Precious metals will almost certainly always stay at or near the top of everyone’s asset class list, especially if they’re aiming for a diversified portfolio. Gold and silver are the most popular choices, especially at Golden Eagle Coins, as they’re readily available, but many investors have a hard time deciding between them. What are the differences (other than price, obviously)? There are significant differences that can influence an investor’s choice at any one time, so let’s look at the main pros and cons of both.
The pros of gold
Whenever the financial markets feel a bit shaky, people turn to gold and other physical assets to spread their risk and to have some form of tangible insurance against a bank meltdown or similar crisis.
Gold has long been seen as stable and dependable; it also gains value over time, albeit usually slowly. There’s little volatility and while it doesn’t offer short-term profits, it’s low-risk.
Both gold and silver are mined, so the market price of both metals is influenced by supply and demand, but not as much as other commodities. Mining is expensive, however, so new supplies of both assets are limited and demand is always higher, for industry, jewelry and for sheer human desire, which keeps both metals fairly stable.
It’s easy to buy and sell gold and it’s also very easy to assay the gold content of bars and coins when they buy it. Gold also comes in a physical form so it can’t be hacked.
The cons of gold
Some forms of gold investment, like old coins, need deep specialist knowledge, which doesn’t come overnight.
The more unscrupulous gold coin dealers charge unfair fees and premiums which can catch inexperienced buyers unawares.
Once someone has bought their gold, they have to store and insure it, which can be onerous and expensive.
Silver versus gold
Although they’re the two most popular precious metals, they’re two different investment vehicles.
The pros of silver
Silver is brilliant when it comes to diversifying a portfolio – if you have too many eggs in one basket you’re taking unnecessary risks – so adding another metal to your holdings spreads your risk.
In the last 15 years, silver has seen a decent increase in price for 11 of those years, although it fell quite sharply in the years it didn’t rise.
Silver is more volatile than gold, but this can be a good thing if you know how to play the market. By buying low and waiting a while for a price spike you can turn a tidy profit. In 2010, for example, silver prices rose by 83%, so anyone who bought before this uptick would have been in clover.
The cons of silver
The relative volatility of silver means that if you’re buying the physical asset, you have to buy, transport, store, sell, transport, buy again and so on within a short time frame, which can be very tiresome and expensive.
Silver also tends to perform better in a stronger economy, which means that there are lots of other assets to invest in which can offer better returns.