Buy Silver or Gold?
Precious metals like Silver and Gold hold a special place in many societies. These valuable commodities have been used as art, jewelry, and currency for centuries. In the modern age, they also make popular alternatives to traditional Investment assets like Stocks and Bonds.
But as investors, knowing how to fold Precious metals into a modern Portfolio strategy is a bit tricky. As with all Investments, it’s wise to consider the advantages and risks of purchasing and managing these unique assets.
So, is it better to buy Silver or Gold?
The answer isn’t so simple.
Pros and Cons of Precious metals
Before we dive into the merits of Silver vs. Gold, let’s look at what Precious metals as an asset class bring to the table.
Pro: Tangible - and portable - assets
When you buy Precious metals, you’re actually investing in tangible assets you can see and hold. That level of physical involvement appeals to many investors who prefer “real” assets. Not to mention, you can take them anywhere in the world – even if you don’t have internet access.
Con: Added costs
Tangible metals incur extra inconveniences, including:
- The time, financial, and spatial costs of transporting, storing, and insuring your Investments
- The commissions dealers charge to cover distribution costs
- Potential premiums on collectibles like Coins
- Up to 28% in capital gains taxes on any profits from selling your Gold and Silver
While some Investments like Gold IRAs and ETFs can circumvent or minimize some of these costs, doing your research first is crucial.
Pro: Inflation hedges
Inflation occurs when the price of goods and services rise over time, diminishing the dollar’s spending power. To protect against souring economies and decreased purchasing power, some investors turn to Silver and Gold. As physical commodities that are in limited supply, these Precious metals provide “safe havens” to store value and hedge against Inflation.
Con: Speculative Investments
Unlike paper assets like Stocks, Precious metals don’t inherently produce income. The only way to profit is to sell your asset for more than you paid. Additionally, their limited supply and uses expose them to unique price volatilities.
These factors make Silver and Gold speculative Investments – that is, buying them involves speculating on their future price movements. While this isn’t inherently bad, it can be risky, and should prompt investors to be clear about the purpose of Precious metals in their Portfolio.
Precious metals can bring diversification to any Portfolio by spreading your dollars into assets that don’t move with regular Financial markets. In doing so, you can prop up your Portfolio when Stocks, Bonds, or Real Estate crash yet again.
Con: Less liquidity than "traditional" assets
Another risk of investing in Silver and Gold is the relative lack of liquidity. Finding and dealing with a buyer requires more time and energy than trading paper assets like Stocks and Bonds. Plus, Precious metals markets often face higher transaction costs and pricing inefficiencies that eat into your profits.
Pros and cons of buying Gold
Now that we’ve established the advantages and risks of Precious metals as a whole, we can scrutinize the specifics. Here, we’ll look at the pros and cons of buying Gold compared to Silver.
Pro: Gold Has More Limited Supply
In 2019, some 27,000 tons of Silver were mined globally, while just 3,300 tons of Gold were produced. For investors, this limited supply means that Gold tends to hold its value higher and more resiliently than the more common Silver.
Con: Gold Has Less Short-Term Growth Potential
Precious metals investors often look to the Gold-Silver ratio to compare the value of the two assets. Historically, this ratio has stayed between 10:1 and 15:1, indicating that Gold is usually 10-15x more valuable than Silver.
In the last few years, however, this ratio has fluctuated between 65:1 and 121:1, suggesting that Gold has gained value far faster than Silver. Unfortunately, that leaves Gold far less room to grow in favor of Silver’s undervaluation. In other words, Silver may have more short-term growth potential than Gold.
Pro: The Gold Market Has Greater Liquidity
Silver is easier to obtain than Gold – and yet, due to these enormous price differences, the Gold market boasts greater price liquidity. Though Gold moves slower, leading to smaller short-term gains, it also tends to retain its value better in various economic conditions.
Pro: Gold Sees More Growth Over Time
In the last century, Gold and Silver haven’t enjoyed the same growth as Stocks or Bonds. Though they hold their value well, they tend to experience less upward-trending price volatility.
However, when compared to each other, Gold sees much higher long-term growth than Silver.
For example, between September 1922 and 2022, Gold experienced an Inflation-adjusted increase of 347%. In contrast, Silver grew just 57% in the same period. While both assets saw periods of volatility that produced greater returns, as long-term Investments go, Gold takes the cake over Silver.
Pros and cons of buying Silver
So far, we’ve covered the advantages and disadvantages of Precious metals and Gold. Now, let’s consider the pros and cons of buying Silver.
Pro: Silver is More Affordable
Because Silver is far more abundant, it’s the cheaper of the two metals. While higher supply somewhat depresses prices, it also means that investors can more easily afford an ounce of Silver. Plus, Silver has more use cases, so when it’s time to sell out, you may have more options.
Con: Silver Has Greater Global Supply
On the other hand, Silver’s higher supply means that the metal will likely never achieve the same enormous gains Gold has seen in recent years. The higher supply also leads to greater physical liquidity, meaning that the market has more wiggle room for volatility.
Pro: Silver Has Greater Short-term Growth Potential
While Gold is potentially overvalued compared to Silver according to the Gold-Silver ratio, that means Silver is undervalued compared to Gold. Effectively, this leaves Silver with enormous opportunities for growth to catch up to Gold’s massive gains.
Con: Silver is More Susceptible to Economic Activities
Both Silver and Gold can diversify your Portfolio and hedge against Inflation.
However, of the two, Silver is more correlated with the markets and economic activities. (Partly because Silver offers more industrial utility, and partly due to its increased supply.)
As a result, the white metal is more likely to suffer economic-induced volatility. For investors, that makes Silver a riskier bet that’s more susceptible to downturns and speculative investing.
Con: Silver Requires More Storage Space
Because Silver is less dense than Gold, a one-ounce Gold bar is almost half the size of a one-ounce Silver bar. At the same time, Silver is less valuable than Gold, meaning that purchasing an equivalent dollar amount leaves you with more physical Silver.
Or, in concise terms: no matter which way you slice it, Silver requires more storage space than Gold. And as your Investments grow, that inevitably contributes to increased storage and insurance costs that eat into your potential profits.
Is it better to buy Silver or Gold?
So far, our comparison makes it appear that Silver offers fewer upsides and greater risk than Gold. To some, that might suggest that Gold is always the better bet.
However, it’s important to note that we haven’t weighted these pros and cons – merely laid them out for you to see.
True, for some investors, the hedging potential and lower global supply of Gold makes it the more obvious choice. The metal tends to encounter less volatility, hold its value better, and is more popular among some investors.
But for others, Silver’s increased affordability and short-term growth potential outweigh its higher volatility and increased storage costs.
In other words, we’re going to repeat the advice you’ve probably heard a thousand times before: whether it’s better to buy Silver or Gold depends on you. Ultimately, you alone can properly weigh your needs, goals, and financial situation against the potential risks and benefits of adding Precious metals to your Investment strategy.
How to buy Silver or Gold
After you decide if, when, and how much Gold and Silver to buy, there’s another question to tackle: how should you add these metals to your Portfolio?
For some investors, the ability to physically own and touch their assets is important. But, as we’ve discussed, buying tangible Bullion increases your costs, not to mention the risk of theft.
Another avenue involves purchasing Gold-related equities, like Mining stocks or ETFs. While these assets offer potential appreciation value and even dividends, it’s not quite the same as buying Silver and Gold outright.
That leaves one of our personal favorites: Gold IRAs, also called Precious metal IRAs.
These tax-advantaged Retirement accounts allow investors to purchase physical Precious metals without breaking the bank with added costs. Plus, their tax-advantaged status means that you may not have to pay taxes now – or, in a Roth IRA, potentially ever – on your capital gains.
To learn more about Gold IRA accounts reach out to one of the companies that offer these unique Investment vehicles. They have representatives available to answer your questions and they can provide you with resources that will explain all of the details.
At Gold Well Live we have evaluated numerous Gold IRA companies and determined that the Augusta Precious Metals IRA is the best overall. As we explain in the mini-review below, Augusta is dedicated to customer education. On top of this commitment to education Augusta has the distinction of receiving zero customer complaints at the Better Business Bureau (BBB) or any other rating agency.
Augusta Precious Metals
Augusta Precious Metals is committed to educating their customers. The company provides extensive educational materials on its website and investors with $100,000 or more to invest can schedule a 1-on-1 teleconference with Devlyn Steele, the company's Harvard-trained director of education. Many of Augusta's customers state that the company worked with them patiently until they were comfortable making an Investment in Precious metals. Augusta minimizes the fees you will pay for a Gold IRA and they never charge an IRA maintenance fee.
After the dot com bubble popped I started researching Financial bubbles - how they evolve, how they pop, etc. I quickly realized that Gold is the only real money on planet Earth and in 2002 I bought my first Gold Coin. I've been investing in the shiny stuff ever since - both physical Precious metals and the Mining stocks. I've also studied the Financial markets, trading, Technical analysis, and the endless games that central banks play with fiat currencies. I do my best to share what I've learned with others - that's what you'll find here on Gold Well Live.