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The permanence and tangibility of precious metals like gold and silver can be appealing to investors, especially given market volatility. These assets are popular investments for those looking for alternatives to the stock market or as hedges against inflation or market changes. But which is the better investment: gold or silver? The answer depends on your goals, how much money you can invest and your risk tolerance.
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Factors To Consider When Investing in Gold or Silver
Precious metals can be a useful addition to your investment portfolio. But before investing your hard-earned money, it’s important to understand the differences between gold and silver:
Uses
When you think of precious metals like gold or silver, you likely think of jewelry first. But there are other uses for these metals beyond necklaces and rings. The range of purposes for a metal affects its demand and stability as an investment.
In general, silver has more potential uses than gold. Silver is used extensively in the manufacturing of electronics, solar panel cells and smartphones. When the economy is strong and growing, the demand for silver often grows.
In fact, the World Silver Survey reported that demand for silver was down in 2023, particularly for the use of silver for the creation of jewelry or silverware. But for industrial and electrical use, demand increased.
Price
One of the biggest differences between gold and silver is price. As of May 2024, the price of gold is $2,422 per ounce. Meanwhile, the price of silver is $32 per ounce. With a lower price per ounce, silver can be more appealing to those just starting out or who have smaller amounts of cash to invest. Particularly if you’d like to have physical stores, silver bullion is much easier to find with a lower barrier to entry than gold.
Volatility
Historically, gold prices have been less volatile than the prices of silver. When the economy is performing poorly, many investors turn to alternative assets like gold as a way of protecting their money.
Silver prices can fluctuate quite a bit. However, silver pricing is typically influenced by industrial demand.
Long-term performance
Gold has performed more strongly than silver over the past 15 years. Consider these examples:
- If you had invested $5,000 in gold in January 2010, you would have purchased 4.64 ounces. By January 2024, your investment would have been worth $9,462—an 89% increase.
- If you had invested $5,000 in silver in January 2010, you would have purchased 218.05 ounces. By January 2024, your silver holdings would be worth $5,052—a 1% increase.
Those returns pale compared to the performance of the , the index that tracks the performance of 500 of the country’s largest public companies. If you invested $5,000 in the Vanguard 500 Index Fund ETF (VOO) in January 2010, your money would have been worth $26,221 in January 2024—more than five times your original investment.
Ways To Invest in Gold and Silver
If you decide to invest in gold or silver, there are several ways you can do so without hoarding jewelry:
- Buy physical pieces. One of the most common ways to invest in gold or silver is to purchase physical assets in the form of gold bars or silver coins.
- Invest in gold or silver mutual funds or exchange-traded funds. Rather than buying actual silver or gold, you can invest in mutual funds or ETFs that track industry trends or precious metal prices. For example, the iShares Gold Trust (IAU) follows the performance of the day-to-day movement of gold bullion, while the Franklin Gold and Precious Metals Fund (FKRCX) invests in companies associated with gold and precious metal operations.
- Invest in associated industries. You can also invest in gold or silver by investing in companies associated with the precious metals industries, such as mining companies like Newmont Mining (NEM) or the Barrick Gold Corporation (GOLD).
Should You Invest in Precious Metals?
Investing in precious metals like silver or gold can be appealing. They have more tangible value than other assets, and historically, these metals have held their value even during times of economic turmoil. Investing in these assets—particularly gold, which is subject to less volatility—can provide some peace of mind during market fluctuations.
However, long-term investors would likely be better off investing their money in a well-diversified portfolio of stocks, bonds, mutual funds or ETFs. Be sure to do your due diligence and evaluate your financial goals before making any investment decisions.
Frequently Asked Questions (FAQs)
How does gold or silver compare to the stock market?
When considering any investment, it’s a good idea to compare its past performance to that of a major index, like the S&P 500. Although past performance isn’t indicative of future results, it can give you an idea of market trends.
The S&P 500 has outperformed both silver and gold over the long term. Consider these returns from 2014 to 2024:
| January 2014 | January 2024 | Percentage Increase | |
|---|---|---|---|
Gold Price Per Ounce | $1,219.75 | $2,059.00 | 68.8% |
Silver Price Per Ounce | $19.94 | $23.79 | 19.3% |
VOO (S&P 500 Index Fund) Price Per Share | $139.70 | $432.62 | 209.7% |
Does Warren Buffett invest in gold or silver?
Billionaire Warren Buffett has warned against investing in alternative assets like gold, silver or cryptocurrency. Instead, he touts investing in the stock market over the long term.
How much should I invest in gold or silver?
When deciding how much to invest in gold or silver, consider your long-term goals, how much money you have to invest and the health of your existing portfolio. In general, precious metals should only make up a small percentage of your overall portfolio. A well-diversified portfolio of stocks will likely outperform the prices of gold or silver over time.
What is the best place to buy silver or gold?
The best place to buy gold or silver depends on the way you intend to invest your money. If you’d like to buy physical coins or bars, you can buy from brokers, dealers and platforms like JMBullion or the American Precious Metals Exchange (APMEX).
If you’d like to invest in mutual funds, ETFs or individual stocks, you can buy shares through an online broker.
Are gold and silver good long-term investments?
Gold and silver, as well as other precious metals, are typically long-term investments. Silver tends to be more volatile than gold, but gold is generally perceived as a long-term tool for preserving your assets.
