Gold or Silver as an Investment

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Gold and silver are both precious metals that can be used for investment purposes, but it needs to be kept in mind that the two metals have different properties, both physical and economic, that suit different needs. This investment guide helps to explain whether to buy Gold or Silver as an Investment.

Difference in Value

Silver is often a byproduct of the mining non-precious metals such as lead and copper, and is relatively abundant in the earth’s surface. However, its conductivity and bactericidal qualities make it increasingly useful in the electronics industry and in the medical fields and so there is always a demand for silver, which is likely to continue to increase in value.

Gold, on the other hand, generally requires more specialized and expensive mining techniques, but it also has a number of industrial and decorative uses, and as a result it is considered more valuable than silver.

Silver has shown slower growth than gold as a long term investment. As at March 2017, the dollar price per ounce of gold has increased some 88% over the last ten years, whereas the price of silver has increased by approximately only 33%. However, silver rose in value by over 400% between the last quarter of 2008 and the first quarter of 2011, before dropping back to a narrow band about double its 2008 value since mid-2013.

The ratio between the dollar prices of gold and silver per ounce has increased from approximately 48:1 in early 2007 to approximately 68:1 in early 2017, further indicating that gold is the better metal for longer term investment, whereas silver is more of a speculative investment.

Difference in Weight

Gold is a more dense and heavier metal than silver and is several times more valuable per unit weight, so it is easier to store and transport $1,500 worth of gold (approximately 1.2oz) than the same value in silver (about 80oz). Nevertheless, both have their uses, since it would be safer to carry around 1oz of silver for everyday trading where an economy is in turmoil, than 1oz of gold.

Silver as a Medium of Exchange

In countries where there is a risk of high or runaway inflation (Zimbabwe comes to mind), it may be easier to use small silver bars or coins as a reliable means of barter and exchange than gold, because silver’s lower value will allow you to buy everyday items without having to receive change in the fast devaluing local currency.

If not a resident in that country, it will, however, be wise to check the regulations before entering the country with silver bullion.

Speculative Investment

Where an economy is stable, silver can be seen as a form of investment rather than a means of trade. The silver price is more liable to volatility than the gold price, however, making silver more suited for speculative investment, with purchases made when the price is low and profit taking when the price rises. In some countries such as the UK, silver purchases attract taxes of up to 20% in the form of VAT, so it is important to ensure that the increase in value offsets the VAT component when deciding to sell.

However, even though the silver price spikes of 1980 (when the Hunt brothers attempted to corner the silver market) and 2012 have passed, holding onto some silver for the long term is still an option, given its increase in value over the last decade.

Long Term Investment

In the case where gold is too expensive for the new investor, buying silver as a long term investment has its advantages. Continued growth in value is almost assured, as the demand for silver in industrial uses multiplies.

Including both gold and silver in one’s investment portfolio provides a degree of diversification that will spread risk and provide flexibility according to market trends.

It is generally recommended that silver be retained for at least a year to recoup the VAT costs where they apply, but a longer term investment is advised, unless one is an experienced investor who can read the markets well and can judge whether to buy Gold or Silver as an Investment.

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