Inflation, the cost of living crisis, and war are leading investors to consider other forms of investments. A couple of years ago, many investors turned to cryptocurrencies such as Bitcoin, Ethereum, Dogecoin and others.
Like crypto, gold and silver offer investors diversification from regular securities such as stocks. They also offer a reliable hedge against the volatility of investment markets in the long run.
Gold and silver demand increases when the economy increases or when volatility increases. In fact, the price of these precious metals soars when the stock market is facing a crisis. For investors, gold and silver are safe havens to protect their investments during an economic crisis.
The question is which is the best investment, gold or silver? Keep reading to find out.
Gold vs Silver
Of all precious metals, gold and silver are the most popular investments. In fact, investors buy these precious metals to diversify their portfolios and mitigate any risks. However, while they are excellent choices for investors, they do have a couple of differences.
Market and Economy
When it comes to the broader market, gold tends to move inversely to the stock market. Basically, if the stock market is in a crisis, the price of gold increases due to increased demands by investors.
In investment circles, gold is a “countercyclical investment.” This means gold goes up when mainstream assets such as stocks and bonds go down. The worse the stock market does, the higher the demand for gold which sends its price skyrocketing.
Silver moves with the economy more so than gold. This is due to its commercial applications which make the precious metal a predictable asset. For example, if the economy slows down due to inflation, industries will need less silver for their manufacturing purposes. As such, its price will drop.
Historically, gold is more expensive than silver per ounce. At the time of writing, the price of gold per ounce was $1,840 while that of silver per ounce was $21.62. This is because silver deposits are 20 times more common than gold.
When it comes to investing, it’s easier to invest in silver than gold. This is because you can buy more of it for less money. As such, less liquid investors can invest in silver easily. Since silver is a low-cost asset, it’s also highly volatile because small price changes have effects on the investment.
What you need to know is that the volatility of silver prices can be three times greater than that of gold. While investors may benefit, such volatility makes it challenging to manage your portfolio’s risk.
Which is The Better Investment?
Gold and silver function as safe haven assets in times of inflation and economic crisis. However, gold stands out as the better investment, unlike silver. This is because gold has a better track record of realising higher profits over long periods of time.
Secondly, companies use silver more in manufacturing than gold. In fact, half the demand for silver is usually driven by its many industrial uses. For example, silver is widely used in solar panels, automobiles, electronics, and medicine to name a few. Because of its countless uses in industries, its demand rises and falls with the economy. This makes gold the hedge of choice in an economic crisis.
Lastly, silver is more volatile than gold. Currently, 70% of the silver supply is usually produced as a byproduct of mining for other metals such as copper. This makes silver less responsive to changes in demand.
When it comes to gold, it’s 70 times more valuable than silver. This is due to its smaller supply. As such, gold is stable as a long-term investment.
Different Ways to Invest in Gold or Silver
One way to invest in gold is futures. Not only can you take physical delivery of gold, but you can also speculate its price. The biggest advantage of investing in gold futures is the amount of leverage that investors can use. Basically, investors can own lots of gold futures for a small sum of money.
If the gold futures move in a specific direction you predicted or hoped for, you can make a lot of money. However, there are risks just like with other assets. What you ought to know is that leverage for investors usually cuts both ways.
If gold futures move against you, you’ll need to use margin just to maintain the security. Otherwise, you’ll have to take a loss because the broker will close the position.
You can also invest in gold by buying gold bars, coins and bullion. In Dubai, you can buy gold in different forms – from nuggets to bullion and bars. With physical gold, you get to enjoy lots of investment stability.
However, there are drawbacks to owning physical gold. One of the drawbacks is safeguarding physical gold. Second, to make a profit, you’ve to rely on the price of gold rising. Also, getting the full value of the physical gold is challenging, especially if you need money quickly.
Lastly, someone can steal physical gold from you especially if you don’t keep your holdings protected.
Another way to invest in gold is to invest in mining businesses that mine the gold. This is one of the best alternatives for beginners, intermediate and experienced investors. This is because one can profit in two ways.
First, when the price of gold rises, the profits of the mining business rise. This means, your mining stocks also increase in value. Second, the mining business can raise production over time enabling you to profit even more.
Gold and silver have proven track records for returns. However, gold has a better track record. Not only does gold outperform bonds and stocks during an economic crisis. But because gold is not highly correlated to other assets, it’s the best option to diversify your portfolio. Remember that like any other investment, it’s not without drawbacks and risks. So, before you invest, take your time to learn the risks and drawbacks.
I hope this article was helpful and that you found it interesting. If you have any questions, we will be more than happy to answer them below.
All the best,