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Gold vs Silver Investment: Pros and Cons

Before we begin, it’s worth noting that at Glint we don’t offer any investment advice. What follows is intended to help you in your understanding...

21 April 2022

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Before we begin, it’s worth noting that at Glint we don’t offer any investment advice. What follows is intended to help you in your understanding of terms as well as potential pros and cons of investing in gold and silver.

Investing in a precious metals like gold or silver may be considered by many as a safe bet for your money. But aside from the initial purchase cost, how do you decide which metal is the right asset for you?

While gold and silver are both precious metals – a type of commodity that is generally considered by many as a safe investment – there are certain factors that affect their long-term value. It’s important to understand what these are before you invest, so you can be sure you’re putting your money in the right place.

Again, Glint doesn’t offer any investment advice, however, to help you choose the right precious metal to invest your money in, we’re taking a look at the pros and cons of gold and silver, and the things you should consider. Whilst we are passionate about gold, we’re not involved in investments, so you can rest assured the information here is completely impartial.

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The Key Differences Between Gold and Silver Investment

Investing in gold and silver may sound comparative, but the reality is there is a lot that separates these two precious metals. Below, we take a look at the key differences between gold and silver that could affect your decision to invest.

Silver is More Readily Available

The volume of new silver pulled from the earth is considerably higher than gold, with close to 1 billion ounces brought into the silver supply market each year. In contrast, the total volume of new gold currently sits at around 120 million ounces per annum.

What does this mean for the value of silver? Because it’s more prevalent and readily available, silver is nowhere near as valuable as gold, and is, therefore, less able to offer as great a long-term return. It is, however, much cheaper to buy, so new investors will need to weigh up whether silver is worth their time and money.

The prevalence of silver also has an impact on its price volatility. With such a liquid market for silver, its value can increase and decrease at a much higher rate than gold, so investors need to be prepared for silver’s unpredictable and volatile value profile.

The Applications for Silver Make it an Important Commodity

Of all the precious metals, silver is among the most widely used in day-to-day applications, particularly in the industrial and manufacturing sectors. Indeed, over 50% of the total supply volume of silver is used for industrial purposes, compared to around 10% of gold.

Why is silver so prevalent within industrial sectors? Firstly, its affordability and ready supply make it much easier to source than other metals. It’s also renowned for its electronic and thermal conductivity, which makes it an indispensable component within the manufacturing sector.

This is all well and good, but why is it important for investors? Given the industrial demand for silver, this goes some way to explaining its widely fluctuating pricing. For example, in a strong economy when demand for raw materials is high, the price of silver goes up; when there’s a recession, demand drops, and with it silver’s value.

In contrast, the value of gold is less likely to suffer such industry-related value volatility. With only a small proportion of total annual gold reserves used in industry, its value is scarcely affected by commercial demand, and more readily influenced by other factors, including economic outlook and currency values.

Silver is Much Larger than Gold – Meaning Significant Storage and Administrative Costs

One of the key differences between gold and silver that many would-be investors fail to grasp is the difference in size and weight between the two precious metals.

Silver is much less dense than gold, with pure silver being up to 84% larger than pure gold by volume. That means that a huge amount more space is needed to store silver reserves than gold – and with that comes significant storage, logistics, and related costs.

To put the size-to-value difference between gold and silver into perspective, here’s a quick example. Say you invested $10,000 in gold; you could hold the total volume of metal in one hand. If, however, you invested the same in silver, you’d need around two medium-sized boxes to carry it all.

The size-to-value variation between gold and silver may not seem all that important from an investment point of view. But with silver requiring significantly more storage, logistics, and transportation infrastructure, administrative costs are something to consider. Add to that the fact that silver requires very specific storage conditions compared to gold (to avoid tarnishing) and managing the commodity safely and securely in the long term can require careful planning and budgeting.

The Pros and Cons of Investing in Gold

Interested in buying gold? Take a look at our essential guide to the pros and cons of this precious metal below to find out if it’s the right commodity for you.

The Pros 

  • Retains its value exceptionally well – gold is considered one of the very best assets in which to invest your money, with reliable and predictable value retention that make it a safe bet in the long and short term.
  • Can be used as an inflation hedge – because gold is a physical commodity, it’s considered a safer means of hedging against inflation. So, when the value of more liquid assets drops due to peaks and troughs in the economy, gold is used as a potential safe haven to avoid the likely losses associated with inflation.
  • It’s a popular portfolio diversification asset – for the reasons listed above, gold is among the most popular assets for investors looking to strengthen their portfolios against financial shock. It allows investors the opportunity to balance the volatility of their other assets against a steadfast, physical commodity, which ultimately provides greater fiscal confidence in times of uncertainty.
  • Investing in gold is easy – compared to other assets (particularly those associated with the stock market) gold is very easy to invest in, making it a popular choice for new and beginner investors. Click here to learn more about the benefits of investing in gold.

The Cons

  • Storage, insurance, and admin fees – while the logistical costs of storing and securing gold aren’t as expensive as silver, they’re no less a consideration. Storing gold in a vault typically means you’ll be subject to storage and insurance fees.
  • Minimal income generation – as with all precious metals, gold isn’t considered an income stream. Instead, it’s more of a security against financial turbulence, which is why investors typically use it to diversify their portfolio.

The Pros and Cons of Investing in Silver

The Pros

  • Affordable – silver is cheaper to buy outright than gold, so if you’re looking to kick-start your investment portfolio on a small budget, it could be a good option.
  • A safe long-term asset – while the value of silver is much more volatile than gold, it’s still a physical commodity, which means it’s a safer place to put your money. That means, much like gold, it can be used to hedge against financial uncertainty.
  • Decent rate of return if sold at the opportune moment – given the huge peaks and troughs in value that silver experiences, you could make a return on your investment if you choose to sell at the right moment.

The Cons

  • Expensive to store and manage – as outlined above, silver is among the most expensive precious metals to store, transport, and manage. Be sure to factor such costs into your investment decision.
  • Minimal income generation – like gold, silver offers little in the way of income, and unless you’re very savvy, you may find it difficult to make a return by selling it on at the right moment.
  • Poor liquidity – because silver is a physical asset, it can’t be easily utilized as day-to-day currency. You can change it into a currency within your country of origin, but this may accrue additional fees and service charges.

 

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline. 

To learn more, visit our homepage or give us a call at +44(0)203 915 8111.

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