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21 December 2022

Gold vs. Silver: Which Commodity Is More Profitable?

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Over the years, precious metals have cemented their place in all financial markets. They almost always join the portfolios of smart investors and many of the world’s famous billionaires have invested heavily in them. 

The reason is that in times of economic uncertainty, people always try to hold on to items they perceive as having real value. 

For instance, When it comes to Silver – it has many industrial use cases while having a decent inherent value to it. This means it’s got actual value. 

Gold on the other hand, is considered very valuable because of its limited supply, demand and durable qualities. It does not erode which also makes it a symbol of actual wealth. 

But between Gold and Silver, which makes a better investment asset? 

In this article, we’ll look at the history of commodities and their investment benefits. We’ll also examine factors to consider when choosing which commodity is better for investment (if any). 

Let’s get started. But first, what is the…

History of Gold as a commodity?

Unlike other commodities, Gold has continued to fascinate human societies. 

This has happened since the dawn of recorded time, with empires built and destroyed for this precious metal. 

As societies developed, Gold became an acceptable form of payment. As a result, history has also given Gold a purchasing power surpassing any other commodity. Interestingly, this power has never disappeared even in modern times. 

Take the USA for example. 

The United States monetary system functioned on a Gold standard until the 1970s. This means that Gold was the underlying asset backing all paper currency. In other words, the amount of Gold backing the currency guaranteed the amount of money that could be printed.

According to supporters of this financial system, this standard controlled credit expansion. 

It also enforced discipline on lending standards. This is because the amount of credit created is connected to a physical supply of Gold. From a fundamental viewpoint, Gold is a solid hedge against inflation. 

Benefits of trading Gold

Unless Gold experiences a sudden or gradual replacement, it’s not going toward irrelevance. The same goes for Gold trading, and here are some reasons to get into it now:

Powerful hedge against inflation

As a commodity with many benefits, Gold inspires trading confidence. Investors always look for a way to safeguard their wealth during an economic crisis. 

Gold has proven to be a good means of storing value because its prices increase during inflation. This means that as prices rise, so will the Gold price. Therefore, your investment will increase if you put your money in the yellow metal.

Portfolio diversification

A good rule in financial investment is to have many unrelated income streams. You’ll risk a lot if your income and investment portfolio are locked in only one investment asset.

Therefore, Gold trading is one guaranteed way to diversify your investment portfolio. You can use it to protect your finances from the rise and fall of other instruments like Crypto, Stocks and Forex. 

Easy liquidity

Trading Gold provides easy liquidity for your invested cash. Traders can place a sell order on their Gold units bought and recover their funds instantly. This is regardless of how much you’ve invested. 

For instance, at ISA Bullion, we immediately buy back your Gold at a pre-agreed price point to provide you with quick liquidity. 

For a full guide on how to start trading Gold and lock in profits instantly from anywhere in the world, read our Gold trading guide now

With this arrangement, you’re not trading in something that won’t give you access to your funds. So, for instance, if you own real Gold, you will need more time to convert your investment to cash. 

Maintains high value for the long term

Gold has stood firm in its value compared to paper money. Imagine if you had $50 to buy a pair of shoes or trade Gold via a platform. In the next 1-5 years, your $50 Gold units may be higher in value than the shoes you bought. The price and value of Gold make it a viable long-term commodity for trading.

For more reasons to trade Gold, check out more Gold trading benefits here

History of Silver as a commodity

Silver is used globally in traditional ceremonies and religious rites. In addition, investors can choose to hold Silver or other instruments backed by the commodity. Silver is also used in producing jewelry + coins and is a key element in electronics.

Most Silver companies own and operate Silver mines and a majority of these are involved in the actual extraction of Silver. In 2021, more than 24000 tons were excavated, with China, Mexico and Peru being the biggest miners. The United States was also responsible for about 650 tons of Silver. 

Traders and investors can buy Silver by accessing the commodities markets operating across the globe. Investors can also buy Silver-backed assets like stocks in Silver companies, exchange-traded funds (ETFs) and mutual funds.

Benefits of trading Silver

A trader can benefit greatly from trading Silver because of its many advantages. You can consider any of the following if you need some convincing:

Wide range of application

The demand for silver remains high across a wide range of industries. Aside from jewelry, Silver is widely used in electronics, medicine, and as semiconductors.

Ability to withstand economic situations

Silver tends to retain its value better than fiat currencies. This is because these currencies fluctuate in value depending on many factors such as economic performance, fiscal policies and the financial position of the country backing them. 

Silver is also more resistant to inflation than the dollar because its price is based on demand and supply. Another key reason is that powerful countries like the United States do not regulate it. 

Less expensive than other commodities

Silver is one of the most valuable metals to invest in, regardless of its trading volume. The reason for this is that it is relatively inexpensive compared to other asset types like Gold. 

As an average investor, it’s an affordable asset and can also protect you from financial disasters.

Factors to consider when choosing between Gold and Silver

Both precious metals are excellent for investment and hedging against inflation. It is important to note, however, that precious metal investments have both positives and negatives. So, you should consider the following factors when investing in Gold or Silver as a general signpost. 

Market volatility

Historically, Silver has been more volatile than Gold due to its industrial demand. This means the demand for Silver wavers as the economic cycle affects industrial production.

Additionally, the Silver price is closely related to that of Gold. Essentially, Silver costs get affected when there’s a change in the Gold price. While these fluctuations create profit opportunities, it also makes Silver a risky asset. Meanwhile, the Gold price remains stable.

Asset liquidity

Liquidity measures the ease of trading an asset without extensively impacting the market. For example, Gold is largely more liquid than Silver, giving it an edge in the market.

The demand for metals

Both metals have a high demand as they are both considered to be precious and industrial metals. Yellow metal is used in the electronics, conductor and thermal industries. But Silver is used in thermal, medicines, and manufacturing sectors.

Affordability

Technically, Silver is more affordable than Gold. This is what makes Gold’s value higher as a reserve asset. The government and banks also store Gold as opposed to Silver.

What’s the better investment option?

The yellow metal has a slight edge in the Gold vs. Silver battle. Gold has always generated steady returns but so has Silver. In 2010, Gold returns were 25%, while earnings from Silver were 80-85%.

Investing in Gold or Silver will depend on your risk appetite. You also have to consider your preference and financial situation. You need to understand the merits of investing in Gold vs. Silver. This will help you determine which financial commodity will give you better profits. 

Start trading with ISA Bullion

Gold and Silver are fantastic assets for you to invest in, and we have the perfect platform to start. 

At ISA Bullion, you get access to live market updates to help you make the best spot trades. You can lock in Gold & Silver profits instantly by making trades from our mobile app no matter where you are in the world. 

You also get guides on how to become a better trader and our blog section is always ready to give you key insights and strategy education. 

So sign up today, and start trading commodities like a pro today!

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