Silver Has More Applications Than Gold
The second reason that makes silver a better investment than gold is that silver has more industrial applications than goldthe industrial applications of silver adds to its demand. Silver is reflective, thermally conducive, and electronically conducive. In the last 25 years, more patents that require the use of silver have been granted than gold-based patents. It was reported that about 1 billion ounces of silver were used in consumer products in the last 10 years.
The industrial applications of silver will also increase in the coming years because only trace amounts of silver are used in industrial applications. Hence, it is not practical to recycle the silver that has been used in commercial applications it makes more sense to mine and use new silver than to recycle silver from older products.
It is logical to expect that the rate at which industrial applications use up silver will continue to rise in the coming years. However, silver is a naturally occurring metal and there is a finite supply of silver in the earths crust. Hence, it is logical to expect the price of silver to trend up in the coming years.
Sterling Silver Vs White Gold: Why Are They So Similar
Silver and gold are precious metals that people have been using for currency, jewelry, and machine parts since ancient times. Today, people still use the phrase worth its weight in gold, which dates back to the Gold Standard when Europe and Americas money was only worth as much as their gold production capabilities and not set by an all-encompassing government. Many citizens from both continents still argue that the Gold Standard should be the only determinant of economic value.
Before silver and gold become rings, anklets, or decorative cutlery, people mine these metals from the ground as soft and malleable materials impractical to use independently. Your wedding ring might have some genuine gold in it, but it is likely not 100% gold. Gold and silver without their alloys are easily mangled and dont stand up well to the rigors of life.
Most silver articles have copper in them so people can wear them to engagement parties and high society dinners without worrying about things like rigidity, contour, and breaking their engravement patterns. If you see a label with the numbers .925 on a silver item, it means it has at least 92.5% pure silver, and the rest are other metals like copper, platinum, or nickel. The same rules apply to gold.
People often use silver as a cost-efficient alternative to gold. Gold buyers often use white gold as an alternative to platinum. The similarities between white gold and sterling silver dont stop at their physical characteristics.
Sterling Silver Vs White Gold: A Comparison
Thanks to recent advancements in smelting and materials engineering, people nowadays have unlimited options when purchasing precious metals as accessories.
When it comes to buying precious metals, its different strokes for different folks. However, with the number of options out there today, its only natural to have a degree of confusion when youre choosing what to get. Many people still mistake iron sulfide for genuine gold, and who can blame them: It takes a trained eye to distinguish between fools gold and the real thing.
The same confusion arises when people choose between white gold and sterling silver. If youre shopping for a ring, bracelet, or necklace for someone special, its essential to know even the minor differences between the two before you can make an informed decision.
Depending on which country youre buying from, sterling silver can be worth more than white gold and vice versa, so you need to have a keen eye on the precious metals market before you fork out your hard-earned money.
White gold and sterling silver are nearly identical in color. To the average person who relies on a jeweler or appraiser to differentiate between precious metals, they can be the same. People can mold them into rings, sconces, and chandeliers, and their friends would be none the wiser about which is which. However, if youre in the market for genuine gold and silver, it pays to know the minute differences between the two so you can get your moneys worth.
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Dissecting The Diversification Efficiency Of Each Asset
Beyond performance, understanding the diversification properties of each asset or the strength and direction of the linear relationship between assets is another tool that investors use to pursue an improved risk/return profile. Adding assets that have a low correlation to each other also can provide diversification that helps investors seeking to optimize portfolio performance through cyclical and countercyclical market changes.
As illustrated below, golds lower correlation over the past year to both global stocks and broad commodities, highlights golds potential to provide higher diversification efficiency on a relative basis compared to the broad movements of these asset classes.
Figure 5: Golds 1-Year Correlation at a Glance
Effective portfolio diversification can be measured by a portfolios risk-adjusted returns over time. As highlighted below, gold has historically delivered competitive returns, and on average has outperformed silver during a number of past black swan events. Golds track record of hedging against significant equity downturns, thereby reducing portfolio drawdowns, is a key example of one of its potential portfolio diversification benefits.
Figure 6: Measuring the Longer-Term Effects of Diversification Efficiency
Silver Has An Industrial Use
The first thing that sets silver apart from gold, is the fact that it has extensive practical uses. It is estimated that about half of the demand comes from industrial uses. Of course, gold also has some industrial uses, phone chips have some gold in them, for example, but the potential for the increased demand for silver is much higher.
The first and most widespread use of silver was photography, which used silver nitrate to create light-sensitive halide crystals. But this technology has come a long way since then, and silver demand from this industry peaked in 1999. However, a much more interesting technology came to take its place photovoltaic.
Silver began to be used in the early 2000s as a conductor in photovoltaic cells. This is in part what led silver prices to explode back in 2011. As a result, manufacturers looked for ways to reduce the silver contents of solar panels, which they have by around 80%. Nonetheless, the photovoltaic demand for silver has grown at a CAGR of 20% over the last 10 years.
Last, but not least, silver has found increased use in medicine, as it is the most antibacterial chemical with low toxicity to animals. Nanotechnology uses silver as an antimicrobial. The nanosilver acts as a catalyst for oxidation and can destroy the cell wall membrane of certain cells.
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Gold Vs Silver: Which Is Better As An Investment
- 13 Oct 2021
- 3 min read
The investing world has a relatively soft corner for precious metals. And why not? Every time the world spun itself into a new crisis, these limited resources acted as a safety net, especially gold.
In 1991, when India arguably faced its biggest economic crisis, the yellow metal bailed the country out of it. In 2008, when the Lehman crisis hit the world largely, again, these metals saved the financial systems from crumbling.
Today, as the world finds itself amidst an economic slowdown triggered by the outbreak of pandemic, we find ourselves circling back to precious metals. But between gold and silver, which is better? Here is what you need to know.
Both Gold And Silver Appeal To Investors In A Bear Market But The Two Precious Metals Are Not Created Equal
When the economy is tanking and inflation is high, investors often rush to gold. Silver is also viewed as a safe-haven investment, though it gets a lot less hype.
Both precious metals have been sought after throughout history, so they’re appealing when stocks and currencies are losing value.
In August, pandemic worries coupled with a weakening U.S. dollar sent gold prices skyrocketing to over $2,000 an ounce for the first time in history. Silver has also rallied. For the first time since 2013, silver prices soared to $28 an ounce in August, a 140% increase from its 2020 low.
Even in good times, many investors keep a small percentage of their assets invested in gold or silver as a portfolio diversification strategy.
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Whats The Difference Between Platinum White Gold And Silver
Here is a question we get asked constantly by customers who are interested in silver-hued jewelry
Whats the difference between platinum, white gold and silver?
While at first glance silver, white gold and platinum appear silver in color, the three metals are actually easily discernible to the naked eye. Silver and platinum both have gray undertones, unlike white gold which has a warmer, yellow undertone, but platinum is much brighter and shinier and silver has a duller, gray appearance.
The difference in durability is really no contest between platinum, white gold and silver.
Silver is a soft metal, easily scratched, that wears down quickly and tarnishes requiring regular cleaning and polishing to keep it in tip-top shape. However, with proper care, a silver piece can last a lifetime.
White gold is stronger and more durable than silver, and resistant to both corrosion and impact, making it a good choice for everyday wear of engagement and wedding rings. Most white gold is plated with rhodium, which eventually wears away and yellows. Every few years your piece may require a reapplication of rhodium plating to restore the finish.
Platinum jewelry is very strong and maintains is shiny luster without much elbow grease. It is also the metal of choice for those with sensitive skin. Its naturally hypoallergenic and shouldnt cause any skin irritation. And like white gold, it is perfect for engagement and wedding rings.
You Should Invest In Gold If
Gold may be right for you if youre an investor with tens of thousands of dollars or more to invest in the asset class and you want to add stability to your portfolio or are looking for a store of value during tough economic times. Gold investments are better for investors who:
- Have a Few Thousand Dollars to Invest. Gold is a highly valuable asset. Because commodities are cheaper in higher quantities and tend to make up less than 10% of a well-diversified investment portfolio, its important to have enough money in your portfolio to purchase a couple of ounces or more at a time. At todays prices, a pair of one-ounce gold bars requires about $3,500.
- Want to Hedge Against Inflation. Gold has historically grown in value at a rate faster than the U.S. dollar has lost value to inflation. As a result, the yellow metal makes a great hedge against inflation-related risks.
- Want Stability in Your Portfolio. As an asset known for generating stable growth, gold is a great option for those looking to add stability to their portfolio in order to balance out the risks associated with other investments.
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Gold Is A Safe Haven Asset
Gold is a historically proven safe-haven investment. This means, over periods of economic uncertainty or bouts of market volatility investors can rely on gold to act as a portfolio stabilizer since it’s an uncorrelated asset to other conventional assets in an investment portfolio like stocks and bonds.
For the same reason, gold is a portfolio diversifier. Gold is an uncorrelated asset to traditional asset classes like stock and bonds. This means that when stocks perform poorly, gold acts as a portfolio stabilizer. This makes it an ideal safe investment during a stock market downturn
The 1970s Bull Market
The big gold bull market everyone talks about occurred in the 1970s. The end of the gold standard coupled with double-digit inflation led to a near-mythical rise in the gold price.
While gold rose steadily through the 1970s, in the last two years of the decade the price appeared to go parabolic as its price increased nearly six-fold. Surely nothing matched its price rise over the same period, right?
Unbelievably, over the same period of time, the price of silver managed a 10-fold gain. Despite silver’s outperformance, most people remember only gold’s run during this period. This could be due to people following the price of gold more than silver’s price. Or maybe people focus more on the end of the US dollar being tied to the price of gold.
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Potential And Risks Of Investing In Gold And Silver
Lets go ahead and directly compare gold and silver to one another.
Gold has traditionally been a safe haven for investors who do not believe in the strength of the current economy. This was proven once again during the COVID-19 crisis, as gold gained more than 16% during the first half of 2020.
Due to its low volatility, high demand , and history as the primary store hold of wealth for centuries, gold has always been a part of mainstream finance.
The Federal Reserve printed more than $3 Trillion to counteract the negative consequences of COVID-19. This has led to many investors being wary of extreme inflation in the next few years. Gold has limited supply and it usually rises as the cost of living increases.
As such, it is seen as an excellent hedge against inflation. Not only that, there seems to be an almost exact positive correlation between the price of gold in USD and the total debt limit of the US.
Gold seems to rise in near-perfect correlation to the US debt ceiling.
That said, gold has its own risks. Perhaps the biggest one is that other investment classes usually tend to outperform gold by quite a bit during bullish market conditions. If the worst is behind us, then gold will probably not fare well over the next few years.
Gold Is More Rare Than Silver
What makes gold more valuable than silver and why is silver so cheap? It comes down to limited supply and rising demand. The total supply of silver each year is more than gold. Since gold is more of a rare and scarce precious metal compared to silver, along with having high demand, its value increases. All these characteristics are reflected in goldâs current price.
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Gold Vs Silver Precious Metals: Compare Key Bullion Investments
While both precious metals are great buys, gold vs silver both have their own unique benefits and downsides.
Gold is not as hot as you may think it is. And silver may not be as weak as you think it is. When thinking of investing between these two beneficial precious metals, both metals may not be as clear-cut as youd like, or as youd think.
Keep the following discussion in mind:
Sterling Silver Vs White Gold: Price Comparison
Typically white gold is more valuable than sterling silver. This is the case because white gold is made up of up to 75% pure gold.
Pure gold comes with a fancier price tag as well as the nickel alloy. Sterling silver is mixed with copper, which is a less expensive metal.
To give you a better idea, keep in mind that white gold comes with a price tag of $23.86 per gram, while sterling silver is only $0.59 per gram!
Does this mean that white gold is always better because it costs more? In some ways, yes. You are guaranteed to get a quality and valuable piece of jewelry when you purchase white gold.
But dont fret if you are in search of budget-friendly jewelry, because sterling silver is exceptional as well. You will pay a price that wont require to dig too deep into your pocket and get a piece of jewelry that resembles white gold.
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Silver Performs Worse In Crashes
We mentioned previously how silver seems to perform much more in tandem with the economy as opposed to gold which rises in price during a crash. The simple reason for this is that silver is used abundantly in industry. Over half of the silver mined every year is utilized in industry.
When the economy collapses, factories often reduce their output or shut down entirely. As such, the demand for silver falls massively. This leads to silver often falling in price during a crash, despite many investors flocking to it as a safe asset.
Its properties as a conductor of heat as well as electricity, along with its reflective nature, make it ideal for many industries. Until a better alternative is found, silver will always be more volatile than gold.
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What Are The Risks Of Investing In Silver
Of course, silver like any investment isn’t all reward the metal brings its fair share of risks, as well.
- Sensitive to recession: Driven as it is by industrial growth, the price of silver can be decimated by an economic slowdown
- Vulnerable to technology shifts: There’s always potential for silver to be replaced by another metal in its manufacturing uses. Or for something to happen to the industry itself witness the decline of photographic film, a big user of the metal
- Limited income/appreciation potential: as a tangible commodity, silver doesn’t offer any interest like a bond, or dividends like a stock. Your only chance to benefit is if you sell it during a price rise.
- Unpredictable price moves: Because silver has worth in multiple categories, its price can vacillate wildly, caught in a tug-of-war between its industrial and investment valuations. Say investors bid up silver prices. “As the silver price rises, the incentive to recycle silver from industrial scrap, jewelry, and silverware grows,” says Camerana. “As there is a lot of potential scrap around the world, it could cause unexpected oversupply,” which would then cause the price to drop.
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