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Investing in Gold or Silver – Are They Good Investments for Inflation?

Commodities trading requires you to buy and sell raw materials instead of financial assets, such as mining stocks, mutual funds, and bonds. Likewise, you’re not purchasing and selling finished products, such as a house.

Overall, a commodity is an asset, such as corn, ore, lumber, and coffee. One common form of commodity trading is gold and silver investing or precious metals. As an investment option, gold and silver have different properties and uses in an investment portfolio.

Because of the rising inflation and the economic crisis, you may wish to buy physical metals. It’s wise to speak with a financial advisor before doing anything else. However, let’s learn more about both silver and gold.

Precious Metals – Utility between Gold and Silver

Investing in Gold or Silver

One thing that differentiates investing in precious metals instead of other asset classes is utility. For many commodities, investors will judge the value based on industrial demand and consumer requirements. Therefore, if you’re investing in coffee beans, you’ll determine prices by current tastes, trends, and how much people drink.

Precious metals are very different because they’ve got a low commercial utility. When compared to other physical metal options, there are fewer consumer and industrial applications for gold and silver.

That said, silver has more commercial and industrial uses than gold. Roughly half of the silver purchased and sold on the market gets utilized commercially, and applications range from electronics to dentistry. However, the use of poor man’s gold is quite small when compared to other metals that are used mainly for production.

By contrast, though, gold has fewer commercial applications apart from jewelry. That will give investors a way to judge price fluctuations and predict them for silver because you can decide based on factors such as how the global economy shifts and industry need.

Precious Metal Volatility and Cost – Gold vs. Silver

At the time this was written, silver’s price was at about $24.03 per ounce. However, gold prices were at roughly $1,813.70. Though the details might vary, the gap is generally consistent. Historically, gold is more expensive than silver because there are 20 times more silver deposits in the world than there is gold. Therefore, investors have two outcomes.

Firstly, it’s easier to invest in silver than it is in gold. You have more purchasing power and could buy more for less money. Therefore, liquid investors can get into it faster and without spending as much.

As with most financial assets, this exposes you to higher potential losses and gains because you will see the changes that are relative to your investment’s scope with a silver portfolio.

However, that’s the definition of volatility. Lower-cost assets are often very volatile primarily because the small price changes have an outsized effect on your underlying investment.

For example, at the current price of silver, it only has to shift by about $2.40 per ounce to see a 10 percent price fluctuation. If the current price of gold changed by that much, it would be a lot less.

Volatility isn’t always a bad thing, but you do have to watch for it, especially if you want a long-term investment of physical precious metals.

The Gold Market Compared to the Broader Market

Typically, prices for that yellow metal move inversely to the traditional stock market. Gold is called a countercyclical investment. That means it will go up when more mainstream assets go down, and the opposite applies, too.

Historically, when the stock market does badly, investors flock quickly to gold. However, when times are better, they pull their money out of gold assets and put it into things with greater links to the economy.

As a result, most investors hold gold in a portfolio only in case they require liquidity in a downturn. For example, recessions are the worst time to sell your stocks but the right time to buy. If you’ve currently invested in gold, you have a more valuable asset to sell in the recession. That means you can purchase other people’s assets that are undervalued without selling yours.

By contrast, the silver market tends to shift with the overall economy. While it’s more than gold, it’s still not as much as you might think. This is primarily because of the commercial applications available to make silver a predictable asset. Whenever there is economic uncertainty, industries don’t need as much silver in manufacturing, so the price is driven downward.

Understanding Gold and Silver Prices

Based on the past performance of gold and silver, it’s safe to say that these are tangible assets that can help during times of rising prices and high interest rates.

Precious metal ETFs are quite popular now and still high. Exchange-traded funds are one type of pooled investment security and operate like a mutual fund. Generally, an exchange-traded fund helps you hold gold and silver, but not in the physical form.

Gold vs. Silver – What to Buy

There isn’t an objectively better investment as an inflation hedge. It depends on your position in the market and your portfolio’s current state. Generally, the rule of thumb is to buy precious metals and store them just in case. Many investors purchase silver when they’re investing for good times. That’s a semi-predictable speculation that could make money.

However, you should purchase gold if you’re hoping to hedge against inflation. Few things will outperform gold, so it’s often the best bet.

Most people think that a decent S&P 500 index fund is the better option in the long run, compared to gold. However, gold is a great countercyclical asset if you wish to ensure more liquidity when a recession looms.

Tips for Investing in Precious Metals

  • The best use for gold coins and gold bullion as an investment is to mitigate your risks. It works well for market downturns because you have a source of value when other investments fail.

  • Financial advisors will help you decide if physical gold and silver coins are right for you.


Both gold and silver are popular investments because they have a historical relationship with money. In the past, governments used these two precious metals to make currency.

No major economy uses them as currency, but precious metal investing can be beneficial. Generally, silver is volatile and cheaper, while gold is expensive but better for diversifying your portfolio.