Five Key Differences Between Gold and Silver

(September 27th, 2021 - Morgan Stanley)

As we edge toward a post-pandemic world, many investors are looking for ways to prepare for future uncertainties. A solution for some may include investing in precious metals, such as gold and silver. Here are five factors to consider when deciding to invest in gold or silver, economists at Morgan Stanley report.

Silver may be more tied to the global economy

“Half of all silver is used in heavy industry and high technology. As a result, silver is more sensitive to economic changes than gold, which has limited uses beyond jewelry and investment purposes. When economies take off, demand tends to grow for silver.”

Silver may be a better inflation hedge

“Historically, both gold and silver have made solid gains when US inflation is rising. Both metals are valued in US dollars, so when the dollar falls in value, gold and silver typically rise because they become less expensive to buy using other currencies. Given greater industrial demand, silver tends to rise more than gold with rising inflation and a falling dollar.”

Silver is more volatile than gold

“The volatility in silver prices can be two to three times greater than that of gold on a given day. While traders may benefit, such volatility can be challenging when managing portfolio risk.”

Gold has been a more powerful diversifier than silver

“Silver can be considered a good portfolio diversifier with moderately weak positive correlation to stocks, bonds and commodities. However, gold is considered a more powerful diversifier. It has been consistently uncorrelated to stocks and has had very low correlations with other major asset classes – and with good reason: Unlike silver and industrial base metals, gold is less affected by economic declines because its industrial uses are fairly limited.”

Silver is currently cheaper than gold

“Silver is much cheaper than gold, making it more accessible to small retail investors. For those who are just starting to build their portfolios, the cost of silver may make it a better investment choice.”