Physical gold and silver have always been attached to our sentiments as we used to buy these precious metals out of love and affection rather than with the intention of investments. But, times have changed due to rising inflation as every unusual expenditure is seen as an investment. So, now the question is blocking money on which precious metals would be more wealth-creating and why.
There are various ways of investing in gold and silver other than holding it physically, which requires an additional cost of safeguarding it. Instead, you can invest in:
- Gold or silver ETFs that own bullion
- Gold or silver ETFs that own mining stocks
- Gold bonds
- Futures
- Mining stocks
No matter in which way you invest, returns on investment won’t change a lot. However, your cost of maintaining such assets will change. Let’s understand what would be the most suitable for you to hold.
Long term returns
After the 2008 debt crisis, people bought both gold and silver in bulk, but very few of us know that on one hand, gold has given 25% in 2010, and silver on the other has given 80%-85% returns. The reason was quite obvious that Indians give more preference to gold than silver. But, during the crisis, investors realised the importance of precious metals, and they have shown more interest in both metals equally. That move was given a massive rise in silver.
Industrial use of precious metals
Gold is used by individuals only, either for the purpose of investment or as jewellery. On the other hand, silver has many other industrial uses like mobile handsets, glass, normal lead acid batteries, solar panels, electric conductors, computers and so on. It is a surprise to see that no other metal has been able to replace silver in this industry.
Also, silver contributes to the manufacturing of several life-saving medicines as well. The return rate of silver will majorly depend on the growth of these sectors. As these industries grow, the requirement for silver will also increase. Consequently, the price of silver will increase as demand for the same increases.
You can judge on this basis as Indian markets are emerging in the global market aggressively, it is a great opportunity to invest in silver.
Cost of assets
At the time of writing this article (6 October 2022), silver is trading at ₹615 per 10 grams and gold is trading at ₹ 51,790 per 10 grams (24 carats). The gap between gold and silver is massive and consistent. If you are an investor with less liquidity, gold would be highly unaffordable to you. Silver is affordable and you can buy more quantities for the same amount of money. Hence, it's much easier to invest in silver than gold.
Volatility
The rule of volatility says that low-cost assets tend to give more exposure to gains or losses, as a slight change in their prices shows a greater effect relatively. It means you will see a small change in the price would have a huge effect on your portfolio. If you are a long-term investor, you do not need to worry about volatility as it will ultimately grow according to the market conditions of the country, whether you invest in gold or silver.
Broader market coverage
While talking about gold, it will perform inverse to the performance of the stock market, which is said to be a countercyclical investment. On the other hand, since silver is used in many industries other than personal usage, it gets more affected by industry performance overall.
By concluding each scenario of comparison, you can decide on what would be the best suitable investment for you. Majorly, if you want your investment to be more market-linked indirectly, willing to take a risk of volatility with less liquidity with yourselves, silver would be more suitable for you. Otherwise, you can invest in gold to outperform inflation as well.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com
