Should I Invest in Gold or Silver?

It only took about one decade for America to leave the Great Recession and enter the global COVID-19 pandemic. These significant downturns in the economy have left many people scrambling to invest in precious metals. The big question is whether they should invest in gold or silver.

Like most things in life, though, there isn’t one simple answer. Both these assets carry significant benefits, so investing in either can prove profitable. It really comes down to your specific financial goals and current economic situation.

The most important thing when choosing between investing in silver or gold is this: always remain an informed investor. This guide aims to help you do just that. Once you’ve got a better understanding of these essentials, you’ll be able to make a smarter investment decision.

Beginners’ vs Seasoned Investors

People often start their research by trying to find out what more experienced investors are doing. After all, if a successful investor has been buying gold instead of silver for a decade, that has to be the best purchase. Right?

In reality, that’s not how it works. Seasoned investors spend significant amounts of money on both these precious metals every single year. The real difference between beginners and seasoned buyers is in how they invest and how they view the investments.

Consider the following:

• Silver’s Higher Volatility: Beginner investors often panic when prices drop, and the volatility of silver means this can happen occasionally. If you think you might be a panic seller, gold could be the right move for you.
• Timing the Buy: Investment professionals know that timing is everything. Knowing when to buy can be just as important as deciding on your asset mix between gold & silver. If either metal is trading at their weekly, monthly or yearly lows, it could mean it’s a great time to buy.

The moral of this story is that there’s no “right answer” based on your investing experience. Smart investments remain smart investments regardless of the underlying asset. Once you learn this, you can make better purchase decisions whether you choose gold or silver.

Is Gold or Silver the Best Hedge?

One major consideration in the silver vs gold debate is hedging. Most people see gold as the better hedge against economic downturns. In many situations, they’re exactly right. Over half of the silver mined every year goes towards industrial uses, and this can hurt the metal during recessions.

That’s because the production of items containing silver – ranging from computers to cell phones – goes down during economic slumps. This means hedging with silver could prove costly if another recession comes along. Gold’s value, however, typically rises during these times.

Of course, there are no guarantees in this world. For instance, look at what America was dealing with in the latter part of the 1970s:

• High unemployment.
• Rising gas prices.
• Multiple recessions.
• High inflation.
• Cold War tensions.
• An energy crisis.

With all these difficulties tearing down the economy, it would only make sense for silver’s value to drop. Right? In reality, the exact opposite happened. Because while silver may perform well when the economy is on the rise, people still view the precious metal as a hedge against turmoil.

While gold might be the typical answer to “what’s the best hedge?”, no one should forget that silver has acted as a store of value for thousands of years. No matter what fundamentals might say, you can’t dismiss that kind of history.

Gold vs Silver Return on Investment

Both gold and silver have proven to be great investments in recent years. Since price fluctuations can have major effects on both metals, though, it’s hard to say which is the better decision at a given moment.

There’s no denying that when prices of silver and gold go down, though, silver typically sees larger drops. You can see this on precious metal price charts. Not that the price won’t rebound, but this showcases the volatility discussed earlier in this guide.

Even with gold being more stable, though, government inventories of precious metals are a major consideration. National banks purchase more and more gold every year for official reserves. When looking at government inventories of silver, though, the exact opposite has happened:

• 1977-1984: Over 300 million ounces.
• 1985-1988: Over 250 million ounces.
• 1989-1998: Over 150 million ounces.
• 2010-2018: Under 50 million ounces.

This was a major global change, but the situation is even more drastic in America. The country currently holds only 0.0056 percent of the silver it maintained during the 1950s and 1960s.

If something were to happen that required the government to acquire silver, they simply don’t have the stockpiles to meet their needs. A supply chain interruption or even just increased future industrial needs could create a situation where the government needs silver it doesn’t have.

If governments suddenly have to begin purchasing stockpiles of silver, the price of the precious metal could go through the roof. So while everyone’s favorite yellow metal might have performed better historically, choosing whether to invest in gold or silver won’t always be a straightforward decision.

Silver or Gold Based on Income and Investment Level

People often refer to silver as “the poor man’s gold” due to its frequent tendency to rise and fall along with the yellow metal. To put it simply, silver costs less than gold. And with the gold-silver ratio, you can gauge how much silver you could buy with gold. At one point in 2018, this ratio hit 85-1.

This ratio indicates that one ounce of gold can buy 85 ounces of silver. The number fluctuates over time, but it illustrates that gold is the more valuable metal. This means a person’s income and desired investment level can play a significant factor in whether they invest in gold or silver.

Just because gold is more expensive, though, doesn’t mean you can’t invest in it at a low cost. You can actually buy gold bars that weigh just a single gram. This is a low-cost way to start investing in gold at prices you might otherwise expect to see silver bullion sold for.

Precious Metals Storage Needs

While income and desired level of investment once played a major role in the decision to invest in gold or silver, the availability of small bullion bars has changed this. Unfortunately, there are still storage needs to consider. This actually can sway your decision based on income and investment level.

If the gold-silver ratio is around 50-1, it means you can buy 50 ounces of silver for one ounce of gold. Of course, it also means that you’ll need to store 50 ounces of precious metal instead of a single ounce. This makes your storage needs far more substantial with silver.

You could obviously store all your precious metals at home, but with the current value of gold and silver, doing so is a risky proposition. Instead, consider a precious metals storage facility. And if you opt to invest in large quantities of silver, be prepared to pay higher prices.

What About Paper Gold and Silver?

When new investors research how to invest in precious metals, they at some point consider buying “paper” gold or silver. Exchange-traded funds, mining stocks, and other electronic investments are all options that carry some benefits over physical metals.

For many people looking to invest, though, the risks of paper silver and gold far outweigh the potential benefits. Just consider the following disadvantages and situations you might encounter:

• Stocks and funds don’t always stay on track with physical commodity prices.
• You don’t have physical possession of – or even own – the actual precious metals.
• The value of paper investments rests upon financial institutions upholding their obligations.
• You’re investing in a market, so your investment isn’t always available to trade.

Making an informed decision – whether you’re investing in gold or silver – means knowing all your options. Paper gold and silver are certainly alternatives to consider, but in most cases, your investment won’t be in the precious metals themselves.

Considering the countless variables unrelated to silver and gold that could affect these paper investments, sticking with physical assets has proven to be a popular option over the years.

You Can Invest in Gold or Silver Right Now

Now that you’ve gotten a better understanding of the fundamentals of these precious metals, you probably realize that investing in gold or silver can both prove to be profitable endeavors. Things like risk aversion, storage needs, and investment types all play a role, but these concerns are each specific to you.

Regardless of your eventual choice, you can start investing in gold or silver right now. At Silver Gold Bull, we have a massive inventory of these and other precious metals. In fact, you can check out our Deal Zone Page to get started right now at a discounted price!

“Should I invest in gold or silver” is a pressing question for many investors, but regardless of what you choose, you’ll always end up with a tremendous and trusted store of value.