Investing in precious stones is gaining popularity especially as a means of surviving the unstable economies. The most common precious stone being gold, silver is gradually catching up. The gold vs silver venture on which one should invest in can be rather confusing. To help you settle for the best investment you need to understand what each brings to the table.Initially, the price change of gold has not changed drastically over a given period as it is changing in the current times which where changes can be noted within 24hours. For example, in the late 1990’s, an ounce of gold was selling at $400. It took about 15 years for the prices of gold to increase to about $450. This is an average variance of $50 in 15 years.
Here is the good news; a $50 change in the current times can be witnessed by the end of the day. By the year 2011, an ounce of gold was selling at $1,875. This was by far one of the greatest prize increases over such a short period (from 2005 to 2011). However, while the trend was successfully increasing, it took a different turn and it started to go down. When the gold price hit the $1,000 mark in the year 2009, many investors had not paid full attention on the gold market. However, after hitting this mark, it has provided investors with reason to monitor its progress just as they have with the prices of DOW as well as that of crude oil.Gold has therefore; attracted not only the Central Bank, gold minors, as well as the insurance companies but also other investors have showed interest. This makes it possible for an average small retailer to trade in the venture through exchange trade funds. While gold has gained popularity, you need note that there are other precious metals out there. One major competitor for the gold market is silver.
Silver and Gold Market
Just like gold, silver has also had a positive turn between the years 2005 and 2011. For every troy ounce, it was about $7 and it increased to $35. This big move could not go unnoticed.
There are several industrial, commercial, as well as consumer uses for these precious metals.Silver has been in use since time memorial. From an industrial perspective, this metal was an important part used in the film industry for their cameras. One may argue that currently, the making of cameras is on a go-slow. As much as this may be true, the introduction of other technological equipment such as mobile phones has created use for silver.
The following are applications where silver is of use:
- It is used in electrical appliances due to its low resistivity
- In photovoltaics, where electrical power is obtained from solar radiation.
- In the medical profession due to its antibacterial properties
- In wood preservatives
- Water purification
- Food hygiene
Gold does not carry as much industrial use as compared to silver. One of its largest use is that in the jewelry market. A small percentage of its use is in the dental and medical market. This however, poses a challenge due to its expensive nature. How far are people willing to go to spend on jewelry? This questions the long-term use of gold in the market especially with the increasing prices.Looking at this perspective of gold vs silver, it is evident that the uses of silver surpass the uses of gold and thus the more reason to invest in silver. The major use of gold is categorized as a luxury and not many are willing to pay heavily for luxuries such as jewelry. There are several uses for silver. In addition, there price difference also allows industries to keep using it as opposed to gold current value. Even when portraying an increase in the price of silver, it is evident that price will not be a hindrance due to its vast application in the market.
While many are celebrating the increase in gold prices and making intense investments with gold, it has come with several effects one of which the U.S. dollar has been declining. The major factors that have contributed towards these include:
- The government pumping funds into the economy
Many governments are swapping from investing in monetary terms to investing in gold from the fear of the U.S dollar gradually losing its value. This is as a result of the economy’s financial crisis. This has applied to other precious metals such as silver and platinum. Many are currently leaning toward investing in gold but silver is giving it a run for its money.
- The gold vs silver ratio
By monitoring the gold price trend through history to current value, investors will be able to determine the future trend. It is therefore, important investors track gold’s historical price trends. To meet this objective, there have been different methods such as stock price to earnings ratio.In reference to the average price of gold in relation to silver, Franklin Sanders who was a Tennessee bullion dealer carried out a research to identify their relation. He noted that since 1792 the price of gold surpassed that of silver by about 16 times over a period of 130 years. This has changed as years go by reducing the ratio.According to traders, they belief that at some point, the gold-silver ratio will take the same ration as it did initially in its historical patterns. The historical ratio indicates a 27.28 ratio. Using this concept, the silver price has a long way to go if this ratio is to be met once again with the perception that the current price of gold will not change.
Bars and Coins
In the traditional setting, investors physically purchased the precious stone. Currently, you can also find bars of silver. The bar shape is easy to store in a safe or safe deposit box. The presence of bars is still evident but many are opting to purchase these precious metals in the form of coins. In the market, there are two major silver coins (the one-ounce, 99.9% pure Canadian Silver Maple Leaf) and the (99.93% pure, one-ounce American Silver Eagle).
Exchange Traded Funds (ETFs)
ETFs were established as a means of tracking some products price ranging from crude oil, natural gas, gold, as well as silver. The advantage of this is that they trade similar to the stock exchange market. in this, for investors who have a brokerage account where they trade in the stocks, they can use this very account to trade an ETF for their silver metal without the actual/physical ownership of a silver piece. This strategy is convenient and physically safe.
If you are looking to invest in the silver market, you may opt to buy shares in companies that actually mine this precious metal. The added advantage of buying shares in these companies is that they also trade in other metals such as zinc, copper, lead, as well as tin. This in turn provides you with a better understanding of how these metals function.
Investing in these precious metals is for the bold due to their volatility in the market. This makes them a rather long-term, as opposed to day-by-day products. It is also important that you trade with a level mind without any pressure due to difficult financial situations.Investors who have owned their gold in the long-term have reason to smile to the bank due to the increase in gold prices. This is also the case for silver investors although the growth rate is slower than that of gold. With the instability and decline in the current financial economies, the thought of owning gold and/or silver comes in as an added advantage. It helps to diversify your portfolio across different financial platforms despite the current economic instability.