Both gold and silver prices have increased over the past few years and the general belief is that this trend will continue. Gold, as well as silver is seen by many as a safe haven for their money, others see them as unpredictable and difficult to trade.
People will invest in something they believe will increase in value over time or simply because other investments might decrease at a faster rate. Gold and silver are scarce commodities that have value as an object of beauty, in jewellery for example, or as it is sometimes used in specific industrial applications.
All investments contain an element of risk and precious metals are no different. One of the reasons people invest in gold and silver is to diversify their investments and spread the risk over a variety of markets. Precious metals often move up in price when other markets fall. This diversification could help to offset some of the loss you experience in other markets.
- The Market for Silver
Silver has seen impressive grown in recent years, much like gold and over many periods, slightly higher than gold.
Much of this growth is based on increased demand. Silver was used extensively in camera film and when digital cameras effectively wiped out that market, silver was no longer in demand in that industry. However, it is used frequently in electronics, especially cell phones so this has seen increased demand.
Silver provides very low resistance, making it very useful in many appliances. It is also used extensively in the fast-growing solar power industry. Due to its antibacterial action, silver is being used more in medical applications. There are many other uses and practical applications for silver, many of which are expected to increase in coming years. As the demand for silver grows, one can expect an increase in the price of the metal.
- The Market for Gold
Gold has less practical uses and is valued mainly for its scarcity and physical or aesthetic appearance, being used mainly in the manufacture of jewellery. There is some demand from the medical and dental industry but as prices continue to increase, other materials become more attractive.
- So, Which Is Better, Silver or Gold?
There are a number of factors that point to gold being a better risk adjusted investment than silver right now
- Gold’s status as a currency
The main reason gold is recommended is its use as an alternative currency. Silver has no such claim to its benefit.
- Central banks
Many of the central banks, particularly Russia and Asian countries are probably going to continue buying gold. The same cannot be said for silver.
- Industrial Use
Although silver use in industry is likely to grow, poor growth prospects will cause this growth to be limited and slow.
These influences are likely to be seen in the short and medium term. Long term it is difficult to predict the growth in gold compared to silver.
- How to Invest in Precious Metals
There are a number of options available to the investor that wants to buy gold or silver:
- Bars and Coins
Although not as popular as in the past, many people still buy physical metal. This comes in the form of silver bars but more popular are gold or silver coins. There are a number of popular standardised coins available to the investor.
- Exchange Traded Funds
A more recent investment vehicle is ETFs or Exchange traded funds. They are used to measure or track the value of goods, normally commodities such as precious metals, natural gas and crude oil. They are traded in much the same way as stocks and can be bought or sold through your cfd broker. This makes dealing in gold and silver a lot easier than buying and storing the physical metal.
- Mining Companies
Another option is to buy shares in companies that mine gold or silver. In the case of silver it is seldom mined in isolation so shares in a silver mining company would give your portfolio exposure to much metal, not just silver.
So as with much investment advice, no guarantees but some food for thought. It is certainly keeping an eye on gold and silver as part of your investment mix.