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According to research in 2010, precious metals were some of the most lucrative assets over the previous five years – earning investors an impressive 42% return from their 2010 precious metal investments.
Despite these optimistic numbers, investors should research the current economy and metals market before diving into investments. The value of precious metals tends to fluctuate over time, so taking the time to consider current market trends is crucial to achieving the highest rates of returns.
Since metal value correlates inversely with economic decline, precious metal prices are currently higher than ever.
As of late, a big question on precious metal collectors’ and investors’ minds is this; what’s the better investment, gold or silver? Its a decision, Gold Vs. Silver.
Gold has traditionally been considered the better investment, as it is the only precious metal to have consistently increased in price every year for the past ten years.
Is silver a good investment? silver began to challenge gold by tripling in value during the short span of June 2009 to April 2011 to its all-time high of $49.82 per ounce.
Before you start rummaging through your silverware drawer for potential investments, be wary that silver has fallen to $35 per ounce since its high in April.
Gold or Silver, which is the better investment?
Let’s start with a price appreciation comparison between gold and silver since 1980.
| Value | Value | |
| Silver ($) | Gold ($) | |
| 1981 | 1,000 | 1,000 |
| 1982 | 1,755 | 1,819 |
| 1983 | 3,533 | 3,050 |
| 1984 | 3,518 | 3,596 |
| 1985 | 3,648 | 4,165 |
| 1986 | 4,251 | 5,831 |
| 1987 | 6,458 | 8,076 |
| 1988 | 7,013 | 8,895 |
| 1989 | 6,905 | 8,764 |
| 1990 | 7,066 | 9,821 |
| 1991 | 6,932 | 10,273 |
| 1992 | 7,744 | 10,750 |
| 1993 | 9,463 | 12,255 |
| 1994 | 12,596 | 14,076 |
| 1995 | 13,386 | 15,073 |
| 1996 | 14,393 | 16,217 |
| 1997 | 14,556 | 14,844 |
| 1998 | 17,466 | 14,190 |
| 1999 | 17,453 | 14,454 |
| 2000 | 17,563 | 15,476 |
| 2001 | 16,498 | 16,027 |
| 2002 | 18,362 | 19,325 |
| 2003 | 20,479 | 23,676 |
| 2004 | 28,947 | 27,649 |
| 2005 | 32,789 | 31,043 |
| 2006 | 52,793 | 43,160 |
| 2007 | 62,178 | 50,737 |
| 2008 | 70,637 | 64,555 |
| 2009 | 84,285 | 84,990 |
| 2010 | 140,970 | 92,852 |
Clearly gold is the winner so far. But will it be winner for next 30 years? Let’s find some more reasoning behind gold investment or silver investment.
Silver is for risk-takers. It has higher highs and lower lows. The future of silver is entirely speculative. Some expect silver’s value to rise dramatically in the coming years, due to silver’s increasing value in green energy projects (as the reflector in solar power cells).
Some claim this is silver’s lowest low for a while, a sort of calm before the silver storm. In bullish times, like today, silver prices tend to climb faster than gold.
Many analysts have declared silver as the investment of the decade and believe extreme increases in silver value are imminent. Despite these positive assumptions for silver, no one can be sure of how its value will fare in the upcoming years.
As for gold, it’s a much more stable investment. Gold’s value is generally on the rise, and its occasional dips tend to be limited. Gold is an excellent hedge against inflation, because as inflation rises and the dollar declines, gold’s value increases, in response.
Though gold is more likely to earn you stable returns, those returns tend to be slower than they might be with silver.
If you can’t decide whether you’re a high or low risk-taker, take a closer look at the advantages of investing in each metal.
Advantages to Investing in Silver
I have been buying silver since past few years through BGASC. somehow Silver is my personal favorite and I bid for it to do well in next 20 years. Better than it had performed in last 20 years.
Silver and Technology
Silver consistently performs well on the precious metals market because of its high demand in industrial applications.
Silver is used in the manufacture of batteries, electronics, automobiles, eyeglasses, solar panels, water purification systems, defoggers, mirrors, window panels, photographs, cutlery, and even NASA spacecraft.
Silver is also a recognized growth inhibitor for bacteria and viruses, and it can catalyze the production of new cells (for wound and bone healing) and the regeneration of lost skin.
Our twenty-first-century society is built on technology, and an increasing percentage of that technology runs on silver. In our growing techno generation, silver is becoming more and more valuable.
Silver’s Decreasing Supply
As a result of silver’s rising demand, the supply of silver is much more limited. Over the past twenty years, the estimated supply of silver in London and Zurich fell from approximately 350 million ounces to a mere 50 million ounces.
Governments no longer maintain silver stockpiles, and there is currently more gold being hoarded in underground bank vaults than there is existing above-ground silver.
Silver on the Market
Many also argue that being priced lower than gold, silver will have greater appeal when selling silver on the general market.
Advantages to Investing in Gold
Gold’s Enduring Value
Gold has historically been the best precious metal investment, and its enduring value is proof enough of its worth as an investment.
Gold and Inflation
As previously mentioned, gold is a safeguard against inflation. When the dollar’s value is low (which it has been for nearly a decade), investors trade in cash for gold to protect their dollar’s intrinsic value.
To clarify this with an example, imagine gold is worth $10 per ounce when you buy it. If the US dollar’s value falls 10%, you’ll need $11 to buy that same ounce of gold, since the dollar has less purchasing power.
Gold and Silver are both worthwhile investments, so it’s up to you and your broker to decide which is right for you.
Gold is the more reliable investment, but silver has unlimited potential. Many precious metal investors like to split up their investments between gold and silver to earn a share of the advantages of each.
You can begin simply with your old gold jewelry and silverware, or with gold coins from reputed companies. If you’re looking for bigger and more complex investments, consult a broker for precious metal trading advice.
Readers, buying bullion is a risky proposition for your hard-earned money. I buy gold and silver from BGASC, so far I haven’t faced any problem what so ever.
Is there a better place to buy from? And the obvious question, what you think has more potential to gain in next 20/30 years? Gold or Silver?
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I have exposure to Gold through mutual fund holdings and have a small amount of silver via ETFs. SIlver has done pretty well for me but I’m not adding to my position.
I am also holding on to it. Not adding any exposure now
Then you don’t really own either silver or gold.
You mean holding ETFs doesn’t mean owning Metals?
My wife and I talk about selling some of our gold that we have. Nothing to big like chucks or blocks but chains and bracelets. I even have a gold ring from Dubai.
Wondering why you want to sell? Do you think Gold peaked or you need some urgent cash?
I would say gold is good for hedging, and silver is good for speculating. I like having silver bullion and have even sold some gold to buy more, but I’m in a holding pattern now. I’ll wait a few months until I’m debt free.
Why didn’t you decide to payoff debt before building position in metals?
My dad’s been on the silver bandwagon for years, stocking pounds and pounds of bullion in a safe. He’s never sold it, despite the highs we saw not long ago. I guess he’s waiting for a certain value…
Who’ll be his heir? If he doesn’t need money why should he sell? Does he have will done yet?
I’m a fan of both and you’ve highlighted the reasons wonderfully. A few things: I never go over 10 percent of my portfolios in precious metals at all, and I also can’t know a ton about everything, and this might be my weakest area. Because of that, I use precious metal ETFs for my portion.
Very good choice Joe! If you don’t know about a particular investment, better not to take risk even if potential is higher.
Good points on both sides. I lean more towards gold because I like the stability, worldwide recognition, and time-tested value of the metal. I have been questioning for a while whether now is still a good time to get some exposure to these metals or if we are at a peak right now.
Isn’t that a million dollar question, similar to your next Google PR status prediction?
From reading the article it looks like silver could be the day traders version in the commodities market, whereas gold is buy and hold strategy. My wife has quite a bit in gold but we would never consider selling it so we don’t count it as an investment vehicle.
I have some similarities with you. my wife has loads of jewelery from her wedding. We do not consider it as investment, they are a security in worst case, just that.
I believe in long term investments, my choice would be gold. even though at my age I should be go for high risk – high return investment.
Its has been an age old tradition of business families in India to invest in gold(particularly as a gift to wife). it is used to cover the occasional losses in business. Those people too preferred gold, not silver
I tend to believe that you would do good to have long term investment in gold. That Indian preference to Gold is because of the emotional sentiment attached to it.
Simply because for same weight, gold costs way more than silver. That’s why people give more value to it compared to Silver. But, when we invest we should look for the price fluctuation compared to base price, isn’t it?
agree with you
I don’t believe in investing in either. But if I did I’d go for silver. It has all those industrial uses which adds to its value in my estimation. What I don’t like about precious metals is the large markups charged when you buy. I wouldn’t expect to pay exactly the spot price, but the markups seem really excessive. Then there’s the problem of knowing whether the seller is reputable or not. With the recent gold selling company scandal in the news lately it makes it seem even more risky. I’ve read that many people who own and operate coin shops have criminal backgrounds. Why would I want to deal with them? It just all adds up to more risk than I’d like to deal with.
Maggie, there are various ways of buying metals. If you have doubt in purity of metal, or the persons selling them, then buy the indirect ways you can buy bullion, you can buy ornaments, you can buy ETFs, you can buy MFs, you can buy direct stocks.
I actually see the value in both, even though my portfolio holds more silver for now. however, I’m always in the constant debate about which to buy more off.
After reading this, I am considering silver with all the pros and cons.
Glad the post helped you to an extent on your financial decision. But cover all your bases before investing any more money in Silver.
I have exposure to silver via some physical and Silver Wheaton stock. It has been bumpy the last few days. Yesterday was especially ugly for the precious metals. I am not adding at this time, but figure that inflation has to rear its ugly head giving the low, low interest rates.
I believe you are a trader. For me its only investment.
My uncle went to a seminar where they endorsed buying silver. He bought a bar and immediately saw the value drop and stay low. He keeps the bar as a conversation piece I think because it is probably worth a fair bit now.
I know that no matter how much I know about investing I will never know as much as Warren Buffett. And if you go to page 18 of this document you will find his opinion on gold: http://www.berkshirehathaway.com/letters/2011ltr.pdf
If you don’t want to read it it basically says that gold is only valuable because people say it is. It does not produce income and is basically only good for decorative purposes. He believes value producing companies are the better investment, and I will generally defer to him.
This is why out of these two I would pick silver, because you listed a whole lot of uses that I had never heard of before. Same with the metal tungsten, it is of lots of use to people so it is also a better investment.
I may buy a precious metals ETF for diversification if the prices drop from the high values they are at now, but it is simply for a difference from my other investments.
Good breakdown on the topic.
I think they’re both more about speculation than investing. I do have an ounce of gold in coin form, but it’s not for investment purposes (if it were, I’d have sold it already, since I bought it at a fairly price compared to where things are now.)
Even in the long term do you thing metals are speculation? There must be some basis behind your view, interested to learn about it..
I found your post very helpful. I have linked your post at my website weekly roundup
Thank you Karunesh, I didn’t get a trackback.
I will any day invest in physical gold bullion than silver. I have my reasons for believing so and would greatly appreciate if anyone can throw some light on it.
Firstly, we all talk of silver being exhaustively used in industries and various forms of technology, making it much more scarce and thus the expectations of higher prices, right? Now, as far as i understand, when the dollar is down and the people are facing the brunt of it, in my opinion the silver stack we have been holding would remain as it is. Why? Well, who do you think in that crashing economy is gonna buy all that silver from you at inflated rates? People who are already short of cash would rather buy something that provides stability and in extreme cases can cater for their family needs. Silver is meant for trading and profit, not for stability. Therefore, i foresee that people would rather spend money on gold even then for that added security, even at soaring high prices 🙂
Secondly, on the other hand comes the question of physical holdings. Now we all hear of ETFs and paper gold/silver. In a crashing economy, when the dollar is losing its buying power, do you really think that the paper precious metal we hold will ever pay us back? When the paper currency itself is failing, all other paper forms of wealth will definitely come down. The guy who offered us that physical bullion anytime we wanted, would probably be broke by the time we ask for exchange! So, then what happens? We lose all or part of our investments as such, forget about any profits 🙂
Thirdly, lets say i buy 10 gms of gold in the form of a coin for Rs 25,000/- today and my friend invests the same amount in 500 gms of silver. We do it continuosly for over a period of time. Now who has more probability of walking upto a market or store in times of economic crunch and get a safe exchange for the precious metal? Me or my friend… Its me! I can simply put a few of my gold coins in my pocket and walk across casually, but my friend might need a small knapsack for carrying few of his 500 gms of silver bars, otherwise he would’nt be able to buy as much as i can. So, the physical security is another important factor according to me.
Lastly, the most mandatory thing before we jump to conclusions, about which metal is better : the amount we want to invest. It is always preferable to invest in small amounts rather than in one go when we have cash! This ensures the rupee averaging factor, besides allowing us to track the market regularly for greater benefits. e.g. I buy 10 gms of gold in the first month for Rs 30000/-, the next month at 31000/- and the month after, when rates are at 29000/-, i buy 20 gms of gold. So my net average purchase rate is 29975/- per 10 gms of gold. I have nullified the first two months of higher rates. Now, if i want to sell all 40 gms of gold the next month, when the rates are 32000/- per 10 gms for example, i will earn Rs 8100/- i.e. a net profit of 6.8% on my investment (approx 19 % annual return):-)
Invest wisely and make your choices deliberately !
Fundamentally, both the Gold and Silver are safe heaven investment but silver can out perform Gold in coming time because of rising gold price, silver low production and high demand for jewelry as well as industrial use.
Its a good read and opinion of different investors makes this post quite edifying for those who are wondering whether to in gold or silver. However i consider both as good to invest in metals that can give you good ROI in long run.
Historically, gold is great during a recession and horrible during a boom. Gold’s prices have gone up so much that there’s no way that you’re buying low unless the US slumps back into a very long recession again.
I see precious metals as a wealth preservation not an investment. Unfortunately I believe a lot of retail investors have been sold the story more so then sound investment advice.
I like how you explain that since metal value correlates inversely with economic decline, precious metal prices are currently higher than ever. My uncle told me that he would like to find something to invest his money on so that he can leave good wealth to his wife when he passes and that way she wouldn’t have to worry about money. It would be nice for him to look for a way to invest in gold so that he can get more profits with time.