When it comes to investing in precious metals, gold and silver are the two most popular options. Gold and silver have a range of strengths for any portfolio
Investing in commodities means investing in materials rather than fixed products like real estate or financial products like bonds and stocks. Both gold and silver are very popular commodities to invest in, and they have been for decades. Knowing this, you might wonder where to invest in gold or silver 2022 and whether it is even a good time to do so. Both investment options are very different, can fit different investment strategies, and have different properties and purposes in your portfolio. In this guide, we will take a closer look at both to help you decide which of the two to invest in.
One thing that differentiates investing in gold and silver from other commodities is their utility. Other commodities are judged on a value mostly determined by supply and demand.
For example, investing in oil means you would have to check how much is being produced and will be soon, its demand, and how its use is changing due to various factors.
Precious metals are different in that they have less commercial utility compared to these other commodities. However, they do have utility but in their specific ways. Silver is used in many more applications than gold, from electronics to dentistry and beyond.
Gold, on the other hand, has few commercial applications outside jewellery. Understanding this allows investors to decide whether to invest in gold or silver based on factors like industrial need and the global demand for either.
Because gold is mostly seen as a store of value, it is typically used as an investment option. So when comparing investments of silver vs gold, you will find that investors move the price of gold depending on how much they need for their investments, how much they can hold safely, and return expectations from their other investments.
If you are looking for a store of value and wondering what to invest in gold or silver, you will find that the higher spot price of gold makes it a better investment for you.
The demand for silver is dictated less by investor demand and more by industrial ones. This is why silver typically does better than gold in periods of overall growth and economic stability. Experts say that you should buy silver when times are good and gold when times are bad.
Another answer to why invest in gold in 2023 is that it tends to move inversely to the stock market. If you want to invest in gold, you will see the term “countercyclical investment” used to describe it. This means that investments in gold tend to go up while other assets considered to be mainstream assets go down and vice versa.
Historically, people flock to gold during times of economic downturn because of how stable its price remains in these times. This increase in demand leads to the price of gold increasing at these times. Even when investments in gold slow down, the price does not fall as much as it does when investments in other assets fall. This is one of the reasons why it is considered a good hedge against inflation.
Another reason to invest in gold is that it provides liquidity during a downturn. Because the demand for gold increases during these times, one can sell gold and invest the money into other stocks that typically do not do well in these times. Buying undervalued assets during an economic downturn is sound advice supported by Warren Buffett, one of the most prolific investors in the world.
On the other hand, silver tends to move with the market, at least compared to gold, due to its many industrial uses. While its ties to industrial applications make it very predictable when times are good and the economy is stable, this is what makes it a less desirable investment than gold when the opposite happens. Industries tend to manufacture less in times of economic downturns meaning that the demand for silver, and therefore its price, take a hit too.
● Silver is more tightly tied to the global market making it more sensitive to economic changes
● Gold can be a better inflation hedge because it gains strength when the dollar weakens
● Silver is more volatile than gold, which makes managing risk even more important when investing in silver
● Gold is a much better portfolio diversifier than silver
● Silver is much cheaper
Knowing all this will help you decide between silver vs gold when investing. That said, you should also know how to invest in gold and silver. There are a few ways to do this, one of them being purchasing physical gold or silver. You can do this through various investment partners who will deliver the quantity you need or store it for you and charge you a storage fee.
If you are not interested in owning physical gold or silver, another great investment option is exchange-traded funds (ETFs). Investing in ETFs exposes you to the price of both gold and silver and their movements like you get with equity ETFs. You do not have to buy the underlying assets, gold, and silver, and you can keep your investment in different accounts.
Buying shares of mining companies is also a great way to invest in silver or gold without owning physical portions of either. Shares of the biggest gold and silver companies globally are traded on various stock exchanges in numerous countries.
Mining mutual funds are an alternative to ETFs and buying individual shares. A mutual fund pools money from many investors and invests in shares and other securities. It gives you exposure to many companies while minimising your risk and exposure.
There are many factors to consider when deciding on investing in silver 2022 or investing in gold 2022. Both can be safe havens, but gold has a better track record in the long term while silver is a bit riskier due to how much it is swayed by economic activities and movements.