Precious metals have long been highly coveted commodities throughout history, and silver and gold remain particularly popular not just for their gleaming beauty but also as profitable long-term investment options.
People often turn to buying gold and silver during economic recessions, wars, geopolitical unrest, and during extended periods of high inflation and rising prices.
So the question arises: which is better for investment and saving?
Understanding the differences in how each metal is used, their economic sensitivities, and their technical properties can aid in determining which metal is best for your investment and savings.
This report will provide you with the pros and cons of investing in both metals, allowing you to make the final decision on which is the best and most suitable for your investment and savings needs.
Silver.. The Indispensable Metal
Silver may not be as popular as gold for investment, but it is indeed a smart and pragmatic choice these days. Its importance is growing daily in the age of the fourth industrial revolution, as it is a major component of numerous industries generated by the revolution due to its superior electrical and thermal conductivity, unrivaled by any other metal.
Approximately 50% of the world's silver is used today in heavy industry and advanced technology, including semiconductors, smartphones, tablets, automotive electrical systems, solar photo-voltaic cells, nuclear reactors, batteries, dental use, photography, LED chips, RFID tags (for tracking parcels and shipments worldwide), and many other industrial products and applications, according to the Silver Institute, a major industrial group based in Washington, named as "the metal we cannot do without".
As a result, silver is more sensitive to economic changes than gold, which has restricted uses that rarely extend beyond the jewelry industry and investment. When the economy thrives and industry grows, demand for silver increases and so does its price. Conversely, in economic recessions and slowdowns in industrial activity, the price of silver can decline, which is perhaps the biggest negative for investing in silver due to its price being tied to industrial demand and supply.
Approximately 50% of the world's silver is used today in heavy industry and advanced technology (Reuters)
However, in the midst of the ongoing fourth industrial revolution and the numerous related industries where silver is a key component, the demand for silver is on a continuous rise, which in turn increases its value, making it a precious asset likely to gain significant value in the long term.
Considering the returns, silver's popularity and price are growing day by day. From an economic perspective, it can be a long-term investment option delivering good returns, as recently reported by the platform "Policy Bazaar".
Gold.. The Safe Haven
Gold has been used as a tool for trade since its discovery and, in our modern age, is viewed by many investors as a strong instrument to protect their wealth from devaluation, as it retains its value over time.
Historically, gold has been a safe haven during market uncertainties, geopolitical tensions, or economic crises. Investors regard it as a reliable store of value that can withstand market turmoil and provide stability. In such periods, the demand for gold tends to increase, leading to a rise in its price.
As a result, many investors maintain gold in their investment portfolio especially if they require liquidity during an economic downturn.
A recession is the worst time to sell stocks but the best time to buy them, and having a prior investment in gold could provide you with valuable assets to sell during a recession, allowing you to purchase others' undervalued assets without selling your own.
Gold or Silver? A Historical Comparison
To understand better which is more suitable for saving and investing in the long term, let's conduct a historical comparison of prices for both metals over the years.
At the end of 1925, the price of an ounce of gold was $20.63. By the end of 2020, an ounce of gold was being sold for $1893.66. Over a period of 95 years, the precious metal yielded a compounded annual return of 4.87%.
It's noted that gold prices closed the year 2023 near $2063 after reaching a record level of $2100 in December 2023.
Over a period of 95 years, gold achieved a compounded annual return of 4.87% (Getty Images)
At the end of 1925, the price of an ounce of silver was $0.68. By the end of 2020, an ounce of silver sold for $17.14. Throughout the same 95-year period, silver yielded an annual return rate of 3.46%.
Silver prices closed above the $24 mark at the end of 2023.
This indicates that gold has performed better than silver as a long-term investment, as noted by Dr. Robert R. Johnson, Professor of Finance at Heider College of Business at Creighton University in the US, according to a recent report by "Bankrate".
However, it is essential to recall that the fourth industrial revolution is still in its infancy, and silver is a fundamental component in many new and emerging industries. While silver is viewed as an industrial asset, gold is seen as an investment asset due to its limited industrial uses.
Looking ahead, investing in silver may be more advantageous in the upcoming days, leaving the final decision up to you.
