At my retail store – I get many new investor’s and even experienced ones asking what is better to buy as an investment, gold or silver? Or how about platinum and palladium. The focus of this little blog post will be the two metals I sell the most of which are gold and silver, I may do platinum and palladium (white metals) at later time.
Gold and silver vary from each other quite drastically at times, I want to let my customers know about the differences and highlight the advantages and disadvantages of each or them .
First – Since the prices of both Silver and Gold change significantly year to year Gold and silver prices move significantly year to year, we should start with the relatively long-term charts. Below we have the gold and silver price charts for a 12 year period.
As you can see below, gold has varied from $265 USD per ounce to $1,850 per ounce over the past 12 years, moving mostly upwards over the long term.
Okay Now it’s Silvers Turn!
With the same mostly upward trend as gold, silver has fluctuated $5USD per ounce to $45USD Per ounce for the past 12 years.
As you can see from the charts Gold has been constantly much more expensive than silver. This sometimes seems quit strange that the two have this price relation because, did you know, there is actually much more gold above the ground in circulation than the same of silver; rough estimates are about 5 billion ounces of gold in circulation and silver at 450 million ounces of the same.
Some reasons why this may occur are because even though mined and ready to use gold is more widely available than silver, gold is in higher demand by the world’s central banks and by investors both individuals, private banks and hedge funds who see the metal as alternative to currency.
The Gold/Silver Ratio.
The ratio between gold and silver is sometimes used by investors to determine if either of the metals is undervalued as compared to the each other. The gold/silver ratio measures how many ounces of silver you can buy with one ounce of gold. Here’s a 10-year gold/silver ratio chart:
Transporting and Storing Gold & Silver.
Gold is definitely has an advantage when it comes to storage and movement. You can fit a much higher value worth of gold than silver into the same sized safe, vault or shipment.
Time to Sell – Liquidity
Both gold and silver are considered fairly liquid assets, viewed by most as valuable commodity, and even by some as an actual currency. As a I dealer I buy and sell both metals on a daily basis and provide my customers as an exchange point for their buying and selling. Aside from my business, countless other precious metal retailers and dealers provide these services worldwide making it fairly easy to sell when the time comes. Ways to sell metals include dealers, virtually any pawn, coin, or jewelry shop, on eBay, or to other local individuals.
I was thinking about it and if I had to pick I think that gold is the more liquid of the two metals due to its higher demand, and supply over silver. That’s not say that silver isn’t adequately liquid, because it very much is. No worries.
Premiums over Spot
As an investor in precious metals, you normally want to buy metal as close to the current spot price as you can, otherwise the metal price has to increase significantly just for you to break even.
In general it’s pretty impossible for an individual to buy gold and silver at the spot price, as dealers like myself, Aaron Buys Gold , we make our money on our buy/sell margins, meaning we need to add a tiny premium to stay in business. But , by selecting the right products and quantities, you can make sure you can end up paying the lowest premium possible.
Generally if you are buying less than an ounce of gold, silver will have a less markup because in order to buy less than one full ounce of gold, you’d have to buy small fractional bars which have higher minting costs and a larger markup over the gold price. For example at the current gold spot price of around $1650 CAD per ounce, if you were to buy 31, 1 gram bars then you’d be paying over $2300 per ounce or a 40+ percent markup. So buying gold in smaller quantities than 1 ounce will normally be more expensive then buying 1oz or 1ooz increments of silver.
There you have the basic differences, the key points, are:
-If your buying less than 1 ounce of gold, then silver will general have a lower markup/premium
-Silver is more difficult to store and transport because, it’s lower value to weight ratio. $50,000 worth of gold could almost fit in your pocket, $50,000 of silver would take up several boxes and weigh well over 100 lbs.
-The price movement of silver is at times more volatile than gold, with larger swings in price percentage wise. This could mean that silver has more upside potential, but also potential for faster and more rapid losses than gold.
This article was my own personal analysis and do not necessarily reflect the explicit views of Aaron Buys Gold Ltd. and should not be construed as financial advice. As with any investment, you could lose all your money.