Investing in Silver vs. Gold

Disclaimer: This article references an opinion and is for information purposes only.  It is not intended to be investment advice.  Seek a duly licensed professional for investment advice.

Though this website is dedicated to sterling silver, given that sterling is a relatively pure form of silver, there is overlap between collecting sterling silver and pure bullion silver, since sterling silver historically has been viewed as money in varied forms. Given that sterling silver can be viewed as an investment or as a store of wealth, it’s worth noting the advantages of investing in silver over gold.

2006 American Silver Eagle 2006.
2006 American Silver Eagle .999 Fine

Investing in Silver Involves More Volatility

During precious metals bear markets, as has been the case from around 2012 to 2015, the gold to silver ratio tends to increase dramatically, so that it takes more ounces of silver to equal one ounce of gold in value. This makes silver undervalued and thus more attractive for many investors relative to gold. Conversely, during precious metals bull markets, which occur from time to time, the gold to silver ratio contracts such that the price of silver rises more percentage-wise than gold. Because of silver’s historically superior performance to gold during precious metals bull markets, investing in silver is more attractive for many investors. On the other hand, silver’s volatility may be too much for some investors to stomach, in which case gold may be a better option for them and a perfectly adequate substitute.

Sterling silver, being a proxy for silver given its purity, will move in value along with the market price of silver. The value of a sterling silver artifact will always be at least that of its melt value — were the artifact melted and refined to pure silver — plus any additional value it may have as a collectible worth preserving.

Silver Is a Bargain

Historically, the gold to silver ratio has been about 15 to one, meaning it took 15 ounces of silver to equal one ounce of gold. Currently, it stands at 75 to one, meaning gold is 75 times more expensive by weight. This makes silver much more affordable to the average person than gold. As a result, the demand for silver jewelry and silver bullion coins has risen dramatically, due to the price of gold rendering it unattainable for many.

Because interest in collecting sterling silver has dropped in the last few decades, the price of sterling silver artifacts is often at or slightly above their melt price, especially online. At times the price may be under the value of the metal, either due to human error or a rush for liquidity by a seller, which is virtually unheard of for pure bullion products. Additionally, sterling silver artifacts may at times be unidentified as such, providing bargains for knowledgeable buyers who are familiar with the hallmarks or traits of sterling.

Silver Has More Industry Uses than Gold

Though gold is an electrically conductive metal with industrial use, particularly in computers, silver is the most electrically conductive of all metals. Because it is also more common on the Earth’s crust and therefore significantly cheaper than gold, it is much more widely used than gold in industry. However, gold holds an advantage in that it is more resistant to corrosion than silver.

Silver has thousands of industrial uses, notably in computers and solar panels, and due to its cheap price is rarely recycled once the products made from it are no longer useful, leaving it practically unrecoverable in landfills. This has made above-ground silver rarer than gold, according to some precious metals analysts. By contrast, the vast majority of the gold that has been mined historically is either sitting in vaults or is used as jewelry. The dual demand for silver as an investment and raw commodity for industry creates the potential of a severe shortage should one or both rise dramatically or unexpectedly, while output remains the same or declines.

Conclusion

Though gold is generally more stable in price than silver, silver historically has shown greater upside swings during bull markets, providing greater opportunities for investors. Additionally, silver is much cheaper than gold right now, making the white metal especially attractive. Because there is greater demand for silver than gold in industrial applications, the silver market is particularly vulnerable to shortages in supply. All of these factors together make investing in silver attractive and worth serious consideration for investors.