Which is a better investment: gold vs silver? With gold reaching a record high of more than $3,200, investors are asking this question.
This article breaks down everything you need to know so you can make smart investments based on your goals and risk tolerance.
Investing in Gold
Gold has been a good store of value for centuries. Demand for gold increases during times of economic uncertainty as investors choose safer assets to protect their wealth.
While physical gold is one of the best ways to invest in gold, it isn’t the only way.
Here’s how you can add gold to your portfolio:
- Physical gold: Includes gold bars and coins that can be purchased through precious metal dealers and online marketplaces like eBay. Some popular coins include the American Gold Eagle and the Canadian Maple Leaf coins.
- Gold ETFs, mutual funds, and index funds: Exchange-traded funds like SPDR Gold Shares and iShares Gold Trust are securities that you can add to your portfolio, whether you have an IRA or a brokerage account. These securities offer exposure to gold prices without the need to store physical gold at home.
- Gold mining stocks: Stocks of companies that produce gold are a way to gain exposure to higher gold prices. Mining companies like Newmont increase in value as demand for gold increases.
- Gold futures and options: These are contracts to buy or sell gold at a future date and price. You can buy on margin, allowing you to increase your exposure. While this is certainly a way to diversify your portfolio with gold, contracts come with higher risks and are best for experienced investors.
Gold is a hedge against inflation and currency fluctuations. Over the last decade, gold prices have doubled.
Gold tends to hold its value or even rise during economic downturns. While this is appealing for many investors, storing physical gold can add risks and unlike dividend stocks, gold-backed securities won’t generate residual income.
Investing in Silver
After gold, silver is a popular precious metal to invest in. It has a dual role as both a precious metal and an industrial metal.
Because it’s used in electronics, solar panels, and medical devices, demand for silver can offer investors the potential to generate higher gains.
Here’s how to add silver to your portfolio:
- Physical silver: Includes silver bars, coins, and rounds. Both the American Silver Eagle and Canadian Maple Leaf coins are available in silver and can be purchased from online precious metals dealers alongside gold.
- Silver ETFs and mutual funds: Funds like iShares Silver Trust are securities that provide exposure to silver prices without physically owning silver or storing it in your home.
- Silver mining and industrial stocks: Stocks of companies that mine silver or produce silver for industrial use can add silver exposure to your portfolio. This includes Pan American Silver and Wheaton Precious Metals.
- Silver futures and options: These are contracts to buy or sell silver at a future date and price. Just like gold, these are high risk investments best suited for experienced investors.
Silver can help you preserve wealth as well as make gains in your portfolio. The price of silver is lower which can make it more accessible than gold.
Silver responds to different market conditions than gold and has a variety of industrial applications, offering greater diversification.
Silver demand is surging due to its role in solar panels and electric vehicles, giving investors the chance to capitalize on the move to green energy.
Gold vs. Silver: Key differences
Precious metals are an asset class that can provide unique benefits to your portfolio. There are some differences between gold vs. silver that you’ll want to consider before making any investing decisions.
| Feature | Gold | Silver |
|---|---|---|
| Market Size | Larger and more liquid | Smaller and more volatile |
| Industrial Use | Has industrial applications, but is more limited | Extensive use in electronics, solar panels, and medical devices |
| Price Volatility | Lower and more stable | Higher and unstable |
| Liquidity | Easy to buy or sell in large volumes | Liquid with wider bid/ask spreads |
| Storage | Gold has a high value density so you need to store less of it | You need more silver to equate the same value as gold |
| Investment Demand | Strong during economic uncertainty | Influenced by both investment potential and industry usage |
Which one is right for you?
Investors often look to gold for wealth preservation, while silver offers investors the opportunity to generate higher returns due to its industrial demand and price volatility.
Choosing between gold vs. silver depends on your personal risk tolerance and investment goals.
- Gold: Ideal for investors who want stability and a hedge against inflation during economic downturns.
- Silver: Ideal for investors who are comfortable with risk and are willing to accept higher volatility for potential higher returns.
You can look at the gold-to-silver ratio to find the right time to buy. The gold-to-silver ratio measures how many ounces of silver it takes to buy one ounce of gold.
The current ratio is about 100:1. This can help investors gauge whether silver is undervalued or overvalued compared to gold.
Diversifying your portfolio with both metals can help you balance the benefits and risks of each.
Holding both gold and silver allows you to preserve your wealth while still capitalizing on changes in investors and industrial demand.
Is silver or gold better?
Congrats on taking the time to learn more about the benefits of gold vs. silver. You’re now armed with information on both metals that can help you make decisions that align with your financial goals.
Remember, there’s no one-size-fits-all answer. Some investors may prefer the stability of gold while others may look for greater diversification through silver.
The best investment strategy will depend on your individual circumstances and needs.
