Loading...

Gold vs. Silver: Key Differences to Know Before You Invest

Gold and silver have captivated human beings for thousands of years, prized for their lustrous beauty and rarity. These precious metals have played a significant role in human history, serving as currency, status symbols, and even religious icons. 

Although they share many similarities, gold and silver also have distinct differences that make them unique. From their physical properties to their cultural significance, understanding the differences between these two precious metals can provide valuable insights into this investment asset class and the role physical precious metals can play in a diversified portfolio.

In this article, we will explore the key differences between gold and silver bullion and delve into their respective histories, properties, and uses. Keep in mind that this information does not constitute investment advice. Please consult your financial advisor as you make your own investment decision. This article will, however, help you educate yourself on your path to choosing the better investment between these two precious metals for your own needs.

Why invest in gold and silver?

Whether you should invest in gold or in silver depends on your personal goals.

Precious metals, including gold, silver, and platinum, are often considered safe-haven assets. That means they tend to perform well, particularly in times of economic and political instability and are viewed as hedges against inflation and fiat currency devaluation. In other terms, they act as insurance in case other asset classes underperform.

Exeter's Pyramid

However, as with any investment, the prices of gold and silver can be volatile and subject to fluctuations based on a variety of factors.

Additionally, investing in physical gold and physical silver (e.g., silver and/or gold coins and bars) can come with storage and transportation costs and the risk of counterfeiting, fraud, or even theft.

Overall, any precious metals investments can be considered relatively safe, but investors should be aware of the risks and make informed decisions based on their individual investment goals and risk tolerance.

What is the difference between gold and silver?

Both gold and silver are precious metals. It means they are rare with high economic value. However, though they share some similarities, they also differ in various aspects beyond coloration. Let's take a look at some of the ways gold and silver compare with each other.

Physical Properties

Gold, silver, and the other elements from the platinum group are classified as noble metals. That means they are resistant to corrosion and found in nature in their raw form.

Representation of Gold and Silver Atoms

However, pure gold is softer and the most malleable and ductile of all metals. Silver is the second. On the other hand, silver has the best electrical and thermal conductivity.

Both silver and gold are relatively inert, meaning they don't react easily to other elements. They are also diamagnetic, that is, they have a weak, negative susceptibility to magnetic fields.

Gold has a higher density with 19.32 grams per cubic centimeter, while silver's density is 10.49.

That means a 1 Troy oz gold coin will be slightly smaller than a 1 Troy oz silver coin.

Size Comparison Between Gold and Silver Eagle coins

Size comparison between the 1 oz American Eagle gold and silver coins

Rarity

Gold is much scarcer in the Earth's crust than silver. In fact, according to the USGS, all of the gold we've mined throughout human history would fit in a cube that is 23 meters wide on every side.

It is estimated that silver is 19 times more abundant than gold. However, only 25% of silver is mined in primarily silver mines. The other 75% comes as a byproduct from copper, zinc, lead, or gold mines. Pure silver ore is quite rare, though.

According to The Silver Institute and Statista, the world silver supply in 2022 was nearly 1.03 billion ounces. For the same year, the World Gold Council Reported just over 167 million ounces of the world's total gold supply.

Uses

Gold was first used by cultures in modern-day Eastern Europe in 4000 BC to make decorative objects and nowadays is used in communications equipment, spacecraft, jet aircraft engines, and jewelry.

Silver was discovered in Prehistory after the discovery of gold and copper (around 3000 BC). The oldest silver objects come from India. It is found in tombs of Egypt, China, and Mesopotamia.

Nowadays, both precious metals are widely used in jewelry manufacturing and for investment purposes. However, silver has more industrial applications than gold due to its high thermal and electrical conductivity. It is largely used in automobile electrical systems, in a variety of electronics, and in solar panels.

Silver and its compounds are used in medicine and water purification due to the antibacterial and antifungal activity of Ag+ ions. Silver nanoparticles are already being used in burn patients to prevent and treat infections.

Market Dynamics

Gold and Silver Bars

Sector investments tend to be more volatile than gold due to their narrow focus (they will always be risky). On the other hand, investing in precious metal assets like physical bullion tends to be able to provide a hedge against economic uncertainty or market downturns. Therefore, monetary or political developments might affect their financial performance, but they will never be worth nothing.

Certainly, precious metals might impose additional costs on the investor since the expense to keep them safe can be high and unsuitable for some people. Additionally, unlike bonds, you will not earn interests or dividend payments from precious metals.

Pros of investing in gold

Unlike silver, gold will always be worth more than other major asset classes as one of the best options for inflation hedge and a safe haven against economic declines.

A popular expression says, "Invest in silver if you hope for good times, and invest in gold for the bad times"

And because gold has very low correlations to other investments, it serves as a portfolio diversifier. Gold's price tends to perform well in times of crisis, especially when compared against fiat currencies.

Fiat Currencies vs Gold since 1900

If you decide on the physical assets, you will have the benefit of holding something tangible, being protected against hacking; you can use it as money if needed, and cannot be depreciated like paper currency.

Cons of investing in gold

It is true that by investing in gold, you will be free of counterparty or default risks. However, because it is tangible, you are susceptible to theft or counterfeits.

Even the smallest gold bars and coins can be more expensive than silver ones. That means you will have to invest some good money to buy it.

Gold doesn't pay any yield, unlike stocks. So you could have a negative yield if you ever have an emergency and have to sell it in a declining trade.

Pros of investing in silver

Silver is much cheaper than gold since there's more supply of it on the crust of the Earth. It is related to the global industry due to its use in electronic production and medical and technological applications.

Understand why silver is cheaper in our article.

Precisely because silver enjoys a higher industrial demand than gold, it usually allows for some speculative investments. On the other hand, because gold is historically seen as a long-term investment, it is favored to face a widespread declining market to retain purchasing power during financial difficulties.

Silver can be considered a good portfolio diversifier with a moderately weak positive correlation to other investment forms.

Cons of investing in silver

Silver tends to be more volatile than gold, which could represent a challenge when managing portfolio risk.

To put it in popular terms, silver's industrial demand is a double-edged sword. If industrial production is high, so will silver consumption. However, if the production of certain products, like vehicles and electronics, falls, so will silver demand.

Silver is prone to tarnish when in contact with sulfur-containing gasses. It can be polished, though.

Read our comprehensive guide on how to clean silver coins.

Gold vs Silver: Volatility

Regarding volatility, silver prices tend to fluctuate more, as previously stated, which can benefit an attentive dealer.

The gold market suffers less from long-term price volatility. It is less susceptible to economic declines since, unlike other industrial base metals, its industrial use is actually very limited.

Gold vs Silver Performance

XAUUSD - Gold / XAGUSD - Silver

Daily spikes in prices are also more pronounced for silver than for gold:

Spot Gold - Daily Volatility

Spot Silver - Daily Volatility

This is important information to plan your future investments. During a bear market, when prices are going down, silver prices tend to fall greater than gold's in the same period. Likewise, during a bull market, when prices are going up, it is even possible to see silver outperforming gold due to the increased demand from a larger variety of sectors of the industry.

That is why, when planning for a long period of financial instability, more investors (and even central banks, for that matter) will flock to gold. Likewise, when industrial production is rampant, investors buy silver.

Analyzing industrial needs and global economic movements is paramount when choosing between these two precious metals.

Gold vs silver: Inflation hedge

Physical gold is universally acceptable and easily authenticated. The price of gold tends to rise when the prices of other assets fall. Therefore, when times are bad, gold will likely perform well because everyone turns to gold in times of crisis. So, as demand increases, the prices go up.

Gold vs Silver vs US Dollar Performance

XAUUSD - Gold / XAGUSD - Silver / USDX - US Dollar

The chart below shows how both gold and silver have outperformed the USD index by over 50% since 2019.

How to invest in gold and silver?

It will depend on your investment objectives.

  • Bullion is for those who are preparing for the worst. The most popular forms of investing in physical bullion are gold bars, silver bars, gold coins, and silver coins. Investing in taking physical delivery and storing it yourself is a possibility. That could be less expensive, but it would mean being responsible for protecting your investments. Read more about hiding your bullion at home here.
  • Precious metal ETFs (exchange-traded funds) are more diverse than individual stocks. Instead of buying many individual stocks, buying an ETF would allow the investor to gain exposure to various stocks and spare the owner from storing the precious assets. The fund's operator will manage the customer's assets, like a physical supply of precious metals. It does not give the investors access to the underlying metals, though. They will protect the customer's cash, other commodities not included. An ETF's expense ratio, the annual operating expense, will be charged. You can buy shares and keep them in a traditional brokerage account.
  • A mutual fund is a company that pools investors' money to make multiple types of investments, and you must know that as the portfolio. Stocks, bonds, and money market funds are examples of the types of investments that may make up a mutual fund. Some mutual funds have both gold and silver as part of their stocks.
  • Many investors also invest in IRA Gold. You can hold physical metals in an authorized facility with a manager who will purchase the rare materials for you and be responsible for maintaining the customer's assets at a third-party depository.

It is also possible to turn your 401k into a Gold IRA. Learn more about Gold IRA.

  • Certificates can offer the benefit of owning precious assets without having the problem of storing and protecting them. But they are paper with no intrinsic value, which could be useless in an emergency.
  •  Mining stocks are investments in companies that produce or explore minerals. That's a complex market divided between two types of investors: majors and juniors. Mining companies go through geopolitical and fluctuating market risks.

The Gold vs Silver Ratio

The Gold /Silver Ratio is the amount of silver one can buy to a given amount of gold. This ratio usually measures the two metals in Troy ounces, but it is possible to get the same estimate using other metrics, such as grams, kilos, etc.

You can obtain the ratio by dividing the silver price by the gold price by the current silver price. It will tell how many silver ounces it takes to buy one gold ounce.

Gold/Silver Ratio in 2023

The gold/silver ratio closed in 2023 at precisely 86.69, with gold reaching the all-time record price of $2.079,49 on December 27th.

FAQs

Should I buy gold or silver in 2024?

Whether you should invest in gold or silver depends on your goals. Gold tends to be a hedge against rising inflation and performs well in times of crisis. Silver, which is more affordable and volatile than gold, is highly demanded in the technological, electronic, and medical industries. Investing in both might prevent you from losing profit if one of their prices goes down or if you want a more diverse portfolio.

Which is more expensive, gold or silver?

Gold metal has been more expensive than silver since ancient times. Actually, silver was just more expensive than gold once in history. Since gold supplies are rarer than silver and the demand for gold is still higher, gold is more expensive than silver. The gold price can be better understood using the Gold/Silver Ratio - the dynamic moving amount of silver one can theoretically buy with a fixed amount of gold.

Why is silver so much cheaper than gold?

In short, silver supplies are higher than gold supplies. But gold has always been more desirable for its rarity and symbol of status and wealth.

What is the current price of gold and silver?

As of January, 2024, the silver price is fluctuating at around $23 per ounce, and gold is fluctuating slightly over $2,000 per ounce. You can check the gold and silver spot prices for updated numbers.

How do I know if my gold and silver are real?

The best option to avoid being scammed is to buy it from respected and trusted dealers or experienced, well-rated online businesses such as SD Bullion. Besides that, another way to ensure that your pieces are real is to have them certified or graded.

What are some ways to invest in gold and silver?

The forms to invest in gold or silver can vary from derivatives to physical precious metals. You can invest in Commodities exchange-traded funds (ETFs), Common Stocks and Mutual Funds, bullion (the actual physical precious metal), or certificates.

← Previous Next →
Mo Menezes
Mo Menezes
Researcher and Contributor

Murilo (Mo) Menezes is an attorney and tenured English professor. His passion for economics and coinage led him to the gold and silver industry where he writes in-depth articles about collectible coins; as well as coin news and investing articles...

Top