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Gold vs. Silver: Which Is A Better Investment

The world’s been hit with a global pandemic, and it hasn’t been easy on any of us. It’s taken its toll on the world economy, and the ongoing crisis will affect us all.

You can argue whether both government or central bank responses have been appropriate or not, but regardless, we have to deal with the reality of those effects and how those policy responses will continue to affect the investment landscape.

What is happening to precious metals? Are they managing to pull through or perhaps barely surviving?

If history’s an indicator, precious metals not only survive turmoil times, they thrive. But which metal is holding its value or will perform better? This question requires an in-depth analysis of the current market as well as an evaluation of records.

So, which is a better investment amid a rampant pandemic – gold or silver?

Go through this comprehensive overview to find out.

Gold vs. Silver – What’s the Differences

1. Volatility

Silver is more volatile than gold. What does that entail?

Firstly, you have to consider the annual supply of both elements. The total supply of new silver each year is close to 1 billion ounces, while the annual gold supply is at 120 million ounces.

From this only, a non-specialist would deduce that the silver market is 8 times bigger than gold. But just the opposite is true due to the massive difference in their price. Silver’s much lower price makes the value of its annual supply much lower than gold.

In summary, silver is more volatile than gold because a relatively small amount of money has a huge impact on its price. Remember that it’s the futures prices that drive the silver price, not the demand for physical, so when big institutional investors allocate funds towards silver futures, it will push the price much more dramatically. As a consequence, silver rises more than gold on up days and falls more than gold on down days.

If you’re going to invest in silver, you have to be prepared for its high volatility.

2. Affordability

Why is silver often referred to as “poor man’s gold”?

Silver has one major advantage over gold – you can capture all of the same benefits with silver as you can with gold, only at a much lower cost. Buying an ounce of silver is affordable to almost everyone. The same can not be said for an ounce of gold. So when the price of gold and silver rises, silver becomes more advantageous because more individuals can afford to buy it.

And the silver in question is physical silver, not ETFs, futures contracts, or certificates.

Just like gold, silver is a hard asset. Among all the stocks, bonds, paper profits, and digital tradings, silver is one of the few tangible assets. Silver is money, as is gold. In fact, throughout history, it’s been used as money considerably more often than gold.

Furthermore, it has no counterparty risks, and it’s never been defaulted on.

Market Recapitulation

1. Gold/Silver Ratio

The gold/silver ratio represents the ratio between gold and silver spot prices. It measures how many ounces of silver you can buy in gold. Investors use this ratio to determine if one of the metals is undervalued compared to the other. Currently, the gold/silver ratio is 1:86, which means silver is undervalued:

Gold Silver Ratio

Source: goldprice.org

The correlation hit a high earlier this year, but now, nine months in, the current momentum looks quite different. This ratio has varied over the years. We have seen some charts that have shown that the ratio has been over 100 at times and as low as single digits at others. What the ratio tells investors is where the risk-reward ratio may lie over a longer period.

The higher the ratio, the more that silver is likely to outperform gold. The time frame, however, is the key metric and we don’t recommend that anyone look at this from a very short-term perspective.

2. Gold vs. Silver Demand

Silver has higher industrial use than gold. Around 56% of the silver supply and only about 12% of the gold supply are used in the industry.

With the constant rise of technology, the demand for silver has never been higher. For example, the year 2019 was a record high for silver demand.

As global economies deal with recovering from the COVID-19 pandemic, I think it’s only a matter of time before industrial demand for silver hits a new high. The same cannot be said (with certainty) for gold. Since gold doesn’t have such wide use in the industry (compared to silver), its industrial demand declined in the first half of 2020, as a result of the pandemic.

But, the demand for gold as an investment asset has climbed to a record as ETF holdings reached an all-time high in July.

This is not surprising, as gold has always been a hedge against both inflation and deflation, and many investors consider it a haven during an economic crisis.

3. Gold vs. Silver price

In the first six months of 2020, gold prices have peaked, and it’s currently at $1,955/oz.

Gold vs. Silver price

Source: kitco.com

However, as presented in the table above, gold has been struggling a bit in the past month or so. Given the incredible run-up in the gold price over the past year, it is healthy from a market perspective for gold to take a breather and consolidate its gains.

Nothing goes up in a straight line, and we think the pause we have seen in its meteoric rise is a positive data point. Nevertheless, experts predict an almost certain rise in gold prices by the end of this and the following year. While gold prices fluctuate daily, they are certainly rising in the long term.

As for silver, it’s at $26/oz. In the past month, silver prices have declined a bit, but with the impending growth in demand, they are expected to rise again:

silver price performance


In 2020, silver has been making waves.

Precious metal is largely discussed among investors as many of them believe it’s about to have a major breakout. There have been talks that it could even weaken Gold’s status as the undisputed leader.

However, gold has a long history of thriving during an economic crisis, so its position won’t be so easily shaken.

And now, back to the main question. Which will have better demand in 2020 – silver or gold?

Market analysts believe that both are good choices. It all depends on your budget how much you’re willing to invest, and what you expect to gain from that investment. Another consideration that we tell all investors is silver and gold. If you want a lot of silver, you better have a solid plan on where to store it. That is a discussion for a future post. Stay tuned.

Dan Barett’s
Dan Barett’s
Dan Barett’s love and passion for the markets stems from a long history of watching and working on Wall Street. He became passionate about the metals markets just before the 2008 financial crisis when he was introduced to the Austrian School of economic analysis. He is currently employed at Pacific Precious Metals, where he offers his expert advice. Before that, he performed a range of investment services.


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