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Comparing Silver and Gold

Silver and gold are compared all of the time. Some people think that gold is the only precious metal that is worth investing in, while others feel that silver is the best choice because it is cheaper in dollars. While both have their positive and negative attributes, it would be unfair to say that one is necessarily better than the other. We are going to explore what elements comprise the prices of gold in comparison to silver. Gold is a major commodity in markets around the world, but silver too has a major share of the world’s bullion markets

Rarity

Gold is simply more rare than silver. Therein lies the number one factor for its higher pricing over silver. Silver mines are very abundant and it is relatively easy to find virtually infinite amounts of it. When a new gold mine is found, however, it would be major news. The scarcity of the metal itself will always be more important than just about anything else when considering prices of precious metals and bullion.

Also, silver and gold have very similar uses, with one caveat. Gold is the most popular form of metal used in jewelry. Silver is also used for many different pieces, but in lesser volume and at a lower level of demand. You will find everything from plated cakes to pure gold chains, all of which are going to be in heavy demand at all times. While silver is common in jewelry, its biggest area of actual usage is in different industries. Companies that need silver to produce their items will always have a bigger and more steady need for the metal than those in jewelry.

Aside from basic ways that these metals are used, they have almost parallel investment purposes. Every country in the world has reserves, essentially stores of wealth. Some of these nations prefer to keep much of their assets in the form of their own currency. Others, and most, keep their value in the currency of other nations, most notably the United States dollar. What almost every country does, though, is own precious metals. The reason that countries own metals is because they have actual, true value.

Paper money is only worth what it is backed in through tangible assets or simple faith. With metals, a country knows exactly what it really has at all times. The difference between gold and silver in this dynamic is that gold is much more abundant and commonplace. The reason that most countries keep more in gold reserves than silver reserves is because of the massive amounts of money that are involved.

GS Ratio

Courtesy of GoldPrice.org

As seen above, the price of gold is usually around 30-80x the price of silver, so it is much more convenient to have tens of thousands of ounces of gold than it is to have hundreds or millions of ounce of silver. While the countries may prefer gold as a protection measure, any time they go out and make a huge purchase or sell off of their reserves, silver will also act in accordance.

Availability

The most obvious differences for a buyer, collector, or investor of real physical gold will be found in the forms of gold and silver that are available. Many of the coins remain the same from metal to metal. For example, the Canadian Maple Leaf and American Silver Eagle have both gold and silver varieties. Some coins, however, are only produced in one or the other, but not in both. As a whole, there are more types of gold coins than there are silver coins. Of course, the silver coins are much more abundant in terms of actual volume, though.

When buying precious metals, your starting price points for any piece will be roughly the same. Expect to pay a minimum of about $50-$100 for a single piece of bullion. The difference between gold and silver in this capacity is the amount that you are going to receive. With gold, sizes from as low as 1 gram can be obtained with ease. Silver, on the other hand, typically starts off at sizes of 1 ounce and larger.

The actual prices won’t be all that far off from each other, but the amount of actual metal content definitely is. With the increased demand and prices of silver, a number of mints have started to produce what are known as fractional items. These are pieces of silver that are less than one ounce. A half ounce round would be an example of fractional silver. Gold will always have many more options available in terms of sizing, where silver will offer more bang for your buck in terms of real volume.