Is Investing in Silver a Better Investment than Gold?

Is Investing in Silver a Better Investment than Gold?

Exposure to silver, in coins, bars, or even stocks can be a great alternative to gold investment.

Much like other precious metals, silver shares a few thing in common with gold. It is relatively rare, expensive to mine, forged into fashion items with immense appeal, and used in a number of different industries.

However, similarities end when it comes to value and price. Silver is arguably now a much better investment in gold and is also much less “in-demand” than gold. Indeed, one major upside to silver is that it does not get as much attention from investors when geo-political events spark anxiety. That is to say: silver is not yet hoarded by investors nearly as much as gold.

Here are a few unique features of that make silver it a worthwhile investment above-and-beyond gold:

There is no doubt that silver is a more volatile stock than gold – which is a good and bad thing. Consider that since the stock peaks of 2011, silver has declined by over 50%, while gold has only decreased 33% in the same period.

However, savvy investors will know that during the rise from 2008 to 2011, silver rose 448% - far more than the price of gold, which rose 166% over the same period. So silver rises more in the good times and falls more in the bad times.

The reason for silvers increased volatility has to do with its low value. The price of silver today is approximately USD $17/oz, which might seem low given how desirable silver is as a commodity. If you buy silver coins it’s best to sit through market volatility until another slow rise takes the market price over USD $20/oz.

Better for Smaller Investors
Part of silvers appeal is that it’s affordable. A lot of investors only have a few thousand dollars to put into the market, and given this limitation it makes more sense to invest in a lot of silver than one piece of gold.

Don’t forget that a few silver coins can be sold off to make an important life purchase (maybe paying rent or buying a new phone) without having to touch your gold investment. The ease with which one can buy and sell silver is an important incentive for pragmatic small-scale investors.

More Storage
One of the challenges with silver is that it’s hard to store. Consider that you can hold USD $50,000 worth of gold in just one hand. If you wanted to hold the same value of silver it would take 10 shoe boxes! Getting into silver coin investment will eventually require renting out a vault. This is, of course, a minor deterrent to the overall value that silver represents as an investment.

Is silver now a better investment than gold?
It certainly looks like now is the time to invest in Silver. Standard investment advice dictates that precious metals are some of the most stable investments on the market.

Usually running in counter-pattern with the US economy – when the dollar depreciates the price of gold goes up – the advice is often to buy up precious metals when the economy is weak.

This simplistic assessment induces investors to jump right in and start buying bullion when real GDP growth dips below 2%. So is now a good time to invest in gold? Not according to investment logic. The Fed listed expected GDP at 2.2%, which falls right into the category of ideal growth. That does not mean silver is a bad investment.

In fact, precious metals speculator Leland Wilkins has one piece of advice: buy silver now. Leland references previous market fluctuations as evidence of the fact that when the gold/silver ratio reaches 75 it’s the best time to buy silver. For example, silver was hovering at around USD $9 in 2009, while the gold/silver ratio peaked at 83.6%.

Today the markets show a similar trend. The gold/silver ratio has been hovering over 74 since the middle of September, and the price of silver is slowly rising from its USD $15/oz low in July (when the gold/silver ratio peaked at 78.6). The logic? According to Leland, “you want to load up after silver has underperformed gold over a protracted period, and you want to sell when silver has outperformed gold over a protracted period.” We could not agree more.

Silver: a Bargain Compared to Gold.
This list is not designed to make your sell off your gold and put it all into silver coins. Switching stocks on a frequent basis is 101 of bad investing practice. Luckily this is not a one-over- the- other type of scenario.

You want to have a diversified portfolio with fingers in a lot of pies, and silver makes for an excellent and affordable addition.

Great advice comes from Henry To, who suggests that you always look at silver investment with the long-term in mind. Based on Henry’s analysis, a macro-level assessment of silver stock suggests it is primed for a slow rise, so jump on board now while it remains below USD $20/oz.

Back to blog