Investing In Gold vs Silver

Investing In Gold vs Silver: Knowing Differences

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If you’re interested in commodities trading, you must have heard about gold and silver, which are common forms of investment. Gold and silver have different features despite being popular precious metals and uses in your portfolio. 

Gold and silver have been in high demand throughout history, so they are attractive investments. Gold prices reached an all-time high of over $2,000 per ounce in 2020 and usually increase in value when the currency falls. Due to this, investors add gold to their portfolios to protect their traditional assets during economic downturns.

Silver is also known for tracking the value of gold, so the value increases alongside gold. It has high demand because it is used to produce goods like jewelry, tableware, flatware, and photographic film, and it is also used in electronics. This causes silver to have high demand and is usually traded in smaller quantities. 

If you’re thinking of investing in commodities and you can’t choose between gold and silver, our guide covers all you need to know. 

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Investing In Gold vs Silver

Differences Between Gold and Silver Investments: Factors to Consider 

If you want to choose between gold and silver for your investment, you need to keep some factors in mind. Both precious metals are smart purchases and will also help you fight against inflation. Despite this, they have some differences that you need to consider. When choosing the best precious metal for your portfolio, you need to check its usage, liquidity, volatility, affordability, and relationship to the stock market. 

Usage 

When it comes to industrial usage, silver has a higher demand than gold. Gold and silver prices move the same way, but gold is a more reliable asset to invest in when you want to hedge against inflation. But in the case of silver, there are different industrial applications that makeup half of the precious metal’s demand. It is used in electronics, solar panels, industries, vehicles, and medicine.

Since silver is important in different industries, you will find that sometimes the price follows the economy. So, if there is more demand for manufacturing, the prices will increase. On the other hand, when the pace of trade slows down, the price of silver will fall. 

On the other hand, the price of gold increases when the stock market falls or even crashes. For instance, during the Great Recession, while the S&P 500 decreased by 37%, the price of gold went up by 24%. The price of gold rises in its market since it is powered by investors and has limited industrial applications, which adds to its protection against inflation. 

Liquidity 

Gold is more liquid than silver, and this is another reason why the market favors it. It is easier to trade, buy and sell gold than it is for silver, and there are even more gold exchanges than silver exchanges. Keep in mind that there are some precious metal exchanges that accept both gold and silver.

You can measure the liquidity of precious metals in different ways. It mostly depends on how much it costs to buy or sell the metal, how quickly you want your money back, and the size of the transaction. While silver is not as liquid as gold, it is possible to trade it for money when you use an ETF. Most people invest in gold bullion because it is more liquid than silver bullion. 

Volatility 

Although gold and silver are volatile in the short term, both are highly safe as long-term investments. But if you compare both assets, you will see that the silver market is more volatile than the gold market. 

It’s important to note that while there is eight times more silver being mined by gold, the silver market is not worth as much as the gold market. That is because gold is almost 70 times more valuable than silver per ounce. 

Due to this, silver is more volatile than gold, and this makes it an ideal short-term investment. On the other hand, gold is great as a long-term investment. 

Affordability 

Silver is more affordable than gold, so if you’re working with a tight budget, you should consider investing in silver instead. This is why gold is considered a safe-haven investment, as it is even held by the banks and government. 

Due to this, silver is more affordable to mine, buy, and produce than gold. If you want a precious metal in your portfolio that acts as a safe haven, you should consider silver. But gold is a great diversifying investment that will protect your other investments from crashing. 

Relationship to Other Markets 

It’s also important to consider the relationship of gold and silver to other markets, especially the stock market. In terms of gold, it moves inversely to the stock market, which is why it is called a countercyclical investment. 

This means it goes up when stocks and bonds go down and the other way around. This is why most investors move towards gold when the stock market does badly. Some investors also remove their money from gold and invest in traditional assets when the stock market is doing great.

On the other hand, silver moves with the economy more than gold. This is due to the commercial applications that they have, making it a predictable asset. So, when the economy slows down, the price of silver also goes down. 

Investing In Gold vs Silver

How to Invest in Gold and Silver 

Gold and silver are both attractive investments, and this is because they come in different forms that you can use in investing. Whether you choose gold or silver, you can invest in them in the same way, whether you buy them as physical commodities or you open a precious metals IRA. 

Physical Metals 

Gold and silver are physical metals which means that you can hold them in your hand, unlike stocks and bonds. Since they are tangible assets, you can store them in a safe, at the bank, or even in your retirement account. Investors can store their precious metals however they choose.

These precious metals are tangible, but you also need to consider the cost of insurance and storage. There is a downside to holding bars and coins, as investors would have to pay more because of the production and distribution markups. 

Mining Stocks 

You can also invest in gold and silver by purchasing their mining stocks. This involves buying the stocks for a silver or gold company, although the value of the precious metals is highly related to the performance of the company. 

You need to check the growth projections of the company and the prospects for demand from electronics and jewelry. Mining companies usually make the purest forms of precious metals, and this is then extracted at a low cost. 

ETFs 

ETFs stand for Exchange Traded Funds, and these have become very popular because it allows investors to gain exposure to gold and silver without actually owning the assets. ETFs are also managed by a professional, so all you have to do is invest, and they will manage the costs of storing gold or silver, 

Keep in mind that buying a gold or silver ETF does not give you direct ownership of the metal. Instead, it tracks the value of the metals. Also, you don’t have to consider the reduced long-term capital gains rates since precious metal ETFs are taxed as collectibles. 

Gold and Silver Futures 

Another way to invest in gold or silver is with futures. Gold or silver futures contracts are agreements to buy or sell assets at a predetermined price. These contracts are available for different commodities, including silver and gold. They are usually bought and sold on an exchange, so you don’t have to own the commodities physically.

It’s important to note that trading gold or silver futures is riskier than owning them physically because they are sensitive to inflation. But, they are more affordable to invest in, so investors can get started at a cheap price. Also, futures don’t have an intrinsic value, so if the contract is not fulfilled by the deadline, you will lose your investment. 

Precious Metals IRAs

If you’re preparing for your retirement, you can consider holding gold and silver in a precious metals individual retirement account. This is a self-directed IRA that allows you to invest in precious metals and will work as a hedge against inflation. 

The IRS does not allow you to hold precious metals by yourself, so you will have to work with a custodian and a dealer to get started. You also need to consider the purity requirements of the IRS, which are 99.5% for gold and 99.9% for silver. 

Investing In Gold vs Silver

Top Three Gold and Silver Investment Companies 

If you want to invest in gold and silver, you should consider working with the best companies in the industry. These investment companies allow you to buy gold and silver of the highest quality and will also manage a precious metals IRA if you decide to open one. After extensive research, we have compiled the best investment companies to get started with. 

#1

Augusta Precious Metals is one of the highest-rated investment companies for gold and silver in the industry. The company offers transparent pricing, a wide range of precious metals, and self-directed IRAs. It partners with third-party storage facilities, so the storage fees are more affordable. 

If you’re not opening an IRA, you can ask the company to buy the gold or silver and send it to your home or store it in your preferred storage space. But if you want to open an IRA, Augusta Precious Metals will manage it for you. The main downside is the minimum investment amount of $50,000.

#2. Goldco

#2
95%
Trusted

Goldco is a reputable company that allows you to hold physical precious metals or open an IRA. The minimum required purchase for Goldco is $25,000, and they are known for their affordable fees. Unlike other companies that offer fees based on the value of your precious metals, Goldco has flat fees instead.

Another advantage of investing with Goldco is their buyback guarantee. If you buy gold or silver from them but change your mind, you can sell it back to them at a very good price rather than selling it to a random dealer. Plus, Goldco focuses on educating customers with different blogs, videos, and e-books.

American Hartford Gold is a well-known retailer of physical gold and silver, and also their commitment to customer service. The company works with different precious metal specialists who are always available to provide you with guidance, answer all the questions you have, and offer the latest market information. The consultation comes at no extra cost.

But American Hartford Gold is the most affordable option on our list. If you want to open your gold IRA, you need a minimum of $10,000. But for cash purchases, the minimum is $5,000. But on the downside, American Hartford Gold does not list its prices on the website, and you have to contact a representative. 

Gold and Silver Investing Tips 

There are a few tips that you need to keep in mind when investing in gold and silver. Gold is the best option if you want to reduce your portfolio risk and is an ideal choice to protect your assets from market downturns. But if you want an asset that exposes you to price fluctuations, you should opt for silver.

Whichever you choose between gold and silver depends on your risk appetite and time horizon. You can also decide to invest in both of them if you have the resources for it. 

Conclusion 

With our complete guide, you can easily choose between gold and silver. Both of them are the most stable assets that you can consider in precious metals and are resistant to recession. Silver is a good choice to diversify your assets, while gold is ideal for protecting the value of your wealth.

If you have decided to invest in precious metals, the first thing that you should decide is between gold and silver. Then, you need to consider how you want to invest in it, whether by purchasing the bullion or opening a precious metals IRA. Ensure you work with a professional financial advisor or reliable custodian before getting started.