you didn't quite understand then others might not either that's exactly what I was thinking as I wrote the reply. Thanks for the suggestion about the 30 day challenge it's certainly something I'll think about. Penny

Reply
  about 8 years ago

Penny, Great! I'll be happy to see them. I've gotten behind on reading:-) Have been reading for hours now:-) Got to do a few other things now... will watch for your 30!! blessings, Cynthia

  
  about 8 years ago
Lemuel  

Good stuff. This is definitely new information for me because I didn't know much about these two other than I collect gold because I like wearing it. Perhaps I should also consider silver after reading the 5 points you described. Thanks Penny.

Reply
  about 8 years ago

Hi Lemuel, yes a lot of people think it's a good idea to have some silver as well as gold and usually buy a small amount each month. Canadian Maple Leaf and American Eagles are the most popular bullion coins or you could buy 1oz bars if you prefer. Glad you found the information useful, thanks for stopping by and commenting. Penny

Reply
  about 8 years ago

Another good one Penny.

Reply
  about 8 years ago

Thanks Shawn, I really liked your last couple of articles too! :)

Reply
  about 8 years ago

I have a little of each. I agree that in a worst case economic scenario silver would be much easier to use especially the small denomination junk silver.

Reply
  about 8 years ago

Good for you John, you're already a step ahead just by owning a little. Thanks for the comment.

Reply
  about 8 years ago

Good article, a difficult decision as to what to buy. In South Africa, gold sold for dollars, the dollar rand exchange rate is one to watch. The idiosyncrasy of gold price and rand dollar exchange makes for a very interesting game of chance.

Reply
  about 8 years ago

Hi Rob, yes it can be a difficult decision. I think the important thing though is that people have at least something that's physical and not paper, whether that's either gold silver or some combination of both, preferably in their own possession outside the financial system where there is no third party risk. Thanks for stopping by to comment Penny

Reply
  about 8 years ago

Good info Penny..thanks

Reply
  about 8 years ago

Thanks Kevin, I'm glad you found it helpful.

Reply
  about 8 years ago

Thank you Penny. I was just having a conversation with a friend about the differences between investing in gold or silver. I appreciate the information!

Reply
  about 8 years ago

Thanks for visiting Stacy, I hope you found the information useful.

Reply
  about 8 years ago
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