Conclusion: Silver is more volatile, cheaper, and is more closely linked to the industrial economy. Gold is more expensive and better for diversifying your overall portfolio. One or both of them may have a place in your wallet. Both silver and gold can function as safe assets, but gold tends to have a better track record over longer periods of time.
That said, during shorter periods, the specific dynamics of each market end up being more important for their respective returns. Regardless of the asset you buy, remember that neither asset generates cash flow, so in the long term it would be better for investors to adopt a buy-and-hold approach with a profitable and growing portfolio of stocks. Now that we've fully addressed the general topic of precious metals as investments, it's time to get a little more specific. The correlation between silver and inflation is also high, Agrawal says, but not as strong as in the case of gold.
In times of uncertainty, people turn to gold based on the false assumption that it will be a safe investment. The relatively high price of gold per ounce makes it easier for investors to store value compared to silver, making it cheaper to store an amount equivalent to the value in dollars. The commonly accepted reasons why gold is more expensive than silver, despite its relative abundance, are that gold is more widely used in jewelry, gold is considered more of an “alternative currency” than silver, and central banks and individual investors demand it more than silver. These precious metals are reputable and have a long history, but they offer different types of benefits and security, and investors should know how they perform in multiple economic climates before deciding to invest in either of them.
The dollar has not been able to turn into gold since President Richard Nixon ended that practice in 1971.1.Before that, people bought gold bars as a way to diversify their investment portfolio and protect themselves against inflation. However, he points out that “the marriage between gold and inflation can sometimes break in the short term, as interest rates react to rising inflation and divert investments to the debt market. As a precious metals investor, you'll always want to buy metals as close to the current spot price as possible; otherwise, the price of the metal will have to rise significantly just to break even. Ideally, an investor should include both gold and silver in his bullion portfolio, covering them for any eventuality and benefiting from fluctuations in both metals.
Holding gold is the best way to maintain the value of your portfolio during times of economic uncertainty.