Precious Metals Buying Guide: 5 Key Differences between Silver and Gold Investing

For years, investors have been hearing all the hoopla over the benefits of investing in precious metals. Unfortunately, when it comes down to it, the question remains: What is the better investment, gold silver?

There are advantages and disadvantages to both, but when it comes down to it, which is the better investment and when should you make it?

Both gold and silver are precious metals, and each is even considered a good investment option, but there are several important distinctions to be made when they are considered for investing.

And when it comes time to diversify your portfolio, there must be one choice that stands out over the other. How to make that choice is what this article is all about.

1- The Price of Silver is Much More Volatile than Gold

The total amount of new silver that comes on the market every year is about 1 billion ounces. By contrast, the annual supply of gold is about 120 million ounces. This might make it seem like the silver market is eight times larger than gold, but this is deceptive since there is a massive difference in price.

At current prices, the annual gold supply is 12 times larger than silver. All it takes is a relatively small investment in silver to affect the price, making it a much more volatile investment.

This volatility can present advantages as well, such as when gold and silver both rise at the same time. When silver increases, it grows more than gold. When the price of both metals goes down, silver will fall more than gold.

There are some exceptions to this activity, but as a rule, this is how it works. Just as is the case with any investment, it does no good to sell the first time that silver or gold drops, so you have to be cautious, but historically, silver has fallen more than gold.

2- Silver is Much More Affordable than Gold

Plainly stated, there are many similarities between silver and gold. If you buy physical silver, you can gain the same benefits as gold offers. This is an advantage that almost no other asset offers.

The real advantage that silver offers over gold is that it has all of the gold’s advantages but at a much lower price. That’s why silver is often called the “poor man’s gold.”

Despite having so many similarities with gold, silver has the advantage of being easier to sell for everyday things. For example, if you wanted to sell some gold to meet a financial obligation, you would have to sell a smaller amount as compared to silver.

If, on the other hand, you wanted to meet the same obligation, you could use a more significant amount of silver to achieve the same price, without having to sell any of your gold.

3- Silver Requires Much More Storage Space than Gold

All of these advantages that silver holds over gold are great, but there is one distinct disadvantage to owning silver: it takes a lot more room to store silver than it does gold.  Buying physical silver demands much more space than that required to store gold.

At the current prices, you can invest the same amount of money in gold and silver, but you will receive about 80 more ounces of silver than gold. Further, it is important to realize that silver is much less dense than gold. The volume of silver is about 84 percent more than gold. As a result, silver will take up about 128 times the space of gold.

4- Silver Has More Industrial Uses

About 12 percent of the world’s gold supply goes for use in industrial applications. By contrast, a whopping 56 percent of the available silver will be used by industry.

This is due to silver’s unique characteristics. Silver is known to have so many industrial applications that it would be difficult to think of a product that is used in everyday life that does not incorporate silver in some form. Silver is used everywhere, from electronics to solar panels. Plainly stated, silver is indispensable.

Due to the greater number of silver uses over gold, silver has the potential to have a greater impact on the world economy in terms of demand. As a result, silver has far greater susceptibility to economic booms and busts.

5- Stockpiles of Silver are Falling, and Gold Stockpiles are Rising

Stockpiles of precious metals don’t have much immediate impact on the price of silver to most investors. However, behind the scenes, the stockpiles of these metals have an enormous effect on the circumstances surrounding investments in them.

In past years, governments and many institutions maintained vast reserves of silver. Today, most governments and institutions don’t maintain silver supplies. In fact, in today’s world, only three governments have significant silver supplies, India, Mexico, and the United States.

The primary reason that governments no longer use as much silver as they once did is that they changed the type of coinage they make, from silver to nickel. The industry does continue to be a huge user of silver, but not to the extent that governments utilize gold.

Central banks continue buying huge amounts of gold every year, -;1.09 billion ounces-; for official reserves. The demand for silver, by contrast, is not nearly as high. This places silver in a difficult spot since if the need for physical silver were to increase, an immediate shortage crisis would ensue.

The net effect of all this is difficult to determine since there are so many factors to watch, all of them volatile. It can be surmised, however, that as long as both gold and silver are made available for investors to purchase, it’s a safe bet that they will buy both for their portfolios.

This scenario does not always play out this way, but generally speaking, just like the stock market, both gold and silver have their ups times as well as their downs. It pays to watch the markets carefully to determine what investment strategy is best for you.