Gold vs Silver

Gold and Silver are two precious metals that are widely in demand and used for various purposes. When ti comes to investing however, which one is better? When considering these two metals it’s important to understand the differences that separate gold and silver and also what they have in common.

Gold and silver are both elements and cannot be further simplified by any chemical process. They are in the simplest natural form possible before being combined with any other element to form compounds. Both of these elements have unique physical and chemical properties that make them valuable, both metals have throughout history been used as forms of currency and jewelry due to their rarity.

Industrial Demand

Gold and silver, however share some differences that give them edge over each other. If we look at their demands, silver outstrips gold when it comes to industrial demand. Silver has got more practical and industrial uses as compared to gold, it is good conductor of heat and electricity, it is used in solar panels and it is also highly in demand by the pharmaceutical sector because of its medicinal properties. Silver is said to be good for brain development and cardiac health. Gold and silver are both used in Greek medicine for their healing properties. Gold is also used for industrial purposes, it is used in electrical appliances in chip boards but the demand of gold is less compared to the industrial demand of silver. One reason for this maybe the difference in their values, as gold would increase the cost of industrial processes and that would change the margins.

Investment and Jewelry

Gold is primarily used for investment and as an article of jewelry and adornment. Countries and banks hold reserves of gold for stability and investors invest in gold for various reasons. One reason to invest in gold is to reduce the risk profile of the investment portfolio as gold carries virtually on risk, secondly gold is used to hedge risk, which means that investors use gold to offset currency or inflation risk. Many investors put their money into gold with a 401k rollover to gold. The amount of money they expect to lose through inflation or due to forex movements, they cover that up by investing in gold futures, options and ETFs.

Ever since gold has been around, it has also been used as an item of jewelry. Many cultures around the world emphasize on gold for weddings and other ceremonies. India is one of the largest consumers of gold in the world, it is the biggest market for jewelry in the world, closely followed by the middle east. Although silver is also used as an article of jewelry, it does not have as much of an appeal as gold. Though one would expect it to be in demand on account of its lower price, but people prefer gold for jewelry because of its sheen, luster and that gilded look that steals away the breath of those looking at it. Silver, simply does not stand up to that quality.

Market Cap

Gold is also used as a store of wealth passed down from generations within families., the gold market is huge valued at $2.4 trillion according to the World Gold Council, if we compare it with the market capitalization of Apple which is about $890 billion dollars, then we can clearly see that the commodity has a class of its own. The gold market possesses a depth and liquidity rivaled only by the largest sovereign debt markets, large amounts of gold trade hands each day and it takes quite a bit to make the market move a substantial amount.

Silver has a much smaller market, its annual physical demand is at only $15.2 billion dollars, the relatively small size of the silver market along with significantly lower liquidity than gold means the price of silver is significantly more volatile than that of gold. This means that silver moves up a lot more than gold in a bullish market but it also falls more than gold in a bearish market.

Storage And Mobility

Storage is yet another point where both gold and silver differ from each other. Gold is a lot denser than silver and this means that the same volume of gold takes a lot less space as compared to the same value of silver. While gold has a density of 19.32 g/cm3, silver has a density of only 10.49 g/cm3. This means that gold is twice as dense than silver, hence it takes almost twice as less space as silver. This means that if you want to invest in gold and silver and want to store both at home, gold is not going to take a lot of space but silver will. Therefore investors who store their stacks with specialized vault providers, will have to pay more to store silver. Silver is simply bulky and thus not as convenient as gold when it comes to storage and mobility.

Thus when it comes to mobility and storage, gold has a clear edge. Gold also can store greater value, so if you are going to invest millions or maybe billions then you will want to choose gold as your precious metal of choice because it is more stable as compared to silver. However if you are just starting off, then you may want to invest in silver as it has a lower value and is thus more affordable, from a speculators perspective, silver tends to move more so in a bullish market silver tends to give a better return.