Silver vs gold
Silver vs gold is a matter of value, properties and personal preference
Silver vs gold – it used to be an argument among pirates with limited treasure chest space and is always a topic in jewelry stores. But these days it’s most often a question asked by investors worried about the stock market. Is one better than the other or should you go with the one whose color matches your bank vault? Let’s take a look at some things to think about when debating the merits of precious metals.
Size of the Markets
If there seems to be more gold than silver, you’re right – some estimates put the global difference at 2 billion troy ounces of gold bullion vs. 1 billion troy ounces of silver bullion. Over the last 20 years, the price of gold has been anywhere from 22 to almost 100 times the price of silver and the market for gold has been anywhere from 44 to almost 200 times that of silver. Gold wins on market size, whether it's bars or gold coins.
Volatility of the Markets
The smaller market for silver means that it’s apt to fluctuate more often and in greater ranges than the gold market. If you can take the risk and buy when market hits bottom, the return on silver is much higher than gold. On the other hand, gold tends to retain its value longer than silver. The gold market is less volatile and the price more stable, but silver is attractive to risk takers.
Because the market for silver is small, one or two large
investors can influence the price. Warren Buffet did this in 1997 when he
bought 130 million troy ounces of silver bouillon and owned 13% of the global
Silver’s low price is also a factor. In the 1970s, Nelson and William Hunt nearly cornered the silver market, driving the price from $11 to $50 an ounce before the market collapsed. The size of its market and gold’s higher price make it more difficult for a small group of investors to influence.
Size of the Supply
Geologists say that most of the gold in existence has
already been mined, while there’s still plenty of silver deposits in the
ground. This means silver is less likely to rise in price because of scarcity –
if the computer industry needs more silver, it can just mine for more.
On the other hand, there’s little chance that a huge new supply of gold from a gold rush will hit the market and drive the price down. Gold wins the supply debate.
We all like to hold and admire shiny objects like pretty gold jewelry, but it’s not a good idea with silver coins and silver bars because they’re easily tarnished. Silver coins should be kept in plastic sleeves to protect them from body oils which will dull their luster. Gold is difficult to tarnish but is a softer metal, so 24 karat gold coins should be handled with care because they can be easily nicked or scratched.
Let’s say the price of gold is 100 times the price of silver, so an ounce of gold is $1000 while an ounce of silver is $10. That means $1000 worth of silver is 100 ounces of coins or bars, an amount that takes up far more storage space then the equivalent dollar amount of gold. In the gold vs silver debate, gold wins the portability challenge.
Throughout history and across the globe today, gold is the number one answer when people are asked to name they’re favorite precious metal. That’s the reason why fine goods are said to meet the “gold standard” and the Olympic winners get gold medals. When investing in medals or metals, gold is the clear winner over silver.