When it comes to the merits of gold vs. silver, I have to admit that I’m a real fan of silver. I love its luster, its clear bell tone when struck, and the fact that it’s so mutable and versatile, right down to being an excellent electrical conductor.
The thing is, gold has most of that and more. It doesn’t tarnish, either. But it also has advantages that go beyond the cosmetic, so in this article, I’ll lay out a few reasons why, if given a choice, you should buy gold rather than silver.
Silver and Gold, Silver and Gold
Like Yukon Cornelius from Rudolph the Red-Nosed Reindeer, most precious metals fans love both silver and gold. But let’s get real here. At its height, silver maxed out at about $54 per ounce, back in 1979/1980 when the Hunts (illegally) tried to corner the market.
It tumbled down to almost nothing thereafter and stayed in the $5-10 range for decades before climbing again in recent years. At the beginning of 2012, it brings about $30 per ounce, and has been bouncing between $25 and $40 for a year.
I believe in silver; and, as I’ve made plain, I simply like it. But precious metals investors can’t let emotions get in their way when it comes to making money. Aside from the price per ounce, there’s the volatility issue.
Advocates — including me — have pointed out that in the last couple of years, the value of silver has climbed much faster than gold’s. That’s true. But in general, silver’s spot price seems to be more uncertain than gold; the price dips seem less predictable, the drops steeper, and the price takes longer to recover.
That’s assuming it does recover. It still hasn’t returned to anywhere near its recent height of $48.48 in late April 2011. In fact, it’s pretty much back where it was this time last year, showing a moribund return overall. Sad, but true.
On the Other Hand…
Gold displays its own volatility, and there’s no denying that sometimes the variations can be rather extreme, at least in terms of dollar amounts. Gold bounced between about $1,400 and $1,900 throughout 2011, and as the year ended, was just a bit over $1,600.
That’s not nearly as nice as its historical high back in August and September, but it’s still a solid growth of over $200, or about 14-15%. Gold’s done about that well annually for the past decade or so, which is something silver can’t claim.
And though there have clearly been some big dips, historically, gold tends to recover fairly quickly.
More Reasons for Going Gold
Want some practical reasons to invest in gold over silver? Okay, how about this: there’s about seven times more gold than silver in circulation. It’s simply easier for us to find and invest in.
This is ironic, since silver is about 17 times more common than gold — at least in terms of quantities available in the Earth’s crust. But most people are more interested in gold, and it’s often easier to refine than silver. Plus, we actually consume silver in industry; mostly, gold just piles up.
On top of all that, gold offers more concentrated wealth than silver. Depending on the prices of the two metals at any particular time, gold tends to be worth 50-60 times more than silver per ounce. In many ways, this is the trump card, because gold gives you more bang for your buck.
So I say, if given the choice of gold vs. silver, go for the mellow yellow every time.