Comparing Silver Vs Gold

Many new investors would have heard and understood the value of gold, but what about silver? What makes it so special? And in a head to head comparison of silver vs gold, which one would be a clear winner?

In current markets, silver would be comparatively more affordable than gold, of course. And perhaps, that may be the reason that they are less looked upon for a financial portfolio. But is the current price really doing justice to a commodity commonly characterised as “precious metal”? If it’s inexpensive, what’s so “precious” about it?

In this chapter, we go deeper into silver and eventually make a head to head comparison to gold. Which would be the eventual winner in your wealth portfolio?

 1. Silver: A Precious Metal?

So the first question we need to first address is: Why is silver considered “precious metal”? In order to categorise a metal as precious, it has to have two characteristics: Rare, and abundantly used.

First of all, is silver rare? Google this and you will see heaps of resources that will tell you silver is rare, and in some cases, “rarer than gold“. Unfortunately, many of these sources are articles found in financial blogs and website who are looking at things in an investment standpoint.

Now, we need to be more objective when it comes to looking at our finance, so let’s get the source from somewhere that we would think would be significantly better: Science.

According to the United States Geological Survey‘s Mineral Summary which was released in 2017, global gold production was around 3,000 metric tonnes, while global silver production was around 27,000 metric tonne. That means only 9g of silver was produced for every 1g of gold produced globally. This percentage has been consistent for the past decade.

How “precious” is silver?

But how rare exactly is silver? Let’s look at more stats from PeriodicTable.com. If you were to have a glass filled with every element in the world according to their proportion, silver will take up only 0.0000079% of that glass.

So is silver rare? Yes, it is. Check that on the list.

As of this moment of writing (2017), demand exceeded supply for consecutive 18 years.

Rare=Valuable?

But does “rare” means that it is “valuable”? Valuable usually relates to demand, which basically means how badly anyone wants a specific item. For example, a rare Pokemon card will be incredibly sought after by a collector, but may not be worth anything to someone like Warren Buffett. So is silver merely a white elephant?In order to determine its value, let us look at WHY silver is mined in the first place.

In order to determine its value, let us look at WHY silver is mined in the first place.

Silver usually comes as a by-product of mining other metals. Hence, silver is not usually actively mined for, hence costs of mining silver may not be as high as gold. However, the importance of silver as an industrial metal is understated. In summary, silver can be found in nearly everything that we touch in the modern world.

Secondly, there’s not enough silver to keep up with demands for years. In fact, in the past 16 years, there’s a significantly consistent deficit of silver supply.

So is silver valuable? Yes, it is. Check that on the list as well!

 2. But how does silver compare to gold as an asset?

Silver has several advantages over gold:

  1. At current market prices, it is one of the most affordable precious metal.
  2. Because of its affordability, silver can be bought and owned in larger volumes.
  3. Silver has been shown to outperform gold in several instances in the market.
  4. There are more designs for silver coins than there are gold coins, hence it’s favourable to coin collectors and numismatics enthusiasts.

However, there are some key characteristics of silver that might make you reconsider:

  1. Silver has a higher premium than gold.
  2. It is a volatile investment. As much as it can outperform gold, it can also underperform as much.
  3. It is not as easy to liquidate as gold, because it is not as popular.

The advantage silver has over gold may convince more people to see silver as a viable asset.

3. Which investment metal suits me?

We have received this question quite often. What you need to first determine is your own financial and what do you wish to achieve from your silver and gold portfolio.

What we offer below is a breakdown of situations in which, in our opinion, one metal may be advantageous over the other. Remember, this is not a hard and fast rule. It is best to consult a qualified financial advisor to see your current financial portfolio could be further enhanced with gold and silver:

Consider gold...

  • Shorter time span to profit
  • Easier to liquidate
  • If you have a larger budget to set aside
  • For older investors
  • Already have a basic financial portfolio
  • Is disciplined in saving cash
  • Prefers value to volume

Consider silver...

  • For a higher profit potential
  • Looking at long term
  • If you have a smaller budget to set aside
  • For young investors
  • Is still building a basic portfolio
  • Have trouble saving cash
  • Prefers volume to value

Consider both...

  • For good liquidity and profit potential
  • If you are just starting out
  • Undecided which to get
  • Balanced portfolio
  • Is a collector
  • Good value for money

Still undecided?

 


Answer these nine questions to understand more about your precious metal suitability.

Are you disciplined with your money?
Are you purchasing for your children's future?
Are you looking to acquire precious metal frequently?
Are you signed up for any financial or investment plans currently?
Are you purchasing for long term future use?
Are you looking at higher profit potential or quicker profit potential?
Do you have a substantial budget?
Are you reaching a retirement age?
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In Chapter 6…

We’re rounding off the guide with some additional tips for you.