Gold vs. Silver

In Session 5 of Safety Step: Protect Your Future, we discuss the various types of precious metals, and how to choose which metal is best for you and your family.  A few of the points that we cover are as follows:

  • Gold is more conservative

  • Gold is a solid hedge used for protecting money

  • Gold is better for saving than for trade

  • Gold is easier to store and transport

  • Silver is better for trade

  • Silver is easier to acquire

  • You can get more metal for your dollar with silver

Let's dig a little deeper for a second, and discuss some of the major differences between these two metals in detail.  

1. The total supply of new silver each year is close to 1 billion ounces compared to gold's annual supply of around 120 million ounces.

This makes it seem like the silver market is 8 times bigger than gold, but it's just the opposite, because of the huge difference in their price.  Silver’s lower price makes the value of annual supply much smaller than gold’s.

This explains why silver is more volatile than gold, as we discuss in the course: it takes only a relatively small amount of money to have a greater impact on its price!  As a result, silver will rise more than gold on up days, and fall more than gold on down days, which can make the silver Spot Price chart look pretty scary sometimes!  Investors refer to these price changes as volatility, as most of you already know.  There are exceptions, of course, but that’s what happens most of the time.

2.  Silver requires MUCH more storage space (see 'Storing at Home' article)!  At current prices, the same dollar investment will get you roughly 75 more ounces of silver than gold.  On top of that, most silver is a lot less dense than gold—pure silver is 84% larger in volume than pure gold!  Add those two facts together and it means that silver takes up as much as 128 times more space than gold for the same dollar value!

Silver will also eventually tarnish; pure gold does not.  So, silver coins and bars must be stored in a dry place with no exposure to the elements, a concern you don’t have with gold.  It takes a little more strategizing on your part to store silver instead of gold!

3.  Governments are increasing their gold reserves and decreasing their silver reserves.  

This difference may not seem to be something to worry about right now, but it's a very significant "behind-the-scenes" development that could drastically alter the prices of metals in the future. 

Governments and other institutions used to hold large inventories of silver.  Today, however, most of them no longer have stockpiles of the metal, because real silver is no longer used to mint circulating coinage.  In fact, the only countries that warehouse silver are the U.S., India, and Mexico.

In contrast, central banks hold almost 30,000 tonnes (96.4 million ounces) of gold in official Reserves.  And on a net basis, they continue buying every year!  These ongoing purchases contribute to the overall demand for the metal, which could gradually increase the price of gold going into the future.

While this source of demand for gold isn’t present for silver, it does put the silver market in a interesting situation, because if the need for physical silver were to suddenly increase—a financial crisis, a shortage in industrial supply, a spike in investment demand, etc.—governments won’t be able to meet these needs with such tiny stockpiles.  Only major precious metals dealers who have bullion inventory will be able to provide, and their supply is also very limited. 

Deciding which metal is best for your family is totally up to you, and the personal concerns you have for the future!  However, knowing a few of these details can help you factor in more variables to your risk management, and could potentially save you money, time and tough logistical planning in the future!  We hope that this information will help you better understand the difference between these two metals, and as always, we're here to answer any questions you might have!