by | Sep 16, 2023 | Precious Metals

Last Updated: December 7, 2023

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There’s a reason why silver is often thought of as gold’s younger sibling. While the global silver market is valued at the not-so-paltry sum of $1.32 trillion, the world’s gold supply is worth nearly ten times that, topping over $12 trillion as of April 2023. 

Gold and silver are two precious metals that have captured the imagination of investors for centuries. Both metals have unique characteristics and serve different roles in investors’ portfolios. Understanding the fundamental differences between gold and silver can help investors make informed decisions about which metal is best suited for their investment objectives.

 

Gold vs. Silver: What Investors Need to Know

 

1. Value and Rarity:

Gold: Gold is often referred to as “the ultimate store of value.” It has been used as a form of currency and a store of wealth for thousands of years. Gold is relatively rare, and its value is influenced by factors such as economic stability, inflation, and currency devaluation.

Silver: Silver is also considered a precious metal, but it is more abundant than gold. Silver’s value tends to be influenced by both its role as a store of value and its industrial applications, such as in electronics and photography.

 

2. Price Volatility:

Gold: Gold is generally less volatile than silver. It tends to be a more stable and conservative investment, making it attractive to risk-averse investors.

Silver: Silver prices are more volatile and can experience larger price swings compared to gold. This volatility can provide opportunities for traders but may also present higher risks.

 

3. Industrial Use:

Gold: Gold has limited industrial applications and is primarily valued for its aesthetic and monetary qualities.

Silver: Silver has a wide range of industrial applications, including in electronics, solar panels, and medical devices. This dual role as an industrial metal and a precious metal can influence silver’s price dynamics.

 

4. Price Ratio:

Gold-to-Silver Ratio: The gold-to-silver ratio is the number of ounces of silver it takes to buy one ounce of gold. Historically, this ratio has fluctuated, and investors often use it to assess whether one metal is undervalued relative to the other. When the ratio is high, silver may be seen as undervalued compared to gold, and vice versa.

 

5. Portfolio Diversification:

Gold: Gold is commonly used as a hedge against economic and geopolitical uncertainties. It can act as a stabilizing force in a diversified portfolio, particularly during times of crisis.

Silver: Silver can also provide diversification benefits but may carry more risk due to its higher volatility. Some investors see silver as a potential growth asset in addition to its role as a store of value.

 

6. Investor Preference:

Gold: Gold is often favored by conservative investors who seek to preserve wealth and hedge against inflation. It is also popular among central banks as a reserve asset.

Silver: Silver is preferred by investors who are willing to take on more risk and are interested in its industrial potential. It can appeal to those looking for both value preservation and growth potential.

Both gold and silver have a place in investors’ portfolios, but they serve different roles and come with unique characteristics. Gold is the go-to choice for wealth preservation and stability, while silver offers potential growth opportunities but carries higher volatility. 

The choice between the two depends on an investor’s risk tolerance, investment objectives, and view on the global economic landscape. Diversifying a portfolio with a combination of both metals can also be a strategic approach to balance risk and potential returns.

 

Silver vs. Gold at a Glance

 

Aspect Gold Silver
Rarity Relatively rare Less rare
Value Store Ultimate store of value Store of value with industrial uses
Price Volatility Less volatile More volatile
Industrial Use Limited industrial applications Widely used in industry
Price Ratio Gold-to-Silver Ratio varies Gold-to-Silver Ratio varies
Portfolio Diversification Stabilizing force in a diversified portfolio Potential for growth but higher volatility in a diversified portfolio
Investor Preference Preferred by conservative investors seeking wealth preservation and hedging against inflation Preferred by investors willing to take on more risk and interested in its industrial potential
Central Bank Holdings Commonly held as a reserve asset Less commonly held by central banks
Historical Role Historical currency and wealth storage Historical currency, wealth storage, and industrial use

 

Physical and Chemical Properties of Silver vs. Gold

Investors need to be aware of the fundamental differences between these two types of metals. Their unique chemical and physical attributes make them applicable to different industries and use cases. 

Certainly, here are some basic chemical and physical properties of both gold and silver:

 

Essential Properties of Gold:

  1. Chemical Symbol: Au (from the Latin word “Aurum”).
  2. Atomic Number: 79.
  3. Atomic Weight: 196.966569.
  4. Color: Gold is a distinctive yellow metal.
  5. Density: Gold is dense, with a density of approximately 19.32 grams per cubic centimeter (g/cm³).
  6. Melting Point: Gold has a high melting point of around 1,948 degrees Fahrenheit (1,064 degrees Celsius).
  7. Boiling Point: Gold has a relatively high boiling point, approximately 5,173 degrees Fahrenheit (2,856 degrees Celsius).
  8. Malleability: Gold is highly malleable, which means it can be easily hammered or pressed into thin sheets, making it ideal for use in jewelry.
  9. Ductility: Gold is also very ductile, meaning it can be drawn into thin wires.
  10. Conductivity: Gold is an excellent conductor of electricity, making it valuable in various electronic applications.
  11. Chemical Inactivity: Gold is highly unreactive and does not corrode or tarnish, which is one reason it retains its lustrous appearance over time.
  12. Occurrence: Gold is relatively rare in the Earth’s crust and is often found in quartz veins or alluvial deposits.

 

Essential Properties of Silver:

  1. Chemical Symbol: Ag (from the Latin word “Argentum”).
  2. Atomic Number: 47.
  3. Atomic Weight: 107.8682.
  4. Color: Raw silver is a shiny, metallic white.
  5. Density: Silver has a density of approximately 10.49 grams per cubic centimeter (g/cm³).
  6. Melting Point: Silver has a lower melting point than gold, at around 1,763 degrees Fahrenheit (961 degrees Celsius).
  7. Boiling Point: Silver’s boiling point is about 3,924 degrees Fahrenheit (2,162 degrees Celsius).
  8. Malleability: Silver is highly malleable, similar to gold, and can be easily flattened into thin sheets.
  9. Ductility: Silver is also very ductile and can be drawn into fine wires.
  10. Conductivity: Silver is an excellent conductor of both electricity and heat, which makes it valuable in electrical applications and for use in mirrors.
  11. Chemical Reactivity: Silver can react with sulfur compounds in the air to form tarnish (silver sulfide), which gives it a darker color over time.
  12. Occurrence: Silver is found both as a native metal and in various minerals, often associated with other metals like lead, zinc, and copper.

These properties contribute to the unique characteristics and diverse uses of both gold and silver in various industries and applications.

 

Top Applications of Gold vs. Silver

To help familiarize yourself with the demand-side factors that influence gold and silver prices, the top use cases and applications of both gold and silver are listed below.

 

Most Common Gold Use Cases

  • Electronics: Gold is an excellent conductor of electricity and does not corrode, making it essential in the manufacturing of electronic components such as connectors, switches, and printed circuit boards.
  • Dentistry: Gold alloys are used in dentistry for dental crowns, bridges, and orthodontic appliances due to their biocompatibility, malleability, and resistance to corrosion.
  • Aerospace: Gold is used in aerospace applications, particularly in spacecraft and satellites, where its excellent thermal conductivity helps manage extreme temperature fluctuations in outer space.
  • Medicine: Gold nanoparticles are employed in medical diagnostic tests and as drug delivery carriers due to their unique optical and chemical properties, making them useful in the pharmaceutical and medical industries.

 

Most Common Silver Use Cases

  • Photography: Silver is widely used in photographic film and paper. When exposed to light, silver halides form an image, making it a fundamental component in traditional photography.
  • Electronics: Silver is another excellent conductor of electricity and is used in electrical contacts, switches, and connectors, particularly in high-frequency applications.
  • Mirrors and Reflectors: Silver is highly reflective, and it is commonly used to create mirrors, reflective coatings for telescope mirrors, and reflective surfaces in solar panels.
  • Antibacterial Applications: Silver’s antimicrobial properties make it valuable in manufacturing items like antibacterial wound dressings, catheters, and water purification systems to inhibit the growth of harmful microorganisms.

 

These are just some of the many industrial and manufacturing uses of gold and silver, and their versatility continues to drive their demand in various sectors.

 

Future Trends in Silver vs. Gold Investing

Now that the chemical and physical properties of silver and gold are clear, and their use cases established, we can look at current market trends to see where both assets may be headed. 

The silver market is heavily influenced by industrial demand for silver in electronics, photovoltaic panels, and other applications that can drive prices up. Similarly, demand for gold in the manufacturing and jewelry sectors put upward price pressure on the yellow metal.

Silver demand hit record highs in 2021 and 2022 and is expected to rise by another 2.6% year-over-year to 550 million ounces in 2023. The resumption of full-scale manufacturing in China following the end of the country’s zero COVID policy in early 2023 will likely accelerate the demand-side price pressure on silver. 

Meanwhile, central banks around the world are buying gold reserve assets at an unprecedented pace. In H1 2023, global central banks added 387 tonnes of gold to their coffers. Demand from central banks in the first quarter of 2023 was the strongest on record

Source: Gold.org

 

On top of that, high interest rates, rising inflation, and other economic uncertainties both global and domestic have garnered even more institutional interest in gold. 

For this reason, TD Securities believes that gold prices will hit $2,100 an ounce by the end of the year—up about 9% from its current price level. 

 

Precious Metals as an Uncertainty and Disaster Hedge

Both silver and gold have historically been sought after for their ability to hedge against economic downturns, prepare for uncertainties, and shield wealth against systemic disaster. These precious metals have historically retained their value during times of crisis, making them attractive assets for wealth preservation.

During the 2008 global financial crisis, for instance, gold prices surged by approximately 25% from the beginning of 2008 to the end of the year. Between 2007 and 2009, gold prices rallied almost 50% as institutional and retail capital divested from speculative risk assets. 

This dramatic increase in value can be attributed to investors fleeing from volatile equities and seeking refuge in the stability of gold. Similarly, during the COVID-19 pandemic in 2020, gold prices soared to a record high of over $2,000 per ounce as investors feared the economic repercussions of the pandemic. 

Silver, often referred to as “poor man’s gold,” has also demonstrated its hedge qualities. In the aftermath of the 2008 financial crisis, silver prices witnessed an astonishing increase of nearly 440% between 2008 and 2011. 

This substantial rise was partly driven by its industrial applications in addition to its role as a store of value. Moreover, in times of currency devaluation or political turmoil, silver has been utilized as a means of wealth preservation in various countries.

Investors turn to these precious metals as a way to diversify their portfolios and safeguard their wealth in the face of unpredictable economic challenges. As we enter a period of protracted inflation, generationally high interest rates, and geopolitical conflict, it may be beneficial for risk-conscious investors to consider diversifying with these assets as a precautionary measure.

 

Top Silver vs. Gold Investment Assets

Below is a comparison chart profiling the two bestselling investment-grade silver and gold assets available on the market today. 

 

Both investment-grade coins can be purchased from reputable online gold and silver dealers as well as pawn shops and collectors’ tradeshows.  

 

IRAs, 457(b), and 401(k): Vehicles for Gold and Silver Investing

Interested in investing in silver, gold, or any other precious metal? Consider doing so within a tax-advantaged retirement account such as a 401(k) or self-directed IRA. 

Investing in precious metals within your IRA or 401(k) may be a smart move for savvy investors looking to secure their financial future. The tax benefits alone are compelling, with tax-deferred or tax-free growth, depending on your account type. 

These accounts provide a perfect vehicle for diversifying your portfolio, reducing risk by adding assets that often move independently from stocks and bonds. Plus, precious metals are renowned for their ability to act as a hedge against inflation and economic uncertainty, safeguarding your retirement savings. 

With regulatory compliance, professional custodianship, and the long-term wealth preservation they offer, precious metals make a powerful addition to your retirement strategy. Consult a top-rated gold IRA company today to explore how you can fortify your retirement savings with the enduring value of precious metals within your IRA or self-directed 401(k).

Liam Hunt

Liam Hunt, M.A., is a financial writer covering global markets, monetary policy, retirement savings, and millennial investing. His commentary and analysis have been featured in the New York Post, Reader's Digest, Fox Business, and Forbes.