Why buy silver instead of gold?
Investing in precious metals is a big commitment, and it can sometimes be hard to know which out of gold and silver is the best metal to invest in. Ideally, we would all have a diverse portfolio containing both among other investments to cover all eventualities. However, we’re aware that it’s not always possible and we may be forced to choose one or the other.
Here we have compiled a list of the top five reasons to invest in silver instead of gold…
1) It is much cheaper
Arguably the most obvious reason to buy silver rather than gold is the enormous difference in price. It is often said that silver is the ‘common man’s gold’ and looking at their respective prices it is little surprise. Even though gold is exempt from VAT while silver is not, the huge difference in price allows investors to get more metal for their money when buying silver.
2) Easier to liquify
An additional benefit of silver being so much cheaper, is that it is so much easier to liquefy when the time comes to cash in on your investment or to free up some funds for a new venture.
A portfolio containing a large amount of lower value parts such as silver Britannias or 1-ounce silver bars is naturally much more convenient to liquefy than one containing a small quantity of expensive 1kg gold bars. While selling half your coins would be a straightforward process, you cannot sell half a gold bar.
3) Bigger industrial use
Silver is also a considerably more useful metal than gold. Although undeniably beautiful and an excellent store of value, gold is used in relatively few industries outside of jewellery and investment. According to statistics released by the World Gold Council, less than 8% of gold produced around the world last year was used in technological industries.
Silver, on the other hand, is used in a huge variety of different industries and technologies, playing a crucial role in countless areas of our everyday lives. Around half of all silver produced in the world is taken up in the production of over 3000 various technologies and appliances including radiology, water purification, circuit boards, and even explosives.
One particularly important, and growing, use of silver is the conversion of solar energy into electricity. As investment in, and the use of, renewable energies increases we should expect demand for silver to continue to rise, potentially driving its value higher.
4) Much smaller market
As well as having many more uses, silver also happens to have a much smaller market. This conspires to make silver a much more volatile metal than gold. It takes a much smaller amount of money moving into silver to make a big difference to its price, meaning it has a tendency to swing one way or the other more regularly. Although some may point out the risk that the price could also drop, these fluctuations offer speculative investors the opportunity to buy when the silver price is low and sell when it is high.
5) The gold - silver ratio: Silver is currently (arguably) undervalued
The gold - silver ratio is a great way of monitoring silver’s fluctuations and its current value relative to gold. It demonstrates the relationship between their respective values and can be a good way of spotting potential opportunities to invest in silver. At the time of writing the ratio is around 83, meaning that it would take 83 troy ounces of silver to buy one troy ounce of gold.
This is an enormous difference that is far above its historical average, having more than doubled in the last 5 years since both metals peaked. Considering that there is said to be around 16 times more silver than gold in the earth’s core, it would be fair for an investor to believe that silver is currently hugely undervalued.