Gold and silver are both regarded as can’t-miss commodities when it comes to investment. Gold, one of the most precious metals in the world, is seen as a safe heaven asset during the witness of long history, especially in bumping times such as financial crisis, inflation and deflation. Though not in difficult times, investors have formed the habit of storing some in case emergency occurs. As for silver, it will definitely be brought up as another precious metal when gold is on stage. Though silver is not as popular as gold, it is starting to be a new trend nowadays between investors. However, if there must be one picked between those two hitting investment, which one is better? Why?
Gold & Silver: Value They Possessed
The most down deep reason why gold and silver is different lies in the value they possessed. As we people living on earth known, gold has more value than silver for some certain reasons.
First, when a thing is scarce, it is precious. The content of silver in Earth’s crust is 19 times more than that of gold. Therefore, just as what indicated from the annual production, silver production is much more higher than gold production.
Second, silver is more prone to be corroded than gold. It means silver is less easy to be restored than gold. When a thing tends to be more easy to be consumed, it always is less valued.
Third, gold is acknowledged as luxury and a representative of one’s status.
To cut it short, you should invest in gold out of the purpose to reserve value.
Gold & Silver: Volatility and Liquidity
Though less value possessed by silver compared with gold, silver has its most strength, that is, it is more affordable. For any investment, there is always a threshold restricting people to enter. Gold has more value than silver, which means you need to invest more money to start. To invest in silver, you can capture all these same benefits as gold but at a much lower cost. That’s why silver gets the reference as “poor men’s gold”.
However, silver is more volatile than gold. It is almost common sense that low-cost assets tend to be highly volatile specifically because small price changes have outsized effects on the following investment.The price of gold is mainly dominated by the value it has, but silver is different, for silver is widely used in industry. The price of silver is more lean to be dominated by the supply and demand of it in industry. Therefore, if you are seeking a short-term investment, silver is the one you should not miss.
In contrast, gold is more liquidity than silver. Liquidity means that you can exchange it with money at any time easily. Therefore, it usually happens that investors exchange gold to money and turn into another asset, and buy gold when they feel the need of restoring it.
Gold & Silver: Large and Small Stockpile
Gold and silver are ranking as top 1 and 2 precious metals that individuals and government should preserved. However, according to the stockpile of government, central banks hold a lot of gold and keep buying it. However, towards silver, governments hold few. And to be more specific about it, the tendency of holding gold is rising, while that of holding silver stockpiles is falling. What’s more, most of countries are no longer having the stockpile of silver anymore. The primary reason governments why they don’t hold silver is because silver is no longer used in coinage. However, along with the future industrial needs rising, or the supply chain being interrupted, governments will be ill-equipped to support those needs.
All in all, gold and silver are both popular commodity investments for several reasons. In history, governments once used gold and silver to be their official currency in circulation. However, as time goes by, no major economy uses gold or silver as the basis for its currency any longer. The occur of coins and banknotes greatly satisfies the contemporary need. However, investors still see these two metals in their active stores of value: silver is more volatile, cheaper and more tightly linked with the industrial economy; gold is more expensive and better for diversifying your portfolio overall. Both have their strength in the investment, investors can choose one to satisfy their investment need (short-term & long-term).