Investing in Gold vs. Silver – Pros & Cons of Both

Cash for Gold One of the most common questions new precious metal investors at the Doylestown Gold Exchange ask is “which is better, gold or silver?” .There are a lot of facts and opinions floating around out there about the two, but your specific direction should be determined by your intentions and means.

First, lets examine the fundamental purpose of purchasing physical gold and silver. A lot of people see the overall rising prices and think that the gold train is a one way ticket to get rich. It is not. There is however the trading market that “traders” hope to buy low and sell high for a quick profit. Traders never intend to take possession of the metal but rather buy and sell the legal rights to it. Customers who come into the Doylestown Gold Exchange are usually “investors”. Gold and silver investors take physical delivery and hold the metal for a longer duration. Physical investors are looking to retain a relative purchasing power. They know that they will be able to buy roughly the same amount of goods and services when they sell as they could have when they bought the gold and silver.

So where should you start? Well the obvious difference between the two is price. As this is written, Silver is just over $22 and gold is a whopping 60x that at roughly $1,360. So if you have only a small amount to invest, silver may be your best choice based on price alone. Come down to the Doylestown Gold Exchange and view our small denominations of sliver for the modest budget. We have silver dimes (currently $2 each) all the way up to silver dollars (currently as low as $29 each). Just $20 can get you started on saving your wealth in precious metals. If you are fortunate to have a larger budget, you may want to consider gold as well since you can retain a lot more value in a much smaller size.

The next consideration is volatility. Historically silver has larger and faster moves (percentage wise) both up and down. It can feel great on the way up but be heartbreaking on the downside. Seasoned investors are used to this and know to expect the moves as this precious metals bull market continues. Silver is also a heavily used industrial metal. It is vital to electronic components, solar panels, photography development, water purification and burn medicine. When times are good and products that use silver are being manufactured, the higher demand translates into higher prices. If the economy slows, then the demand softens and prices can fall. Anther twist is that the majority of silver is produced as a by-product of lead, zinc, and copper. So if the mining of those slows, the silver supply tightens and prices could rise. Long term however, silver is being discarded in very small increments everyday. Almost all electronics contain a few grams of silver and due to the way it is intertwined in the product, it is very cost prohibitive to recapture. This means a lot of the silver that is used in industry will be gone forever or until prices become high enough that it is economically viable to recover from the landfills. That would have to be an extraordinary high price!

Gold is much more stable since the majority of previously mined gold is just sitting in a vault or in the form of jewelry. Not as much depends on it and the vast majority is still in possession of its owners. There are some industrial applications but not nearly as many as silver. Gold tends to have a higher correlation with monetary variables such as real interest rates, inflation and changes in the value of the dollar. This means that if the economy is suffering, gold will benefit whereas silver may slump due to the lower industrial demand. As the developed world becomes less financially stable, silver may take on a more monetary role, it just hasn’t happened yet. This component is a dormant positive for future silver price.

Finally, the historic ratio between the two metals is roughly 16:1 – meaning 16 ounces of silver could purchase 1 oz of gold. As stated above, the current ratio is 60:1. In order for this to correct back to the average, silver will have to multiply by 4 and gold not move OR silver not move and gold go down by 75%! Do you think gold is heading back to $340 and silver not change or silver go to $88 without effecting gold? Highly unlikely for both. The most probable based on all fundamentals today is gold is going to continue its steady (long term) climb and silver is going to have to hustle to close that ratio gap – compounding the rise in price.

So what’s our opinion at the Doylestown Gold Exchange? If you are in it for the shorter term, gold has lower risk and reward potential. It is more conservative. You could get lucky with silver and buy in at a lower price, have a quick rise, and cash out profits. This strategy is risky and not recommended since the short term downside cannot be ignored.

If you are in it for the long haul and have no intentions of selling, silver is the more likely to outperform. It is consumed and discarded by industry, it is being gobbled up by small investors faster than gold, and it greatly underpriced compared to gold based on historic averages. For those with a larger investment budget, it is recommended to acquire both so that you can benefit from the positives of each. Most investors that purchase both go a little heavier on silver since the long term upside is more promising.

Come down to the Doylestown Gold Exchange to see our extensive inventory of gold and silver investments. Honest, trustworthy and reputable – we can recommend an assortment of top quality gold and silver for budgets from $10 to $100,000.

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