Investing in gold vs silver investment

Silver on the other hand has become a vital ingredient of industry. Industries use silver for many purposes. Electric conductivity — As mentioned, silver has the best electric conductivity of the elements. So it sees high demand in electrical wiring, circuit boards, and even nuclear reactors.

Silver also possesses anti-microbial characteristics. This has caused a demand surge in the medical field. But this isn't new. For hundreds of years people used silver in bandages and purification tablets to stop the spread of harmful bacteria. Scientists only recently discovered why: Silver ions penetrate the bacterial cell wall and destroy the chemical bonds necessary for the bacteria's survival.

Medical Space — So silver is sure to see increased demand from the medical space. And this becomes even more certain as hospitals worldwide look for alternatives to antibiotics due to worries of new strains of antibiotic-resistant germs. The Green Space — Another interesting area that has seen increased demand for silver in recent years is the green space, specifically photovoltaic panels.

Batteries — And silver is a key component in batteries. Zinc-silver batteries have the highest efficiency in terms of energy per ounce. While the price of silver has made its use prohibitive in everyday batteries, industries that require the most efficient battery cells such as aeronautics, space exploration and military generate high demand for the metal. Why Investors Are Buying Silver Silver is increasingly becoming a key component of what has been referred to as the high-tech economy.

Thanks to the demand for silver in advanced industries, silver's place in an economy will grow right along with it. Likewise, emerging markets — countries such as China that are rapidly modernizing and adopting modern technological solutions — will become larger and larger importers of the metal.

The variety of uses of silver is a key reason investors should consider it instead of gold. Gold's price on the one hand is effectively a function of economic crisis, currency debasement and jewelry manufacture. There is often not enough long-term demand for gold to absorb increases in supply. And because gold is generally recycled and rarely used up, large booms and busts occur.

Silver on the other hand has a variety of demands. This often creates a shortage in the amount of available silver. And shortages usually increase the price of the commodity. So in terms of pure supply and demand, silver paints a much brighter picture than does gold, one that investors can much more easily follow.

Silver as an Inflation Hedge One of the major reasons people purchase gold is as a hedge against inflation. Gold is a real asset with limited supply, in contrast to fiat currency, which can theoretically be printed infinitely. This became a point of major interest as the Federal Reserve enacted its quantitative easing QE policy, which escalated many fears of runaway inflation But silver also has all of the characteristics that make gold an effective hedge against inflation. Currently inflation in the U.

This is the highest inflation has been since Reasons to consider investing in silver as an inflation hedge include: Silver is of course a real asset. And though it is more abundant than gold, its supply is still limited. And silver has just as rich a history as gold as a store of value. Silver During Previous Gold Bull Markets Of course, some investors buy gold in order to profit from a rise in the price. They don't worry much about Venezuela-level inflation or a Mad Max-style apocalypse.

As with any commodity, the gold market has seen quick and spectacular rises in price. But silver has also enjoyed its own bull markets. Now that we have made the case for why silver can be attractive, let's see how it compares to past gold bull markets. The s Bull Market The big gold bull market everyone talks about occurred in the s. The end of the gold standard coupled with double-digit inflation led to a near-mythical rise in the gold price.

Price of Gold From to Source: St. Louis Fed While gold rose steadily through the s, in the last two years of the decade the price appeared to go parabolic as its price increased nearly six-fold. Surely nothing matched its price rise over the same period, right? Silver Price Increase Relative to Gold — Source: Seeking Alpha Unbelievably, over the same period of time, the price of silver managed a fold gain. Despite silver's outperformance, most people remember only gold's run during this period.

This could be due to people following the price of gold more than silver's price. Or maybe people focus more on the end of the US dollar being tied to the price of gold. The — Bull Market Some may wonder if perhaps this outperformance was a one-time event. But let's look at the most recent bull market during the lates.

Of course, past performance is no guarantee of future performance, but fundamentally this outperformance makes sense. After all, silver's price is much more sensitive to the forces of supply and demand than is gold.

As mentioned, the supply of silver can change quickly since silver continually gets used up while no new silver mines are found. And demand for silver seems to only grow as more uses are found for the precious metal. Over the last 10 years, the silver price has been a lot more volatile than gold's on both the upside and the downside. This would explain the outperformance over the long term compared to gold but also reveals one key risk for investors: To see the long-term gains, an investor would have had to sit through multiple large losses.

The Risk of Investing in Silver The risk of investing in silver is the same as investing in any commodity. Gold vs. Commodities are assets like corn, coffee, lumber and ore. One common form of commodities trading is investing in precious metals , namely gold and silver.

As an investment asset, gold and silver have very different properties and uses in your portfolio. For more help with investing in gold or silver , consider getting the help of a financial advisor. Silver: Utility The biggest thing that differentiates precious metal investing from other commodity investing is utility.

For most other commodities, investors judge value based on supply and consumer demand. If you want to invest in coffee beans, for example, you can judge prices by how much coffee people are currently drinking, how tastes are changing, etc. Precious metals are different in that they have relatively low commercial utility. Compared with other metals, here are relatively few consumer or industrial uses for assets like gold and silver.

However, silver does have much more industrial and commercial use than gold. Approximately half of all silver bought and sold on the market is used commercially, with applications ranging from dentistry to electronics. This is still quite small compared to other metals, which are almost entirely used for production. By contrast, gold has very few commercial applications aside from jewelry.

This gives investors a basis on which to judge and predict price movements for silver, since you can make decisions based on factors such as industry need and how the global economy is moving. While the details vary, the gap is consistent. Gold is historically much more expensive than silver. This is in part because silver deposits are nearly 20 times as common as gold.

This leads to two outcomes for investors. You can buy more of it for less money, meaning that less liquid investors can get into silver more easily.

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Compared with other metals, here are relatively few consumer or industrial uses for assets like gold and silver. However, silver does have much more industrial and commercial use than gold. Approximately half of all silver bought and sold on the market is used commercially, with applications ranging from dentistry to electronics. This is still quite small compared to other metals, which are almost entirely used for production.

By contrast, gold has very few commercial applications aside from jewelry. This gives investors a basis on which to judge and predict price movements for silver, since you can make decisions based on factors such as industry need and how the global economy is moving. While the details vary, the gap is consistent.

Gold is historically much more expensive than silver. This is in part because silver deposits are nearly 20 times as common as gold. This leads to two outcomes for investors. You can buy more of it for less money, meaning that less liquid investors can get into silver more easily. Low-cost assets tend to also be highly volatile specifically because small price changes have outsized effects on the underlying investment.

Silver: Relationship to Broader Market The price of gold tends to move inversely to the stock market. Historically, the worse the stock market does the more investors flock to gold. By contrast, when times are good, investors tend to pull their money out of gold and put it into assets with greater links to the overall economy.

As a result, many investors hold gold in their portfolio specifically for if they need liquidity during a downturn. For example, a recession is the worst time to sell stocks but the best time to buy them. By contrast, silver tends to move with the economy overall, at least more so than gold. This is in significant part because of the same commercial applications that make silver a more predictable asset.

When the economy slows down, industries need less silver for manufacturing, driving the price down. This often creates a shortage in the amount of available silver. And shortages usually increase the price of the commodity. So in terms of pure supply and demand, silver paints a much brighter picture than does gold, one that investors can much more easily follow.

Silver as an Inflation Hedge One of the major reasons people purchase gold is as a hedge against inflation. Gold is a real asset with limited supply, in contrast to fiat currency, which can theoretically be printed infinitely. This became a point of major interest as the Federal Reserve enacted its quantitative easing QE policy, which escalated many fears of runaway inflation But silver also has all of the characteristics that make gold an effective hedge against inflation.

Currently inflation in the U. This is the highest inflation has been since Reasons to consider investing in silver as an inflation hedge include: Silver is of course a real asset. And though it is more abundant than gold, its supply is still limited. And silver has just as rich a history as gold as a store of value. Silver During Previous Gold Bull Markets Of course, some investors buy gold in order to profit from a rise in the price. They don't worry much about Venezuela-level inflation or a Mad Max-style apocalypse.

As with any commodity, the gold market has seen quick and spectacular rises in price. But silver has also enjoyed its own bull markets. Now that we have made the case for why silver can be attractive, let's see how it compares to past gold bull markets. The s Bull Market The big gold bull market everyone talks about occurred in the s.

The end of the gold standard coupled with double-digit inflation led to a near-mythical rise in the gold price. Price of Gold From to Source: St. Louis Fed While gold rose steadily through the s, in the last two years of the decade the price appeared to go parabolic as its price increased nearly six-fold.

Surely nothing matched its price rise over the same period, right? Silver Price Increase Relative to Gold — Source: Seeking Alpha Unbelievably, over the same period of time, the price of silver managed a fold gain. Despite silver's outperformance, most people remember only gold's run during this period.

This could be due to people following the price of gold more than silver's price. Or maybe people focus more on the end of the US dollar being tied to the price of gold. The — Bull Market Some may wonder if perhaps this outperformance was a one-time event.

But let's look at the most recent bull market during the lates. Of course, past performance is no guarantee of future performance, but fundamentally this outperformance makes sense. After all, silver's price is much more sensitive to the forces of supply and demand than is gold.

As mentioned, the supply of silver can change quickly since silver continually gets used up while no new silver mines are found. And demand for silver seems to only grow as more uses are found for the precious metal. Over the last 10 years, the silver price has been a lot more volatile than gold's on both the upside and the downside.

This would explain the outperformance over the long term compared to gold but also reveals one key risk for investors: To see the long-term gains, an investor would have had to sit through multiple large losses. The Risk of Investing in Silver The risk of investing in silver is the same as investing in any commodity. These assets by their nature experience continual boom-and-bust cycles. Most of the money made in commodities such as gold and silver occurs once in a generation.

And many who prosper in one bull market end up giving away their gains trying to time the next move up. Investors avoid such pitfalls by making sure their portfolio is diversified and understanding the speculative nature of owning these metals. Another way investors can avoid losses is to look at their investment in these metals as insurance for their portfolio and not as a big trade. For this, we have physical metals and once again silver offers benefits.

Physical Silver vs. Physical Gold We often hear that we should own physical gold as insurance against an inflation crisis or other worst-case scenario. The Price of Gold — The big issue for most investors however is the price of gold. And most investors don't have that kind of cash lying around. Storage — Storage also becomes a concern. It could be difficult to sleep knowing you have thousands of dollars in gold lying around the house. Professional storage is an option, but that introduces more costs to investors as well as a risk if something happens with the company holding your gold.

Silver has a major advantage, which is the same quality that made it a key piece of trade for thousands of years. It is just as trustworthy as gold for a fraction of the price. This makes it much more affordable for everyday investors. While gold will most likely continue to take the lion's share of press releases, silver continues to be a dependable precious metal that is far more affordable for investors. And in a bull market, it may even offer far better returns. Today it is easier than ever for investors to get exposure to silver.

You no longer have to buy physical silver but instead can buy shares in a silver exchange-traded fund ETF through your investment broker. No one knows for sure if we are in another big bull market for precious metals. But if you believe we are, perhaps skip over the much-hyped gold market and consider its less famous cousin instead. Further reading:.

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