“…silver has characteristics which have become appealing to the middle-class investor, both metals will save you during times of financial turmoil. Or if you are lucky enough not to live through a financial emergency, your metals will quietly grow in value – often outperforming the Dow Jones Industrial Average.”
Written by guest author: Michael Chagala
The views and opinions expressed by guest authors do not necessarily reflect the official policy or position of Precious Metals Direct. Any content provided by our guest authors are of their opinion and not intended to be financial advice.
So you’ve decided to buy precious metals. You are among the very low percentage of Americans who understand the valuable role precious metals play in their own finances and the global economy. You are using them not only as an investment opportunity, but as a hedge against recession, inflation, or worse.
But being new to precious metals, you inevitably find yourself faced with the question of gold vs silver. Although there are more American precious metals to choose from, such as platinum and palladium, and a staggering array of non-precious metals from copper to scrap – gold and silver are almost always the best decision for the novice investor. But which is best for you?
Going into this, most people’s assumption is they will buy gold. Unlike some of the more exotic metals such as platinum, we all have an inherent perspective on the value of gold. Gold has never been worth zero, is universally valued, and just feels safe – which it is. But what about silver? It didn’t take much research to discover silver has become just as, or perhaps more, popular as gold coins or rounds. This is not due simply to hype or any psychological forces, there is some science and reason behind it.
Low Barrier to Entry
Silver is an inexpensive way to get a feel for buying and possessing precious metals. For a few clicks of the mouse, you can have five 1oz American Silver Eagles sent to your house for around $100. The coins are big, heavy, shiny and beautiful. The same amount of money in gold will get you something smaller than a dime. Starting with a small purchase is one way to get yourself off the fence – out of analysis mode and into actually taking action.
Our Government Loves Gold
Which should make you nervous. Most new investors are unaware that the United States outlawed the private ownership of gold in 1933. Citizens were forced to hand over all but a very small quantity of the gold in their possession. Done under the guise of promoting economic growth by preventing the hoarding of money rather than spending it, there were many underlying reasons for this decision, most of which remain controversial. If you understand the role gold still plays in the global economy, you understand a gold seizure like this could happen again. In its defense, the United States government did pay people $20 per ounce for the gold they seized, roughly the market value, however, once all the gold was collected they raised the price to $35, essentially creating a profit for themselves from thin air. In 1974, President Ford legalized private gold ownership once again. Although silver was included in some of the legislative language, it was never subject to seizure – partly because of its use in private industry and everyday life.
The risk of your gold being seized by the government is overstated here. It’s one thing to take gold from a total population of less than 125 million mostly rural farmers 1933, compared to doing the same today where the mere threat of such action would send shockwaves of panic through the global economy.
Private Industry Loves Silver
Supply and demand. Over half the silver mined in the world is gobbled up in manufacturing processes never to be seen again. This means supply is always going down, while demand for computers, cell phones and other electronics that require silver goes up. There is much less silver pulled out of the ground each year than you probably assume – there are individual people in the world with enough wealth to buy all the silver that is mined in a single year. There just isn’t a lot of this stuff to go around. Unlike gold which historically goes up in value only in response to economic factors, the price of silver could skyrocket even in a strong economy if the manufacturing industry suddenly couldn’t get their hands on enough of it.
Getting Potatoes During the Apocalypse
One issue with gold during the apocalypse, as likely or unlikely you feel this could happen, is the price of precious metals across the board will absolutely skyrocket. If the day came where the dollar lost its value, gold would become the easiest form of money for trade and barter. However, in this type of scenario, a single 1oz gold coin could be worth $10,000 or more – not very practical if all you want is to buy potatoes from the farmer down the street. It may also bring unwanted attention to the fact you have more at home. The same is true for silver, however, in that a single 1oz coin could be worth $600; whether you buy gold or silver, it may be smart to pick up a range of denominations including 1/2oz, 1/4oz and 1/10oz, but keep in mind even a 1/10oz gold coin could be worth over a thousand dollars when all you need are potatoes.
Less Risk of Theft
There are two primary reasons silver is less vulnerable to theft. First, silver does not inspire theft the same as gold; gold has the same effect on a thief as the ring has on Gollum in The Lord of the Rings. Gold is untraceable (in most cases), can be sold quickly and easily, and has an optimal size-to-value ratio. Gold is almost designed to be stolen. The second reason silver is less vulnerable to theft is sheer weight; a thief can put $10,000 of gold in their pocket, while $10,000 of silver weighs over 30lb. This is sort of a built-in anti-theft mechanism.
You Get More of It
So this one does fall more on the side of a psychological effect. You’ve made some wise financial decisions in life and have the opportunity to put $10,000 into precious metals. The image in your head is a stack of brilliant gold coins; you can’t wait to feel their weight, study them, marvel in owning humanity’s one true timeless and universal form of money… only to find $10,000 gets you less than three 1oz coins. Not exactly the experience you fantasized about. However, $10,000 will get you nearly 500 of the most beautiful silver coins you eyes have ever laid eyes on. A ‘monster box’ is the slang term for an unopened case of 500, 1oz, American Silver Eagle coins straight from the mint. It is something breathtaking to behold, and you will never forget the shade of green it comes in.
In fairness, there are two scenarios in which gold performs better than silver.
If you find yourself in some sort of evacuation scenario whether that be fire, home-invasion, civil unrest, or other, and need to grab your valuables and run – $10,000 of gold will fit in your pocket. As mentioned above, the same value in silver will weigh over 30lb.
The reality is that any precious metals stored at home need to be kept hidden as to not be taken during a burglary. There is some debate around keeping metals in a safe as they can be pried open easier than most people think, or the thief can simply come back with a gun and ask you to open it for them. There are a thousand places in your home where $10,000 in gold can be hidden where a thief would never find. The same cannot be said for $10,000 in silver.
The Reality is Either Decision is Smart
Generally speaking, whether you are buying gold or silver, you are making a wise decision. Although silver has characteristics which have become appealing to the middle-class investor, both metals will save you during times of financial turmoil. Or if you are lucky enough not to live through a financial emergency, your metals will quietly grow in value – often outperforming the Dow Jones Industrial Average.