Gold vs silver investment - Where should your money go?

London (Aug 10)  Precious metals have long been considered as stores of wealth for thousands of years. Prior to the advent of the fiat currency system, the world’s currencies were directly or indirectly pegged to gold. Some proponents of the latter system still believe that holding precious metals is better than holding currency.

However, these people are small in number. The vast majority of people across the world think of gold and silver as a hedge against inflation. A way to make sure that their wealth is stored in something that is tangible and has a use as opposed to paper backed by the ‘full faith and credit of the government’. By far, the two most used precious metals for this purpose are gold and silver.

Generally, gold is considered to be the ideal metal to store wealth. However, silver also has its uses, and can be a better investment in certain conditions. As such, we will look at both and compare their potential as investments in the current economy.

Why Invest in Gold or Silver?

Precious metals are considered the perfect investment by many during times of economic turmoil. Until the turn of the millennium, very few individual investors knew about the utility of precious metals in a portfolio. In fact, gold was only really used by organizations and banks. However, the constant barrage of economic meltdowns ranging from the dot-com bubble to the COVID-19 crisis, along with questionable government programs such as Quantitative Easing have bought precious metals to the mainstream.

Gold and Silver have stayed true to their intended purpose. During most crashes, gold and silver have outperformed the stock market. At no point is this more apparent than during the housing bubble of 2008.

From October 2007 to March 2009, the S&P 500 fell more than 55%. However, the price of gold went up by over 25% during the same period. Silver, while not as high as gold, also rose by 1%.

Throughout history, we can consistently see silver underperforming against gold during times of crisis. We will look at why this is the case a little later. We will also compare their performance over the long-term to see whether silver may be preferable to gold in certain situations.

FXstreet