Silver is more volatile, cheaper and more closely linked to the industrial economy. Gold is more expensive and better for diversifying your overall portfolio. One or both of them may have a place in your wallet. Arguably, the best use of gold as an investment is to mitigate portfolio risk.
While both gold and silver are precious metals, both are singularly different, with different uses for their possessions. Deciding whether to invest in gold or silver will likely depend on your objectives and how these metals might fit into your overall investment strategy. Investors should keep in mind that all of these factors make platinum the most volatile of all precious metals. The commonly accepted reasons why gold is more expensive than silver, despite its relative abundance, are that gold is more widely used in jewelry, gold is considered more of an “alternative currency” than silver, and is more in demand by central banks and individual investors than silver.
While many investors are looking for gold and silver in physical form, such as ingots or coins, investing in mining stocks is often a better option. So should you invest in gold or silver? There is no definitive answer because you are unique as an investor. While gold and silver have similar boom-bust cycles, there are some key differences to consider when deciding whether to invest in gold or not. So if you're just starting out with precious metals, keep reading to learn more about how they work and how you can invest in them.
Precious metals are raw materials that must be stored securely, which can entail additional costs for the investor. While they can come with a certain degree of security, there is always some risk when investing in precious metals. Investing in precious metals has some benefits compared to investing in stocks, such as being a hedge against inflation, having an intrinsic value, having no credit risk, a high level of liquidity, bringing diversity to a portfolio and facilitating purchases. The value of investments in precious metals may fluctuate and may appreciate or decrease, depending on market conditions.
Even in good times, many investors keep a small percentage of their assets invested in gold or silver as a portfolio diversification strategy. While short-term fluctuations in gold prices get a lot of attention, gold is relatively stable as a long-term investment. From the point of view of investment theory, precious metals also offer a low or negative correlation with other asset classes, such as stocks and bonds. The best way to invest in precious metals is to buy the metal directly and maintain your physical shape or buy ETFs that have significant exposure to precious metals or to companies that are involved in the precious metals business.
Because of their limited focus, sectoral investments tend to be more volatile than investments that diversify into many sectors and companies.