Comparing Gold And Silver As Investment Options

With so many investment options for your hard-earned money, it can be tricky to decide where to put your cash to get the best possible returns.

Two precious metal investment options that often come up are gold and silver. Both have their advantages and disadvantages for investors and traders to consider.

In this article, we will look at how gold and silver stack up against each other so you can decide which (if either) is suitable for your investment portfolio.

Timeless Appeal of Gold

Gold has long been valued as a reliable store of wealth and hedge against economic uncertainty. In recent years, gold has reemerged as one of the most compelling investment options in the market. There are several reasons why gold may deserve a place in a savvy investor's portfolio.

First and foremost, gold has historically performed well during high inflation. Unlike paper currency, gold cannot be debased by imprudent monetary policy or central banks' flush money printing.

Gold maintains its purchasing power when inflation rises far better than cash or fixed-interest-rate assets. This was demonstrated in the 1970s when gold prices soared and surged inflation. Protecting against inflation erosion makes gold a wise choice for at least a small part of one's holdings.

Gold also tends to do well when other assets are declining. It is commonly seen as a haven investment and shelter from stock market volatility. When economic or geopolitical tensions rise, worried investors often pour money into gold, increasing its price.

The strong inverse correlation between gold and stocks was highlighted during recessions like the Great Financial Crisis 2007 to 2009.

The fundamental supply and demand characteristics of gold also make it attractive as an investment. Gold is durable, divisible, portable, and universally recognized. It is rare enough to maintain value but not so rare; its price is excessively volatile.

Finally, purchasing gold is easy through coins, bars, Exchange Traded Funds (ETFs), mining stocks, and other avenues. It also provides a tangible asset to counterbalance "paper" investments that can feel abstract. Having a real asset brings a sense of security for some investors.

Classic Allure of Silver

With economic and geopolitical uncertainties rising, many investors turn to precious metals like gold and silver to diversify their portfolios. While gold grabs most of the headlines, silver also merits consideration as one of the investment options for several reasons.

First, silver has a track record of explosive upside. From 1970 to 1980, for example, silver gained over 2,300% compared to 850% for gold. Silver can quickly catch fire and provide exceptional returns during high inflation or industrial activity periods.

Second, silver has far more industrial uses than gold. Over 50% of silver demand comes from industrial applications in electronics, solar panels, and more. This gives silver an economic advantage that gold does not have. As technology and green energy expand, so should industrial demand for silver.

Third, silver is more affordable and practical than gold. With silver trading around $20/oz compared to over $1,800/oz for gold, small investors can gain precious metals exposure more easily with silver. Lower prices also make silver more practical for bartering if ever needed.

Finally, the gold-to-silver ratio sits around 75:1 today compared to a historical average of 47:1, suggesting silver is undervalued relative to gold. Reversion to the mean could provide a significant tailwind to silver.

Give this article a read: What Does Comex-approved Mean For Silver And Gold Bars?

Differences in Gold vs. Silver Investing

Now that we've discussed the market case for each metal let's examine some differences between gold and silver investing:

• Volatility - Silver prices are more volatile than gold, given its smaller market and extra exposure to industrial demands. For those with a strong tolerance, silver could yield higher returns.
• Liquidity - Gold benefits from higher trading volumes and active futures markets. This makes gold more liquid if you need to sell in a hurry.
• Storage - Silver is cheaper to store than gold. You can request delivery of silver from online bullion dealers versus gold, which requires expensive secured storage.
• Size - Silver takes up more space. Storing high-value amounts requires more security. Gold stores more value per ounce.
• Counterfeiting - Gold is more complicated to counterfeit and easier to authenticate than silver.
• Tax Treatment - In the U.S., gold/silver coins meeting specific purity requirements receive favourable capital gains tax treatment versus bullion bars/rounds.
• Trading Hours - Gold trades 23 hours a day during the week in global markets, while silver trading is more limited overnight. Gold offers more liquidity for active traders.

So, while both precious metals have their merits, gold tends to be viewed as a superior safe haven, while silver has added risks and rewards from its industrial exposure. Gold also has the advantage of better liquidity and more investment options for gaining exposure.

Take a look at this article: What To Do Before Buying Silver Bars

Trading Gold and Silver Through CFDs

CFD trading is another way to gain exposure to gold and silver prices. CFDs or "Contracts for Difference" allow you to speculate on gold and silver price movements without owning the underlying metal.

With a CFD, you agree with a broker to pay the difference between the price of gold or silver when you enter the trade versus when you choose to close the position. If you think prices will rise, you go long. If you expect prices to fall, you go short.

Benefits of trading gold and silver CFDs include:

• CFDs provide leverage up to 20:1 in some cases, allowing you to put up just a fraction of the trade's full value.
• No storage or delivery costs are involved since you do not own the physical metal.
• The ability to go long and short allows profiting from rising or falling prices.
• Spreads are typically lower than buying physical bullion.
• CFD positions can be opened and closed quickly to take advantage of short-term price swings.

Of course, leverage also compounds losses if prices move against your position. Always use stop losses and maintain proper risk management when trading gold and silver CFDs.

In Summary

Gold and silver have merits as investment options, with gold tending to be viewed as a superior haven and silver offering more industrial upside and volatility.

For traders interested in gaining exposure to precious metals, CFDs provide a flexible and low-cost alternative to physical bullion. CFDs allow you to capitalize on gold and silver price movements without the hassles of storage and delivery.

Just be sure to use prudent risk management. With the ability to profit from rising or falling prices and zero ownership costs, CFD trading is an intriguing way for traders to diversify their portfolios with gold and silver exposure.

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“When considering “CFDs” for trading and price predictions, remember that trading CFDs involves a significant risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be considered investment advice.”