Silver vs gold: Finding the right precious metal for your portfolio

Photo by Zlaťáky.cz on Unsplash
If you’re considering investing in precious metals, you have an important choice ahead of you. While gold makes up the majority of the bullion market, silver is also a widely-used investment asset and offers many of the same strategic benefits that gold provides.
But they also differ in several key attributes. Buying silver may make it more affordable to access the bullion market, or it can be used to diversify your bullion holdings and tap into key attributes you won’t get from gold alone.
The benefits of investing in silver
Silver has more industrial usage
While silver and gold are both used in jewellery and as financial assets, silver has more widespread industrial usage. One of its most common applications is in electronics, thanks to its electrical conductivity.
Silver is an important part of manufacturing everything from solar panels to electric cars, and it plays a key role in the growing renewable energy sector.
Higher industrial demand does make silver prices more vulnerable to economic cycles. Lower demand for consumer electronics can hit silver prices, just as high demand can benefit them.
Silver is more affordable per ounce
For beginner investors, silver is often an easier place to start because it comes in at a much lower price point. Buying a 1 oz. silver coin, or even a stack of them, is a much smaller commitment than a similar 1 oz. gold coin.
If you are on a smaller budget to start investing, you may be able to get more value for your money by buying silver.
Silver coins are just as easy to sell
Gold may make up the majority of the bullion market, but that doesn’t mean it’s any harder to sell silver coins in Toronto or other markets. While you may not get top price for junk silver (old circulation coins with a smaller percentage of silver content), coins like the Canadian Silver Maple Leaf and American Silver Eagle should sell reasonably close to market value while accounting for the bullion dealer’s margins.
The benefits of investing in gold
The standard for hedging against a crisis
Gold prices are far less dependent on supply and demand, as the existing, above-ground supply of gold outweighs the amount mined out of the ground annually considerably. Unlike other commodities, most gold is hoarded rather than consumed. It tends to trade on sentiment, with more investors doubling down on the precious metal during times of economic and political uncertainty.
Gold is uncorrelated to stocks
One of the top reasons to invest in precious metals is to diversify your portfolio, which means investing in assets that don’t correlate to each other. A diverse portfolio has assets that will respond in different ways to the same events.
Historically, gold has shown little to no correlation with stock prices. What this means is that when there’s a stock market crash, your gold investments will not necessarily be hit. They may take a small dive, or they may even go up.
By contrast, silver has a bit more correlation to global markets, largely because of its wider use in industrial and consumer goods.