Buying a Lot of Silver vs a Little Gold

Buying a Lot of Silver vs a Little Gold

Gold and silver, which is also known as poor man’s gold have close historical ties. In fact, no other tradable assets move as closely as gold and silver.  Historically speaking, out of the two, gold has been more popular and has played major role in economies. But over the past few decades, silver has shown impressive growth and in some aspects has grown in popularity than gold. There is a section of investors who prefer to deal in silver over gold. In this article, we will take a look at factors that makes silver a better investment than gold.

        1. Valuation 

The historic silver gold valuation ratio was approximately 16:1, but over the past few decades the price of gold has increased more swiftly than silver with the present ratio being somewhere between 50:1 to 70:1. It should also be considered that the difference between silver and gold demand isn’t that huge. So, it can be said that silver is undervalued and is cheaper than the historical rates, which means it has good potential to rise and is a perfect choice for anyone who is looking to buy low and sell high.

        2. Industry Uses

Though, silver and gold share same ornamental uses, but silver hold upper hand in industrial uses. Amongst the metals, silver is the best reflector of light and best conductor of electricity. It is widely used as an industrial catalyst and is elemental to many medical processes. From industrial point of view, silver is used in batteries, bearings, brazing and soldering, and electronics. It is also widely used in photography and movie making process.

Silver is also a key component of photovoltaic cells which are used in production of solar energy. And, with countries such as China, Japan and Germany making a thrust to promote cleaner energy production by 2018, the demand for silver is expected to increase further more.

        3. Demand Deficit

The deficit in demand and supply of silver is extraordinary. This deficit in demand and supply for silver has been ongoing for last 12 years. Over 30 years, the silver used for production has been much more that the silver that has been mined over the same period. Furthermore, there are no signs of resolution of demand and supply deficit. It can be said that in times of high demand this deficit can be elemental in steep increase of gold prices.

        4. Volatility

The silver market moves faster than gold market when money is pumped or taken out. It is often seen that for every one percent change in gold value, the silver undergoes three percent change. So, if investors manage to position their silver investment properly before a raise in market, they can pocket larger windfall than they would have for similar amount gold investment. However, this factor also makes gold an attractive investment option than silver. If there is a significant fall in market values, you stand to lose much less for gold investment than silver investment.