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Is Silver a better investment than Gold?


“Silver, on the other hand, has a reduced price and hence, will be more attractive to the general public.”

By Abinash Narayanan, Staff Writer

 

For many decades, gold has been considered the best investment.  But during the last few months, the price of silver has shot up drastically, making investors contemplate whether silver has overtaken gold as the best precious metal investment.

To put this into perspective, gold is the only precious metal investment that increased in price every year for the last 10 years.  Then again, silver prices have more than tripled since June 2009 to post an all-time high of US $49.82/ounce in April 2011.

In addition to being used along with gold as a store of wealth, silver has other industrial uses – the main among which is in the emerging solar power sector.  Silver is used exclusively as a reflector in solar power cells.

One of the most common and basic theories used to analyse silver prices is the silver/gold ratio.  This ratio calculates how many ounces of silver it would take to buy an ounce of gold.  This relation is based on the assumption that the quantity of silver found in the Earth’s crust is 17 times the quantity of gold.  This essentially means that the silver/gold ratio will theoretically not fall below 17:1.


The silver to gold ratio has fallen from 70:1 to around 35:1 in just a year.  And this ratio is expected to lower in the long run due to huge industrial demand for silver.

After hitting its all-time high of just below $50 (U.S.), the price of silver has snapped back to around $35 (U.S.).  This trend is noticeable with any investment that rises exponentially over a short period of time.  However, it is widely accepted that the prices of silver will continue to rise faster than gold in the near future prompting analysts to label silver as the investment of this decade.

Even though gold continues to rise steadily and reach the US $1500 per ounce level, gold is a safer investment and may even be beyond the reach of most people.  Silver, on the other hand, has a reduced price and hence, will be more attractive to the general public.  The only problem being that the prices of silver will be more volatile than the stable haven provided by gold.

The increasing demand for silver combined with the expectation for the silver/gold ratio to decrease further, and almost a constant increase in the price of gold means that it is reasonable to lay your bets on silver price to increase considerably in the near future.

But it is rather foolish to think silver will switch places with the gold medal in the Olympics anytime soon…

By Abinash Narayanan, Staff Writer

ARB Team
Arbitrage Magazine
Business News with BITE.

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  • http://www.dataandinvestmentconsult.com Millard gates

    Thanks for your important things and i think you have given the best way to invest money at right place which will give better returns to people.

  • http://www.vouchercodespy.co.uk/ voucher

    Gold’s atomic number of 79 makes it one of the higheratomic number elements which occur naturally. Like all elements with atomic numbers larger than iron, gold is thought to have been formed from a supernova nucleosynthesis process. Their explosions scattered metal-containing dusts (including heavy elements like gold) into the region of space in which they later condensed into oursolar system and the Earth.

  • http://www.talero.de/silber Silber kaufen

    Precious metals such as silver and gold are appealing investments because they hold their value better than paper money. Although the price of precious metals is influenced by international trends, there is no way for central banks to influence the price of metals by printing more money or buying or selling government bonds to expand or constrict money supply. Precious metal supply is determined by the success of mining operations alone, so the price is more stable. In this sense, silver and gold are very similar investments.
    Supply and demand factors may suggest that silver should be a better long-term investment than gold, but these market indicators alone do not determine the value of the metals. The risk of investing in silver is the historical relationship between gold and currency. The gold standard, which was formalized under the Bretton Woods international agreement of 1944 system but had essentially been in place in different forms long before, tied currency values to a specific amount of gold. This way of valuing money lasted until the early 1970s, when the United States backed away from the gold standard to gain more control over the value of the dollar to cope with a balance of payments deficit.
    Before the gold standard became the norm, some countries did have a silver-based currency valuation system or a bimetallic system. But silver never became as internationally accepted as a valuation standard as gold. Given the historical tie between gold and currency values, gold tends to weather economic declines better than silver, if for no other reason than investor preference. In addition, most people believe gold to be more valuable than silver for noneconomic reasons, which influences the price.

  • http://www.talero.de/gold Gold kaufen

    In our country, Gold is something which every family buys because of the attraction we have for this metal. On any occasion, gold is the obvious choice. But Silver is not seen the way gold is looked upon. It’s generally limited to not so well off section of the society. This is one of the reasons why middle class or even richer one’s never considered looking at what’s happening in silver and if it can have some potential in future as an investment option. Gold, Gold and Gold was the only option when it came to buying some precious metal.
    A lot of people are surprised to hear and see how gold has given fabulous returns year on year in the last decade, but now you would be more surprised to know that for most of the years silver has outperformed gold with good margins in terms of returns. For example, everybody knows that Gold gave 25% return in 2010, but not many know that Silver in the same year gave 80-85% return.
    Silver has given 24% absolute return in just one month of April 2011. I don’t think it’s anything other than speculation because that rise was short-lived and in just 1 week (May-‘11 first week), all the gains made in Apr disappeared and prices fell by 25%.

  • Andrew

    Great article, Gold and silver investing is really the way to go in this economy. I found an article that mention silver being a much better investment than gold is:

    http://silverdollareagles.com/what-should-you-purchase-gold-silver/

    What do you think?
    Any help would be appreciated.

  • sell my scrap gold

    I don’t think so. Gold will be staying on top of the food chain even if it has major problems in the past 6 months or so.. Silver did find it’s way through but never will it surpass gold.

  • http://www.primevalues.org/ PrimeValues.org

    Silver is “poor man’s gold”, as many say… But: it’s sold for a hack of a lot above gold’s price and that makes it less profitable on the short and mid term.
    Gold is sold just a little above spot. Silver is often sold for 50 % more than it’s worth! Simply said: if silver spot price if 33 $, you might find it selling at dealers for 1.5 times more: around 48 $… At least this is the case in many countries around the World. What’s even worse is that some governments request additional taxes to be added on top (generally 10-25 %). Too bad!

  • cooper cook

    I myself and not that knowledgeable about silver or buying silver. But is it easier to fake gold or silver? Because you see a lot of people trying to make fake gold,and I was wondering if it was common to see a lot of fake silver as well?

  • http://www.primevalues.org/ PrimeValues.org

    There are lots of theories and myths about silver, but until it won’t start going very high, the potential for loss is tremendous: price variations are frequent, often +/-25 %. So I still prefer gold… but on the long term, indeed there are solid grounds for investing in silve, especially when preparing for a hyperinflationary scenario…

  • Alisha

    Investing in gold and silver is considered to be a hedge on other investments. It is always considered safe despite several rise and fall in its prices. http://www.primebullion.co.nz

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