Deciding whether to invest in gold or silver is not easy. Both investments have their merits to weigh up. In this guide, you will read all the reasons for and against each metal, helping you to make a more informed investment decision.
Silver is a lot more volatile than gold. The volatility is due to the supply of silver. When considering the size of the gold and silver markets, silver has a total supply of around 1 billion ounces per year, and gold has a total supply of around 120 million ounces.
This makes silver appear to be a larger market than gold, but this is not true because of its price. Silver’s lower price makes the value of its annual supply much smaller than gold’s. The total market value of the gold supply in 2019 was $192.6bn and silver was $16bn. This makes Disney worth over 15 times larger and Apple worth over 56 times the silver supply.
Silver’s greater volatility means that compared to gold, silver falls lower and rises higher as a percentage of its price. Historically, gold performs better than silver in bear markets and silver performs better than gold during recovery and bull markets. So if you expect there to be a market recovery in the foreseeable future, silver may provide greater gains.
Silver is more affordable to buy than gold. Of course, this is only an issue when comparing a similar weight. Gold bars and coins can be bought in sizes as small as 1g, which at present prices is close to buying a 50g bar of silver.
However, the smaller the unit of metal you buy, the higher the premium will be as a percentage of the cost. This is why the Pamp 1g gold bar currently costs £58.59, but the 10g Pamp bar only costs £472.82. As you start to buy larger quantities, the premium comes down, making it quicker to start earning a profit.
However, the premium is only part of the story. You also need to consider taxes. In the UK, investment gold is VAT-free, and generally gold is subject to CGT, except for gold Britannias and gold Sovereigns.
Our silver Britannias are also CGT-free. Most silver is subject to VAT, but if you invest in one of our silver monster boxes and keep your silver stored safely in an LBMA vault in the UK, you will not be liable for VAT unless you remove your coins from the vault.
So there are several points to consider in terms of affordability: not only the price of the metal, but the premium you are paying and the taxes you may be liable for. On top of this, you would want to consider what level of risk and reward you want from your investment.
As noted above, silver has a greater risk/reward profile and rises faster in recovering and growing economies, whereas gold generally outperforms silver in downturn economies.
With gold and silver being precious metals, you have to think beyond the purchase. You need to consider how and where you are going to store your bullion safely.
Now, here, all the affordability benefits of silver start to tip back in favour of gold because even though it is easier to buy a larger quantity of silver, that also means you need to be able to store a larger quantity of silver.
Silver takes up a lot more space than gold. For example, a 1kg gold bar, worth around £45,000, would easily slip into a pocket; the equivalent in silver would be around thirteen 5kg bars of silver, which would fill a large safe.
At current prices, one ounce of gold will buy 68 ounces of silver. In addition to this, pure silver is 84% larger in volume than pure gold, meaning silver takes up over 125 times more space than the equivalent value in gold.
This can make storing silver a lot more expensive than storing gold because storage fees are usually based on weight and volume. However, at UK Bullion, our storage fees are based on the total value of your holding, rather than the weight or volume. As an example, for a value of up to £9,238, the monthly storage fee is only £6 per month including VAT.
A significantly higher proportion of the silver supply goes to industrial use compared to gold. Only around 12% of the gold supply is used in industry but 56% of the silver supply. Silver is used in nearly everything around us, such as electronic devices, motor vehicles, photography, antibacterial products.
Silver is the most indispensable metal due to being the most electrically conductive, thermally conductive, and reflective. Without silver, life today would be drastically different.
From an investing perspective, this is significant because silver is much more closely connected to the performance of the global economy than gold. In an upturn, economies develop, industrial production increases and silver demand grows. This is why silver will rise at a faster rate than gold in a bull market.
The opposite is also true in a bear market, where production drops and demand for silver falls. However, because gold is less intrinsically linked to industry, it does not suffer as much as silver in downturns, and generally benefits a great deal more because people tend to invest in gold as a safe haven.
Invest in Gold and Silver
One of the best ways to protect your spending power and maintain your wealth is by investing in precious metals. Both silver and gold are effective stores of value that will help prevent inflation from eroding your savings.
We offer some of the best prices for silver and gold. Our silver and gold ranges are suitable for all budgets, starting from 5g silver rounds and 1/10 oz gold coins up to multi-kilo bars. Take a look at our range here.