Before anyone starts investing in precious metals, they’re going to see a distinct difference between investments. The two more popular choices will be silver or gold, with silver being the least expensive of these options. This may lead some new investors to wonder if silver is worth investing in at all, considering the much higher price tag attached to gold bullion products.
While silver has its own distinct benefits, we’ll be examining why silver is valued differently than gold.
It Has Intrinsic Value
Contrary to popular statements made about precious metals, some of them actually do carry with them intrinsic value. Silver especially has applications within electronics, as it is far more effective at conducting electricity than gold is. Silver also has applications within the medical world, as silver can prove to be a potent disinfectant that is used to this day. Silver also plays an important role in the creation of electric vehicles as well as solar technology, and as their popularity increases - so will the demand for silver. However, as silver is tied to multiple industries, it’s price also fluctuates with more volatility similar to a stock. Although it’s price makes it quite attractive to new investors, and it’s honestly the best way to get your foot into the door with precious metals purchases.
It’s Less Rare
Silver is found in greater abundances in the earth’s crust than gold, and this too contributes to its lower cost. Of course if there is more of something, it’s value is reduced, and a similar principle occurs when too much of a fiat currency is printed. The larger quantity there is of something the less that it’s worth. However, unlike gold, stockpiles of silver are not increasing. This is because banks are not purchasing quantities of silver and keeping them in their vaults in the same way that gold is. The quantity of silver mined is also reducing with time in lieu of more efficient mining techniques, leading some to believe that silver is currently undervalued.
The Demand Is Lower
While silver has historically been valued as a metal standard for currency, it still does not hold quite the same weight that gold does. Most currencies were historically held to the gold standard, with some exceptions adhering to the silver standard (i.e. China). People are naturally attracted to gold, and silver investment currently only holds 25% of bullion investors. The lower the demand there is for a product in turn the lower that the prices will be, causing a reduced price for silver.
Even though we’ve touched on a few points why silver is valued differently than gold, it still does not account for the huge variable in price points. We’ll be touching on this subject within another article. However, for the time being, if you’re just looking to get started in the precious investing market, silver can be an extremely affordable, and historically good investment. There’s always room for variation in the future, and none of the above should be taken as 100% guaranteed financial advice. Ensure that any investments that you make are always within your financial constraints. Happy stacking.