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Gold vs Silver – Key Differences for Investors

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As an investor you may be thinking that now is the ideal time to start trading in precious metals. The prices of both gold and silver are riding high in the current uncertain economic conditions. The question then becomes, which one is best to buy, and what are the actual differences between these two precious metals.

Here we will take a closer look at several of the key differences between the two with a particular focus on how they may impact you from a trading and investment standpoint.

Affordability of Silver

Naturally, this is one of the first things you will notice when you look at the silver spot prices. It is cheaper than gold by quite a distance. This lower price though actually comes with many of the same benefits you will find in a purchase of gold or other precious metals.

Silver just like gold works as a store of value and hedge against many economic uncertainties that can occur. Alongside this intrinsic value it is also a tangible asset in that you can see and touch it unlike some other forms of investment. Silver is also a very private and secure physical asset to hold.

For these reasons then, an investment in silver can bring you several of the same key benefits but with a much lower and more affordable price. This affordability is also one of the key reasons why demand for silver among first-time investors in precious metals remains very high.

Storage Space Required for Silver

As we just mentioned, an investment in silver brings with it great affordability due to the lower price. Currently, you can purchase silver for around $24 per ounce compared with $1,900 for the same ounce of gold.

This may not appear to be a problem, but factoring in that silver also has a much lower density than gold, and you can see there are some issues with practicality when it comes to storing your precious metal. Simply put, you will need much more space in which to store your holding of silver than gold. This storage is already a key issue when buying physical gold but is something that is increased much more with silver.

The bottom line when it comes to storing silver vs storing gold is that silver will cost you more in storage due to the amount of space it takes up. Silver must also be stored in a dry place to avoid any deterioration of quality. This is simply a worry you do not have with gold.

Price Volatility of Silver vs Gold

In terms of quantity, the annual supply of silver is much greater than the annual supply of gold. This can also be a contributor to later differences but when it comes to volatility we have to look at the value of the silver market compared to the gold market considering current pricing.

With this value attached, the value of the gold supply to the market is more than 12 times greater than the total value supplied to the silver market. How does this impact the volatility of silver?

With a smaller supply value, silver can be more impacted by any changes in the market. This can be compared to the stock market in general with the example of a very high market cap company vs a lower market cap company. It takes less trading action to move prices at the lower value.

This volatility point can be viewed from either perspective as a trader. It likely means that on a bad day when markets are down, silver can be down more than gold, though it also means when prices are up, silver can rise proportionately more for the same reasons.

Silver is Used More in Industry

A much higher percentage of the silver supply is used in industry. It has a broad range of uses across many sectors. Silver is widely used in electronics due to its conductivity. It is also used in many medical applications, batteries, renewable energy, and other areas. Gold on the other hand is not used nearly as much in industry. What does this tell us about these precious metals?

On one hand, it shows that silver is much more exposed to the general economic climate since much of the demand comes from industry. These industries can be hit hard by any kind of downturn. You may think that such an event may lead to falling silver prices. That is not always the case though.

What both silver and gold have in common is the fact they are both used as a major store of value. They are both hugely popular safe haven investments in times of economic trouble. As has been demonstrated in the past and right now, precious metals like gold and silver can rise most in times of economic uncertainty as more investors buy both to safeguard their capital.

Much More Gold is Stockpiled

Government and other major institutions often hold major stocks of many precious metals. At one point, silver was the predominant metal held in reserve by many around the world. Today though that is certainly not the case. There is now much more gold stockpiled by countries around the world than there is silver.

There are several reasons for this, not least that silver is no longer used for the most part to make coins. This creates a situation whereby if there was a large sudden demand for silver from any kind of industrial need or economic situation, prices for the precious metal could jump up very quickly.

On the other hand, millions of ounces of gold is held in reserve by governments around the world. This holding is only increasing year on year. The bottom line is that if there does happen to be supply interruptions or unprecedented demand for silver, this demand may quickly outweigh supply at least in the short term which would lead to rising prices in a precious metal already prone to slightly more volatility.

Buying Gold or Silver

There are multiple ways to buy Gold or Silver. We recommend the following vendors:

  1. Bitpanda (USA Prohibited)
  2. Gold Broker
  3. Bullion Vault

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.