Gold Vs Silver

Though there are at least four major precious metals and half a dozen or so less well known ones, silver and gold are the primary investment metals for the vast majority of the world’s bullion seekers.

Both are clearly rare and valuable, though in different degrees, and both have the unique properties which mark out the noble metals from their “plebeian” brethren, such as great resistance to most forms of chemical corrosion, and immunity to the effects of oxidation. They are soft but have a very high melting point.

Silver has more industrial use than gold at the present time, though both are employed for some applications. This is because silver is more electrically conductive than copper by a hefty margin. Though it is too scarce to be used for the billions of miles of electrical wiring that run across the world’s face to bring power to private homes and businesses from generation plants, it can be used in many high tech and medical applications in small but crucial parts.

This factor helps to explain why silver’s price behaves the way it does – in a completely different fashion from gold. As will be seen presently, silver’s price movements are relatively predictable, while those of gold approach chaos.

Considerations of Price

The first thing to consider when you are contemplating whether to buy silver or gold is the relative price of the two metals. Silver currently sells at a spot price of around $35 per ounce, plus whatever premium you are obliged to pay on it. Gold’s spot price is $1,500 an ounce or more, plus premium.

For those with a large amount of disposable income, this is not a quandary – but such people represent 1% or so of the total population, and there are many buyers of precious metals who are honest, hard working, but simply do not have the cash flow to buy $1,600 gold coins.

For those in the lower 99% of the income pyramid, silver may be literally the only feasible investment metal. Purchasing one or two coins weekly, with occasional larger purchases when there is a “windfall”, is a slow but certain method of building up a nest egg of silver. Even buying 10 silver coins a week is far less costly than buying a single gold coin or even a gold round. The amount of value stored is less, but so is the current outlay.

Considerations of Liquidity

Liquidity is a measure of how quickly, easily, and cheaply a commodity can be converted into cash. The more liquid an asset is, the more valuable it is as a source of “emergency money”. In this case, silver is a very liquid asset, not only because of high demand (meaning there is always a buyer readily available), but because the cost of an ounce of silver is relatively low. This means that there are many people and businesses that can afford to buy it, even in considerable quantities.

Gold is comparatively illiquid, meaning that it is much harder to convert into cash than silver is. In effect, it is so valuable that it is harder to sell – just like it is easier to sell a dented Hyundai or Ford in a financial emergency than a mint condition Aston Martin. There are simply more buyers for silver than for gold, so if you are buying in anticipation of an emergency, silver may be more practical even if it is less valuable per unit of weight.

Considerations of Risk

The risk involved in purchasing each of the precious metals differs greatly as well. Silver is needed for industrial purposes, so there is a steady – and indeed, rising demand for silver from industry worldwide. This demand is not wholly dependent on any one nation, and has some real basis rather than the airy gambling of speculative commodity markets.

As such, silver is unlikely to witness sudden plunges in value, and is apt to rise in price over the next few years, perhaps sharply – since the Commodities Commission is investigating a possible “selling short” scheme by several major banks, artificially holding silver prices far lower than their real market clearing price.

Gold is far riskier, which means that you have a chance to hit the jackpot with it – but also the possibility of hitting the cesspool as well. Historically, gold has responded mainly to commodity speculator’s betting, and not to predictable real world economic policy or inflation rates. Its value has risen and plunged unpredictably – remained static during decades of the worst inflation the world has seen – and sometimes moved in the opposite direction of all other indicators.

Interestingly, if adjusted for inflation, gold has lost 40% of its value since 1980, according to sober Wall Street Journal statistics. If gold spikes upwards, then you could potentially sell it at a tremendous profit per ounce, but if you bet wrong, you may very well see your investment wither into ashes.

Considerations of Profit

Gold is more profitable than silver if the bettor in the market gets in at the right moment. Since its price is ridiculously overinflated, you may be able to buy high and sell even higher, especially in times of economic fear. Silver offers more modest profits , but more certain ones, because its price expansion is more rationally based and therefore more steady and predictable. Gold is the world’s main “get rich quick” metal; unfortunately, as noted above, it is also a “get poor quick” metal if you bet on the market and it goes into one of its unpredictable, but powerful, downward jolts.

Conclusion: Pick Your Metal According to Your Daring

Ultimately, your choice of which metal to invest in depends on your level of daring and the amount of risk you are prepared to shoulder, assuming, of course, that you can afford to invest in gold at all. Silver is a practical precious metal, with real industrial demand and a market which responds in some measure to general inflation.

Gold is a speculative precious metal whose price is determined mainly by commodity trading, with scant reference to anything in reality – including the inflation rate, as historical data demonstrates time and time again. It should mainly be considered by those who want to make a quick buck, to put it in vulgar but highly accurate terms.

If you are willing to accept a slightly higher level of risk – and want to make a good profit if the market goes your way, then buy gold. If you prefer a more staid, cautious approach, with prudent margins of safety and the possibility of a more modest but more certain profit, then silver is a better investment to make.

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