Investing In Gold vs Silver

Investing In Gold vs Silver

The world of investing is so vast that you may not know where to start. Between stocks, bonds, short positions, and all of the other complex investment options at your disposal, it can be pretty difficult to figure out where you should put your money. If you want a smart investment that doesn’t require much micromanagement or expertise, then you may want to consider purchasing gold and silver bullion.

Gold and silver have been prized for millennia, and many civilizations have used these metals as the basis for their economies. To this day, gold and silver remain extremely relevant and useful, and that is not likely to change for a long time, so they are a great investment for someone who wants long-term stability and growth. Getting started may seem a little intimidating, so this comprehensive article will help you understand relevant economic concepts while running you through the pros and cons of each metal so that you can make the wisest investment for your needs.

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Important Economic Concepts to Understand

What Is Liquidity?

Investing In Gold vs Silver

In short, an asset’s liquidity describes how easily you can exchange it for cash or other goods and services. For example, a house is an asset with low liquidity. After putting your house up for sale, it may take several showings and negotiations to actually sell the house. Depending on your area and the state of the economy, this process could take years. In the meantime, you won’t be able to spend your home’s value because it hasn’t been converted into cash yet.

Naturally, your country’s national currency is the most liquid asset within your country. Vendors, government offices, and enterprises that operate with an official license have to accept the national currency in exchange for goods and services. However, many assets are almost as liquid as cash.

There is high demand for gold and silver, and it’s easy to find a buyer for either of these metals. Unlike a home, you can sell gold or silver bullion in a matter of minutes. You don’t need to jump through hoops and sign an array of complicated contracts to buy or sell precious metals. Therefore, gold and silver both have very high liquidity.

As an investor, high liquidity is good because you never know when you may need cash. If all of your money is tied up in assets with low liquidity, then you might not be able to gather enough cash to deal with an emergency. While you don’t have to put all of your money into liquid assets, it’s still very important to have enough liquid assets to handle whatever life throws at you.

What Is Speculation?

Speculation is the act of buying a risky asset with the intention of making a large profit from it. People can speculate in all sorts of markets. For example, a volatile stock may see a lot of speculative trading. Depending on how well the stock does, some people may make a lot of money, and others might lose everything.

While stocks, homes, and many other commodities are prone to speculation, not all precious metals are desirable for speculative traders. For example, gold tends to remain very stable, and its price steadily increases over time. Therefore, under normal economic conditions, you can’t strategically buy gold at a low price and sell it at a higher price to make a quick buck over a short period.

Instead, it will take years to see your gold investment significantly grow. Consequently, gold is not a good asset for speculators who want to get rich overnight. However, it’s much more secure than other assets, so you don’t need to worry about sudden losses either.

Silver and some other precious metals have more volatile prices, so they’re more appealing to speculative traders. Speculation is risky, so don’t invest too much with speculation in mind. Otherwise, you risk losing a large chunk of your wealth in a matter of hours or days.

What Are Fiat Currencies?

Investing In Gold Vs Silver

Fiat currencies are currencies whose values are solely based on the full faith and credit of their users. Furthermore, fiat currencies are not tied to any commodity. These days, all national currencies are fiat currencies. Fiat currencies are considered legal tender in their respective countries, so they can be freely exchanged for goods and services.

The values of the U.S. Dollar, Vietnamese Dong, Japanese Yen, and all other national currencies are based on market factors that affect how their users think of them. For all intents and purposes, a U.S. Dollar is just a piece of fancy paper. A dollar only has value as long as the country and economy are healthy.

Until the last century, most currencies were tied to gold, silver, and other commodities. You could exchange a dollar for an equivalent amount of gold at the bank. Now, however, that’s no longer possible. Consequently, national currencies can be very volatile, and they experience a lot of inflation. In contrast to U.S. Dollars and other national currencies, gold and silver are less volatile. Therefore, if global banking systems were to collapse, precious metals would still be valuable, but the same can’t be said for fiat currencies.

What Is Inflation?

You’ve probably heard your grandpa or some other older family member go on about how many things they could buy with a quarter in the old days. When they tell these stories, it’s usually contrasted with how expensive things are now. This phenomenon is due to inflation.

Inflation is when the purchasing power of a single unit of currency declines over time. If you stash $100 under your mattress for a decade, that same $100 won’t be able to purchase as many goods or services when you finally decide to spend it. Thus, you shouldn’t keep all of your wealth in cash. Otherwise, as a result of inflation, your money will essentially lose value as the years pass.

Because countries use fiat currencies, they can basically print as much money as they want. Fiat currencies allow governments to quickly react to changing economic conditions, but such interventions may have severe consequences. This is especially true if the money supply is not managed competently. As a result, the value of cash may not be very stable.

In the United States, inflation hovers around 2% every year. This isn’t a rule, and inflation can be much higher or lower. Some countries and currencies consistently see much higher or more volatile rates of inflation. No matter where you live, if you want to see your wealth grow over time, then you need to invest in assets that grow in value at a rate that outpaces inflation.

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Why Is Bullion a Good Investment?

Investing In Gold vs Silver

Bullion is a term used to describe metal in a pure or refined form. Bullion bars are not bought and sold as collectibles. Unlike collectible coins, jewelry, and trinkets, nobody cares about the history of bullion or the handiwork that may have gone into producing it.

Instead, the value of bullion is solely based on the value of the metal itself. While gold, silver, and other precious metals may have their differences, certain commonalities set them apart from stocks, bonds, real estate, and other investments. The following list details some of the most typical advantages of physically owning any precious metal.


You may not want everyone to know about your financial situation. However, with stocks, real estate, and paper investments, your name is recorded in a public ledger. It is illegal to keep these investments confidential, so with some digging, someone can find out if you have invested in these things.

In contrast, precious metals can be physically kept in a safe, so the public doesn’t need to know about your gold or silver. Of course, when you sell your precious metals, you still need to report your earnings to the relevant tax authorities. Unfortunately, no investment is tax-proof, and you really don't want to get in trouble for failing to pay your taxes.

Zero Counterparty Risk

When you buy and sell gold, you don’t need to deal with a third party. Instead, you can just deal directly with the buyer or seller. Real estate, stocks, and paper investments, however, require vast infrastructures and an array of third parties to complete any transaction.

For example, when you buy or sell a stock, you have to use an investing platform, and you might even have to deal with an individual broker. That’s fine when everything is working, but if the system were to unexpectedly go down, then your investments could be at risk. Such things affect the overall stability and safety of your wealth, so it’s important to have some money invested in precious metals to avoid these risks.

Beat Inflation

If you don’t want your wealth to shrink, then you need to invest in a way that makes your wealth grow faster than inflation. Gold, silver, and many other precious metals consistently beat inflation. By investing in precious metals, you can see your wealth grow with little effort, so you will have more money when you eventually decide to sell. With other investments, you’re less likely to beat inflation, and if you just store your money in the form of cash, then your assets will surely lose purchasing power over time.

Easy Storage

Precious metals are very value-dense. Therefore, it’s super easy to store a lot of value in a small space. At the time of writing, an ounce of gold is worth about $1,800. That same ounce of gold takes up about as much space as a military dog tag. A quality safe will allow you to store a ton of wealth at little cost, or you could store your gold in a safe deposit box at a bank for an extremely low monthly fee.

Simple to Understand

Dealing with gold or silver isn’t rocket science. Most precious metals will grow in value over time, so you don’t need to pay close attention to short-term peaks and valleys. Instead, you can simply leave your metals alone for several years until you’re ready to sell them. By the time you sell your bullion, it will likely sell at a much higher price than you had initially bought it at. Stocks and other investments require much more research, and they can be very volatile, so they’re not nearly as easy to profit from.

Global Demand

Gold and silver are coveted across the world. No matter where you go, there will always be buyers for gold and silver, and you won’t have to travel far or jump through many hoops to make a transaction. Since precious metals are very value-dense, it’s extremely practical to take your precious metals with you wherever you go. Gold and silver are used in several industrial applications, and demand is only expected to rise, so they’re both very safe investments.


No matter how good a company is, a few bad words or questionable moves can seriously affect the value of its stock. A boisterous CEO or bad PR stunt can make a stock’s value completely tank overnight. Gold, silver, and other precious metals are commodities, so they are not susceptible to PR blunders and other human errors. Therefore, precious metals are much more stable than any stock.

Advantages of Gold

👍 Easy Storage

Compared to silver, gold is much more value-dense. At the time of writing, it would take about 70 ounces of silver to buy a single ounce of gold. Thus, it would take about 70 times the space to store an equivalent amount of wealth in silver. Gold allows you to store your wealth easily without having to dedicate entire rooms or closets to that singular purpose.

👍 Stable Growth

Gold is less volatile than silver, and its value grows at a much more stable rate. Since silver is more abundant, more new mines are opened every year. This can affect the overall supply of silver, and that can have a serious impact on silver’s price. In contrast, deposits of gold are much rarer, and they’re usually not significant enough to negatively affect the price of gold.

👍 Hedge Against Other Losses

Because gold is so stable, it can help you protect your portfolio against sudden economic crises. It’s vital for microchips, computers, and various other industrial applications, so it is more resistant to market downturns. Although silver is safer than stocks, it’s much less stable than gold, so it’s not the best way to protect your portfolio from risk.

👍 High Liquidity

Both silver and gold are very liquid, but gold is easier to sell. Since gold is a safer investment, more people are willing to buy it at any given point. Since the value of silver rises and falls more rapidly, people may be hesitant to buy it at certain times, so there may be times where it could be difficult to sell your silver at a fair price.

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Disadvantages of Gold

👎 Long-Term Commitment

Gold takes a long time to grow in value. To make decent gains from your gold investment, you will have to wait several years to sell. Gold is good for people who are focused on retirement and long-term growth, but it’s not the best option for the investor who is willing to accept greater risk to make quick profits.

👎 More Susceptible to Damage

Silver is a relatively strong metal, but gold is extremely soft and malleable. Therefore, you have to be much gentler with it, and you need to store it in a very safe place. A single scratch or dent could cause a piece of bullion to lose value. However, as long as you handle your gold carefully, you shouldn’t have to worry too much about damaging it.

Advantages of Silver

👍 Opportunities for Quick Gains

The price of silver changes much more rapidly than the price of gold. As a result, you can buy silver and make a decent profit within weeks or months. With gold, similar turnarounds could take years. If you enjoy watching the market and doing research, then silver can be a more lucrative investment over shorter periods. In short, silver is a great option for speculators.

👍 Affordability

As discussed earlier, an ounce of gold is worth about 70 times as much as an ounce of silver. If you don’t have a ton of capital to work with, then silver is a much more accessible investment. You don’t need to endure huge upfront costs to start trading silver and making a profit.

Disadvantages of Silver

👎 Less Liquid Than Gold

It’s easier to find someone who is willing to buy gold. While there are plenty of silver buyers anywhere you go, different buyers and sellers will give you a wide variety of prices and offers at any given moment. As a result, you may have to shop around and do some research to find a buyer who is willing to pay a fair price.

👎 Volatility

You can reach higher peaks with silver, but you can also lose huge amounts of money over very short periods. Because it has less liquidity than gold, its price is not as stable. Thus, it’s much easier to purchase silver at suboptimal times. Many investors don’t like keeping their eyes glued to the market headlines, so silver may seem a bit too laborious for someone who is looking for more stable long-term growth.

Final Verdict

Although gold and silver have their differences, they are both good investments in their own ways. You don’t have to put all of your money into one metal and completely abstain from the other. Instead, you should invest in a way that diversifies your portfolio and works with your unique wants, needs, and personality. By making smart investments now, you can accumulate more wealth to enjoy a happy future and a higher quality of life.

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