Gold and silver are both popular precious metals to buy and invest in.
Both metals have histories dating back to the Roman era, along with similar utilities and pricing patterns. Both gold and silver were once used as currencies and have held their value over the centuries. Gold is more widely used than silver, and seen more as an alternative investment. But silver is more useful in itself and is present in nearly every person’s home.
In this post, we aim to cover the main differences between gold vs silver when it comes to investing in precious metals.
History and uses
Both gold and silver became currencies in 600 BC when they were used to trade goods. This went on for more than 2,500 years, and both still hold inherent value today. Both precious metals were minted into coins and used to exchange goods. Gold has usually been a symbol of excellence, while silver was more commonly used for trading.
Currently, most of the demand for silver is in modern appliances: computers, electronics, cars and more. Most of the demand for gold comes from investors and central banks. Although gold is also used in electronics and jewellery, it’s mostly seen as a safe haven investment.
You can fit more pounds worth of gold than silver into a safe. This simply means that 10 grams of gold are worth more than 10 grams of silver, and therefore less physical gold is needed to hold a certain amount of wealth. This is because gold is denser and holds more value per ounce.
Gold is usually purchased and stored with gold bars, while silver is usually purchased with silver coins to make it easier to store. The most popular silver coins are the pure Canadian Silver Maple Leaf at 99.99% value and the American Silver Eagle. In the UK, the most popular silver coin is the Britannia silver coin.
Both gold and silver are highly liquid (although this depends on how you store your precious metals) and relatively easy to buy through dealers. Having said that, gold is usually more liquid than silver simply because there is higher supply and demand.
When buying gold, you can usually choose to sell through an online or physical dealer, or through the bank. When it comes to silver, your best bet is to buy and sell online, as it can be a little harder to find physical dealers or banks that are willing to buy your silver.
How expensive is it to buy silver and gold? This usually depends on the amount you are buying. If you are investing under £1,000, silver premiums are usually cheaper. Once you are committing to more than £1,000, gold tends to be cheaper to buy.
When it comes to silver, you’ll need to pay 20% VAT in addition to the premiums. With gold, you won’t need to pay any VAT – only capital gains tax once you sell your investments. The usual guidance is to keep your silver investments for at least one year to gain back what you paid in tax.
Gold and silver do perform a little differently as an investment. Silver is a much more volatile investment, which means that more investors buy and sell gold with the aim of making a profit. Just look at the gold vs silver chart by Macrotrends below:
From 1979 to 1980, the price of silver rose from $6 to over $50 per ounce. It then crashed more than 50% of its value in 1980. That is some spectacular volatility!
Although they may perform differently as a market, both gold and silver are good ways to diversify your investments away from currencies and the general system. They are both “outside the international monetary system”, and can be invested through bullion bars, coins, ETFs, mining stocks and derivatives.
The gold vs silver ratio
Although silver is more volatile than gold, both metals follow a similar pattern of prices as you can see in the graph above.
The gold/silver ratio is a ratio that tracks the price of gold in relation to the price of silver over time; it basically tells you how many ounces of silver you can buy with an ounce of gold. Historically, the price of gold has always been several times higher than the price of silver. Today the ratio of gold/silver is currently at 93 – which means it takes 93 ounces of silver to buy one ounce of gold.
Usually the ratio works in gold’s favour – especially during recessions, when gold becomes more valuable than silver. The ratio is used by experienced investors who look for signals for the best time to buy and sell gold or silver. When there is a high ratio, it means that silver is high and therefore may be a good opportunity to buy silver. If there is a low ratio, it may mean that gold is favourable and better to buy.
At Minted, we make gold investing accessible and affordable. We believe every citizen should keep some of their savings in gold – many small and central banks keep their reserves in gold to hedge against losses. However we do believe that everything does depend on a person’s situation. As usual, we recommend doing the research and testing before committing.