The precious metals market is one that has attracted a growing level of interest from casual amateur investors over the past decade. Once the realm of investment banks, financiers, Heads of State and movie villains, today, anyone can add precious metals to their investment portfolio, and as a commodity that is largely recession proof, there is plenty of sense in doing so.
This leads to the question of whether you should put your money in gold or silver? We all know that gold is of higher value (typically tracking at around 16 times the value of silver). But when James Bond’s latest adversary is trying to decide whether he needs one ton of gold or 16 tons of silver, does it purely depend on the size of the vault in his underground lair?
Volatility
Over time, precious metals go up in value, and that is why investors are so keen to have them as part of their portfolios. They provide a safe harbor in times of trouble. But that is not to say they are immune from short term volatility.
Of the two, silver is the more volatile. Production of silver is around nine times that of gold. The fact that supply is higher means the value is far more exposed to the overall state of the market. In other words, when the financial markets have a good day, so does the price of silver, but the converse is also true.
That doesn’t make silver a bad investment – it just means that as an investor you need to hold your nerve and ride the storm – your silver will certainly go down in value sometimes, but it will also go up, and in the long term, it is as safe an investment as anything.
Value
We can joke about Bond villains with their tons of precious metal, but for the smaller investor, the lower value of silver can make it a more versatile investment option. Here’s the thing: although you can buy gold in tiny quantities, right down to a tenth of an ounce, the smaller you go, the less cost effective it becomes. This is because it costs the refiner exactly the same to make a tenth of an ounce coin as a one ounce coin.
In this respect, then, bigger is better – for around the same price as a tenth of an ounce gold coin, you can buy a 10 ounce silver bar here. Of course, the versatility doesn’t stop there. If you buy a 10 ounce gold bar, you are looking at something in the region of $14,000. For the same price, you can buy around 80 silver bars of the same price.
Clearly, the advantage here is that if you need to generate a few hundred dollars, you can sell two or three of your silver bars and hang on to the rest. With the gold bar, however, you have no choice but to either keep it or sell it.