In a world where many financial investments can fluctuate greatly, investing in precious metals is often attractive as it can offer a level of security that other options simply cannot. However, investors then need to decide which metal to put their money behind and can often finding themselves choosing between gold and silver.
So, which one is the best metal to invest in? In this article, Wall Street Metals take a look at the benefits of investing in both gold and silver to help you decide which one is best for your investment portfolio.
Links to the economy
One of the attractive things about investing in precious metals is that they are relatively unaffected by the global economy. Whilst an economic crisis might send other stocks and shares plummeting, many metals continue to hold their value and ride out any storm. However, it is worth remembering that around 50% of all silver is used in heavy industry and high technology, which means that it is linked more closely to the fortunes of the global economy. This can lead to changes in its value, but it can also make it easier to judge what will happen to its price based on its demand.
Volatility
Precious metals offer investment stability in most cases, but silver can be more volatile. Whilst it can nosedive at times, it can also be worth as much as three times as gold on certain days. Therefore it can take more managing and needs a hands-on approach in order to buy at the right time and to maximise your returns, and it is worth remembering that you will be exposed to more losses as well as gains.
Price
One of the barriers to investing in precious metals can be the cost, and gold in particular can prove to be very expensive. Silver tends to be cheaper per ounce, and so it can be a more accessible option for smaller investors. This is because it is around 20 times more common than gold, and so rarity pushes the gold prices up.
VAT
In many countries around the world, investing in gold bullion is not subject to any value added tax, whereas silver can be. This means that gold is treated in the same way as other investments, but because silver has so many other uses, it is still subject to taxes. Whilst silver is still cheaper to buy, some of your money will be going into the pocket of the tax man and not into your investment.
Time frames
When it comes to investing in precious metals, it is important to think about what your time frames are for your investment and what your exit plan might be. As silver can fluctuate in price more, it can be better for short- or medium-term investments. Gold tends to grow more steadily, and is therefore a common choice for those with a longer term strategy, such as saving for retirement.
Portfolio risk
Gold is often seen as a good way to diversify an existing investment portfolio because it is generally attached to less risk. The steady nature of gold in the face of economic uncertainty can offer good protection for your portfolio when the market takes a downwards turn and ensures that not all of your investment eggs are tied up in one basket.
Both gold and silver offer some terrific investment opportunities, and each have their own pros and cons. It is important to weigh up your own situation and what you want to achieve with your investments in order to find the precious metal that works best within your investment portfolio.
