With all the talk lately being about Bitcoin, I figured I’d take an old school approach to investing and focus on some time-tested investments: gold, and silver.
Both Gold and Silver are precious metals and good investment opportunities when you want to protect your finances against inflation. Choosing one over the other can be difficult though, as it is mostly a personal choice.
This is not to say that they are the same, as they offer differences in availability, ratio of investing, and price volatility.
Pro’s and Con’s of Gold & Silver Investing
Gold deposits are much fewer in the world as compared to Silver deposits. Hence people are not worried about whether Silver will be available in the years to come, but the same cannot be said of Gold, as it is widely believed that most major Gold deposits in the world have already been found and mined.
The belief in the scarcity of Gold suggests that Silver will never be as expensive, and hence that Gold prices will remain stable, given its scarcity, while Silver prices can fall if more reserves are found. For this reason, many people are starting to invest in gold 401k plans.
Related: Roth IRA vs. Traditional IRA investing.
Ratio of Investing:
The market for Gold has always been, and is expected to continue to be, much more compared to the market for Silver. This is apparent by the fact that the amount of bullion Silver available for investment is approximately half as much as the amount of bullion Gold available.
The market for Gold has also historically been many times more valuable than the market for Silver, with the price of Gold having been almost a 100 times more than the price of Silver during just the last 100 years.
The market for Silver tends to be more volatile than the market for Gold, given the size of the two when compared to each other, with the Gold market comfortably beating the market for Silver in terms of size. Silver is so volatile that sudden changes in the price of Silver are very common, and this makes investing in Silver much riskier than investing in Gold.
But with increased risk, comes increased reward, as the price of Silver can easily gain more than the price of Gold in the same amount of time, with the first half of the year 2010 being a good example of this.
Conclusion, Which One to Choose?
The four most important points to think of when choosing are that
- Gold deposits are diminishing with time, while Silver deposits are still many and ripe for picking.
- The value of Gold is and always will be more than the value of Silver.
- The market for Silver is very small when compared to the market for Gold.
- The value of Silver is more volatile and can very easily fall or increase by large amounts and more times than the value of Gold.
When we consider all these points, the conclusion is that neither Gold nor Silver is the ‘better’ investment. The ‘better’ investment, in the end, is the one that best suits your purpose and situation, as investing in Gold means fewer scares of the price plummeting, and hence fewer risks, while Silver investment can yield bigger returns on investments in a relatively short time, but these investments are also susceptible to more risk.