Precious Metals

The 5 Biggest Differences of Gold Vs. Silver That Mean the Most to Investors13 min read

Nov 2, 2021 10 min
Gold vs Silver
Reading Time: 10 minutes
You’re getting ready to buy precious metals, but you aren’t sure if you should actually buy silver or gold, right? Besides the price, is there really a major difference between the two investments?

They are both definitely considered precious metals, which means they are rare because they come directly from the crust of the earth. But as far as an investment in gold vs. silver, it’s important to learn the 5 different distinctions between the two that investors need to be aware of. These differences can either victimize your portfolio or supercharge it. Within this article, we will share these 5 different differences and emphasize their implications on your investment.

The More Volatile Investment Is Silver

Each year, the silver supply tends to increase by roughly 1 billion ounces. The yearly supply of gold is about 120 million ounces.

Guess what? Based on those figures, the silver market seems much bigger than gold by about eight times. Or at least that’s how it appears. But there is a major difference in price as well that has an effect. The lower price of silver causes the annual supply’s value to be smaller than the value of gold.

Based on the current price structure, the yearly gold supply is bigger than silver’s supply by 12 times.

And gold has a huge market cap when compared to some of the most popular stocks as well. Using Disney as an example, the company’s valuation is 15 times bigger than silver. And the valuation of Apple is actually 56 times bigger than silver as well, which proves just how big the gold market really is.

This tells you exactly why silver is the volatile choice when compared to gold: you do not need a large amount of money to have an impact on the silver price.

The ultimate result is that the silver price rises and falls at greater levels of volatility when compared to gold on up days and down days. Some things to consider include:

Investors must remain emotionally prepared for the volatility when trading silver. Buying a precious metal like silver and panicking at the first drop in price could be extremely destructive to your portfolio. Between 2008 and 2011, gold gained 166% in value and silver gained 448% in value. This is obviously proof that silver is much more volatile and has much bigger price swings.

The bigger volatility in silver means it will perform better than gold in the next bull market. The higher levels of volatility mean you should be nimbler when it’s time to sell your investment. When the bull market in silver starts to peek, remember to sell your position because it will sell off fast and you’ll lose the value quickly.

Silver Is a More Affordable Option

This should be very obvious to everyone, but I’m mentioning it anyway because of the gold similarities.

If you intend to buy physical silver as opposed to futures contracts, certificates, or ETFs and other paper investments, you can have the same benefits that gold receives. No other asset tends to provide these benefits.

Similar to gold, owning physical silver means:

1Silver is a hard asset. It’s a physical asset that you get to hold in the palm of your hand. Owning physical silver means you have a tangible asset that can never be hacked, and your stockbroker has to constantly protect your account against being hacked whether you realize it or not.

2Silver is actual money, just like gold is. You cannot create this out of thin air because it’s a physical asset unlike digital or paper currencies. If you pay attention to the history of money you’ll see that there are more silver coins in existence than gold.

3Silver doesn’t have any counterparty risk. If you own physical silver, you never need a second party to make good on a promise or contract.

4Silver is never defaulted. There is no risk of default whatsoever if you own this investment, which isn’t the case with most other investments.

5Silver ownership is confidential and private. You’ll report gains on your income tax return, but there is a definite level of confidentiality and privacy, and when compared to gold, it takes advantage of these benefits at a much cheaper cost.

Silver Is the More Affordable Choice for Average Investors

Purchasing gold investments in small denominations – like half ounces and 1/20 of an ounce – is okay but you’re going to end up paying higher premiums for products below 1 ounce. The refiner has to spend more money to produce the smaller coins, which makes them a lot more expensive from a premium perspective.

At some point, you may prefer not to sell your entire gold ounce to pay for a small financial obligation. This is when silver comes into the picture. You can use the proceeds from a gold sale to purchase a car or something else on a larger scale. But if you’re looking to buy a new phone or pay for groceries, you can sell some of your silver and use the proceeds to pay for these less expensive items, without having to liquidate some of your gold assets.

All investors should keep silver on hand for this reason alone.

Definitely the Practical Choice

Since silver is such an affordable option, it’s a great choice for many different things including giving it away as a gift. Have you ever wanted to give somebody the gift of owning precious metals? Buying silver is definitely a much more affordable choice and it’s especially good to giveaway as a gift if you’re looking for a cheaper option.

To reiterate, investing in silver is a great choice for anyone with a much smaller budget. It’s also an awesome choice to take care of your smaller needs from a financial standpoint, like paying for groceries and less expensive goods and services. Gold is a much better choice when you’re making larger purchases.

Silver Has a Need of a Much Larger Storage Space

Even though silver is by far the more affordable option when compared to gold, it definitely has a catch though. You’ll require a lot more storage space to store all of your silver as opposed to gold.

At the current price level, you can purchase 80 more ounces of silver for the same dollar amount investment when compared to gold. Also, silver has much less density compared to gold, and pure silver has 84% more volume than pure gold. All told, silver needs a lot more space – in fact it needs 128 times more space – to store the same dollar amount worth of silver compared to gold.

Some examples of the different needs in storage space include:

Investors can hold $50,000 worth of gold in the palm of their hand. On the flipside, to hold $50,000 worth of silver you would need 10 big shoe boxes to fit it all.

Gold worth $50,000 weighs roughly 2.6 pounds. Silver worth $50,000 weighs 189 pounds.

$170,000 worth of gold can easily fit in a small safe deposit box. In the same small safe deposit box, you can only fit roughly $2300 worth of silver.

For the most part, you’d have no difficulty hiding gold investment coins in a cookie jar or sock drawer in your home. But they make very impractical hiding places when it comes to hiding silver investments. It doesn’t matter if you buy bars or coins, because more space is definitely needed to store silver as opposed to gold.

And since more space is definitely needed for all the reasons mentioned above, the fees for storing your precious metals in a depository are going to be higher. This has to do with the actual space itself and the fact that it requires more room to transport, which definitely adds to the overall expense.

Lastly, silver tarnishes and it will eventually happen, which is something that doesn’t actually happen to gold., All silver bars and coins need a dry storage space that will not get exposed to the elements, which is another concern that doesn’t come into play when storing gold.

Finally, just to reiterate, you need more space to store silver as opposed to gold and storing gold is cheaper than storing silver. Gold is light, not very cumbersome, and it doesn’t tarnish either.

Gold IRA Guide

Special Gold IRA Guide for Beginners:

Silver Possesses Greater Industrial Use

For all intents and purposes, the industrial sector uses roughly 12% of the supply of gold. Silver has many unique characteristics, so the same industrial sector needs to use 56% of the silver supply. Because there are so many uses for silver, every person typically uses a product containing it on a daily basis whether they know it or not.

Silver is found in solar panels, batteries, electronics, medical applications, and it’s in so many other places but you never really see it.

To paraphrase a passage in Mike Maloney’s book, out of every element, the metal silver is completely indispensable. It’s more reflective, thermally conductive, and electronically conducive than anything else. Our modern world wouldn’t exist without it.

What does this mean to investors? It means the overall condition of the global economy will have an impact on silver demand much more than gold. Silver price changes are directly related to economic busts and booms.

Silver Is in High Demand for Industrial Uses during Strong Economies, but the Demand Is Weaker during Recessionary or Deflationary Environments

This is only one major part of the story. The major uses for silver, as opposed to gold, is that we consume this metal and then throw it away or destroy it as it gets burned up during the fabrication process. There is no economic feasibility to recovering tiny grains or flakes of silver from the majority of the products that we produce. This puts a recycling limit on the amount of silver that comes back into the market.

Because of the Way Silver Is Processed, We Need Fresh Supplies of Millions of Ounces of Silver Regularly to Meet the Demand

Will the price of silver fall during an economic downturn or recessionary environment? This is a good question, but the truth is that silver tends to thrive during economic downturns, which may seem counterintuitive but it’s the truth.

In the 1970s, there were two recessions and a 14% inflation rate as well as an energy crisis, high unemployment, and the Russians even invaded Afghanistan. The demand for silver had increased on a global scale, even though it seemed like the wrong environment for it to thrive.

The silver price increased dramatically because investors protected their portfolio as a hedge against inflation and the economic downturn. This happens regularly in all recessionary environments, because the price of gold and silver tend to thrive during economic turmoil.

During Times of Financial or Monetary Crisis, the Role of Silver as a Form of Legal Tender Has Had a Bigger Impact on the Price Then It’s Industrial Role

If there is a deflationary depression, this is likely a scenario where silver will not excel, at least in the beginning. The Great Depression is a good example. But keep in mind that in a situation like this, central bankers and governments will likely put forth policies that are highly inflationary in an effort to keep the economy afloat, and it’s these policies themselves that will launch the silver price higher by creating a safe haven for investors.

Gold Stockpiles Are Rising While Silver Stockpiles Are Dwindling

This may not seem like a big deal to investors right now, but this development could have major consequences in certain areas behind the scenes.

Major institutions and governments liked to have a large silver inventories available and on hand in the past. But the majority of them no longer keep large stockpiles of this precious metal. The only countries in existence with silver warehouses are Mexico, India, and the United States.

Governments do not hold large amounts of silver any longer because they do not use it to mint coins. But silver has many important uses in different industries to one degree or another, so if future needs for silver ever arise, or the supply chain experiences some type of interruption, governments will not have the ability to step in and support the shortfall.

On the opposite side of the spectrum, central banks hold more than 1.09 billion ounces of gold in official coffers. And they continue to purchase gold each year. These regular purchases create a demand for this precious metal.

Silver doesn’t have this type of demand source available to help it grow in value. Nevertheless, the silver market ends up in a precarious position because of it. If there was a sudden major need for physical silver, like an industrial supply shortage or monetary crisis, this will spike demand and governments will not have the available supply on hand to meet these needs since they only have tiny stockpiles at best.

If you are interested in diversifying your portfolio with precious metals, consider a 401k to gold IRA rollover.  It’s a great way to add diversity to your retirement investments.

If Governments Begin Purchasing Silver for One Reason or Another, It Will Have a Massive Market Impact and Prices Will Skyrocket As Demand Increases

There is no guarantee that this scenario will ever play out, but it puts the silver market in a delicate position that could experience an immediate and sudden impact nevertheless.

Gold IRA Guide

Special Gold IRA Guide for Beginners:

5 Biggest Distinctions between Silver and Gold

1As far as volatility goes, silver is a lot more volatile than gold. In a bear market, the value of silver will drop more than gold does, and in a bear market it will rise higher than gold does. To succeed as a silver investor, it’s best to sell your position after a large silver bear market to lock in your success.

2From an affordability standpoint, it costs 80 times more to purchase an ounce of gold when compared to an ounce of silver. Silver is obviously the more affordable choice. And it’s a cheap way to give gifts. To purchase smaller denominations of gold, you should expect to pay higher premiums because it costs more to produce.

3For storage, gold never tarnishes, it doesn’t need a lot of space, and it’s cheaper to store. Silver, on the other hand, needs 128 times more space to properly store it when compared to the same amount of gold. Silver also tarnishes given enough time.

4From an industry perspective, the industrial sector needs 56% of the total supply of silver every year as opposed to just 12% of the gold supply. A healthy economy – or a struggling economy – will have an impact on the silver price.

5 As far as stockpiling is concerned, central banks stockpile large amounts of gold but they rarely stockpile silver and only in small amounts.

At the end of the day, investing in gold and silver can reap many rewards and add a solid balance to your portfolio.  Look to it ahead of times of crisis to help your keep your portfolio hedged against other investments you hold.

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