Silver vs Gold: 9 Differences That Matter to Investors

Each year, thousands of people decide that they would like to invest in precious metals. Here, many of them come across both silver and gold, and ask the age-old question: Silver vs gold? Which is better?

In recent years, many people have heralded silver as an incredibly safe investment, especially during the recessions we’ve seen recently.

At the same time, many have done the same with gold, which partly causes this confusion!

Practicality

Both gold and silver investments pose a number of practical issues, many of which are the opposites of one another. It should go without saying, that gold is more expensive than silver.

For many investors, gold is more practical as it can be be bought in small quantities for a lot of money. You could quit easily spend $10,000 on pure gold without even buying one kilo of it!

This lightweight nature is extremely practical for many investors, especially when/if they want to transport it. $10,000 worth of gold can quite easily be stored in a briefcase or on your person without creating logistical issues.

Silver on the other hand, is much cheaper. As such, buying $10,000 worth of silver would create a number of logistical issues if you planned to transport it all at once.

Chances are you’d need two or maybe even three briefcases to transport this much silver!

Due to silver being much cheaper, it is much easier to sell silver in order to cover unforeseen expenses. For instance, let’s say your car broke down and it’s more than what’s in your emergency fund.

Chances are that selling 10 g of gold will cover the cost and then some. But silver? You could sell 1 kg of silver for just enough, rather than covering it, and having loads of money left over at the end!

Types

When you think of investing in precious metals like gold and silver, most people tend to picture buying gold or silver bars. However, both investment-grade gold and silver come in a number of different forms…

Thanks to Hollywood blockbusters portraying gold and to a smaller extent silver bars as the money of criminals, when most people think about investing in gold or silver, they think about gold or silver bars.

Due in part to this, physical gold and silver bars are by far the most common ways people invest in both metals. Here, they can be stored incredibly easily, either in their original packaging or not!

If you’re familiar with coin collecting, you might also be familiar with the concept of gold coins. Old gold coins like the American Eagles, British Sovereigns or South African Krugerrands are seen as pretty good ways to invest in either gold or silver!

However, if you’ve ever looked at buying gold coins, you’ll have likely come across proof coins. Essentially proof coins are coins designed to be collected with them often being struck separately, and placed in ornate collection cases.

The concept of proofs is not really a new thing. They have been around in some form since the early 1800’s, with the older ones generally being much rarer, and therefore more expensive!

Uses

When it comes to investment-grade silver and gold, bars, coins and proofs are by far the most common. Yet, it isn’t the only uses of either silver or gold…

Silver has a number of industrial uses. Today, most mirrors, phones and sunscreens have large amounts of silver in them, not to mention their countless other weird and quirky industrial uses!

At the same time, gold also has commercial uses, mostly in medicine. Here, it can be used in a number of different ways to treat bone injuries, by reducing swelling, joint pain and stiffness.

For most investors, whilst lifesaving to many, isn’t really of particularly great importance to them.

Both gold and silver have one more, non-industrial and non-medical purpose: jewelry. Many precious metal investors do shy away from jewelry due to the low returns and complexity of the business, but it is a main use of both metals.

Due to how expensive they are, gold and silver are both used to make jewelry. Looking online, it is possible buy 24 karat gold jewelry (and/or pure silver jewelry) which have diamonds, sapphires, rubies and/or emeralds in them!

Over time, if done correctly, the increase in the prices of the precious metal and stones can yield incredibly high results!

Generally, pure (24 kt) gold jewelry outperforms pure silver jewelry.

Price

It doesn’t take a genius to know that gold is a lot more expensive than silver is. On top of this, gold is also a little but more expensive than platinum (except at certain times of year!)

As of the time of writing, silver is currently sitting at around $27.20 per ounce. Gold on the other hand, is currently sitting at around $1,914.88 per ounce.

Needless to say, gold is a lot more expensive. Roughly, gold is around 69 times more expensive than silver is (as of the time of writing anyway).

For investors, this can work either for or against you. For those with a lot of money to invest, they often tend to buy as much gold as they can afford. Whilst those with less money to invest tend to buy silver.

Many bullion investors I know solely buy silver, as it has all the securities and benefits of gold (and perhaps a few more!) at the same time, it is also far cheaper, which allows them to buy more metal to reap the benefit from!

However, the opposite case is also true. Many bullion investors solely buy gold because it is more expensive. Due to this, less people buy it, so it retails for more money, thus netting them more.

Safety Net

The majority of people who invest in precious metals like silver and/or gold, don’t solely invest in silver and/or gold. Instead, silver and/or gold is just one of many different types of investments in their portfolio.

Generally, many of these investors buy silver and/or gold to form what they call a “safety net”.

When you look at investing in precious metals, you’ll learn that when stocks and real estate are down, gold and silver are up. And vice-versa, when stocks and real estate are up, gold and silver are down.

For many of these investors, it is just a matter of diversifying their portfolio. The vast majority of it is made up of stocks, bonds, real estate etc. however, they also want to be protected when things go south.

During recessions or market corrections, both gold and silver increase in value exponentially. Generally speaking, gold outperforms silver year on year, but in recessions, the opposite is often true.

Recessions often see the price of gold increase by about 25%, however with silver, it’s almost 66%.

Volatility

Many investors choose silver because its price fluctuates greatly from day to day. Take this week for example, the price went from $26.39 per ounce to $27.20 per ounce jumping to as much as $27.82 per ounce a mere two days ago.

To many, this may not seem like a lot, after all, it’s less than a dollar more per ounce. And yes, that is true. However, if you were buying 1,000 ounces, that’s an extra $810.

Now imagine if you were buying 10,000 ounces, that would be $8,100. The more you buy, the bigger the difference. This has the ability to net you thousands of dollars, but also for you to lose it as well.

During the same period the price of gold fluctuated from $1,898.40 per ounce to $1,914.88 per ounce. To many, this may seem like a lot, a weekly fluctuation of $16.48 per ounce is almost as much as it costs to buy one ounce of silver!

However, when you take into account the percentage changes, you’ll see that gold is far more stable. In total, over the course of the past week, silver has increased in value by 3.07%, whilst gold has increased by only 0.87%.

Yes, both have increased (and usually do week-on-week), however, silver has grown exponentially compared to gold. This can be good for investors, as they can net a lot of money, but for others, it could mean they lose a lot more!

Long Term Returns

Overwhelmingly, investors tend to buy silver or gold and hold it for several years before selling it. Most of these investors will keep their gold or silver for well over a decade, perhaps even two!

This is done for a number of reasons. The overwhelming amount of time, this is simply because it is easier, because most of them do it with their other assets, be it stocks, real estate or whatever!

Despite this being the reason the overwhelming amount of the time, it is also because of the long term returns of both metals. After all, it’s the only way to make money from gold or silver… they don’t produce any dividends.

Twenty years ago, the price of silver was $4.45 per ounce. As of the time of writing, the price of silver sits at around $27.20 per ounce. In total, the price of silver has increased by 511.24%, still a significant amount.

Over the course of the past twenty years, the price of gold went from $272.19 per ounce to $1,914.88 per ounce. In total, over the past twenty years, the price of gold has increased exponentially, by 603.51% exactly.

During the same period, inflation was roughly 50.1%. This means that the net price of silver increased by 461.14% whilst with gold, it is 553.41%, meaning that gold yields a higher return than silver does.

Storage

Gold is a far denser metal than silver is, as such, you can buy much more silver than Gold. Take this for instance, $10,000 of silver will buy you 11.2 kg, whilst the same amount in gold will buy you only 5.1 ounces.

Clearly, it is going to be easier to store 5.1 ounces than it is 11.2 kg.

Generally, most bullion dealers will offer their own vault services. Here, you buy some of their gold/silver and they send you a certificate saying how much of it is stored in their vault, for you to redeem for cash, whenever you want.

However, most people (unless they’re buying a large amount of gold/silver, usually upwards of $10,000) tend to store it at home instead. However, the same concept applies.

At a vault, you rent out a storage box, or a particular part of the vault. The more you store, the more you pay. At home, you could store it in one of a number of places, with the most common being a personal safe.

Most relatively cheap personal safes retail for between $100 and $200 dollars (depending mostly on size). This kind of safe would be perfect to store 5.1 ounces of gold (as well as any other valuables!)

But with 11.2 kg of silver? Most of these cheap safes would be too small to accommodate this. As such, you’d need to buy a larger, potentially more secure, safe. These safes range from as low as $300 to as much as $300,000!

Availability

Silver and gold are both considered to be finite resources. This means that one day, if we continue to mine them, both silver and gold deposits will run out. One day, there will be no more silver or gold left to mine.

And this isn’t far off into the future. This is something that will likely happen within our lifetime. Studies suggest different dates, with some being as early as 2025, with others being as far away as 2040.

However, the general consensus is that during the 2030’s, we will run out of both silver and gold. From there, it’s highly likely that the price of the metals will then increase drastically.

Due to this fact, many people are stockpiling precious metals, in the hopes that the price of these precious metals will increase dramatically and they’ll be able to sell it for an incredibly large profit!

However, out of silver and gold, they’re only stockpiling one metal: Gold.

Many of these precious metal hoarders are slowly selling their silver stockpiles. Using this money, they are then buying large stockpiles of gold and having it stored in vaults and personal safes all across the world.

This is one of the many reasons why the price of gold has increased so much over the past few years. The supply of gold is being depleted by mining and by hoarding, as such, the price of gold is absolutely massive to accommodate that!

Silver vs gold? Which would you invest in? Tell me in the comments!