Editor’s Note
This article addresses a common question for safety-oriented investors: whether gold or silver is the better investment. We examine the fundamental differences between the two precious metals to help clarify this persistent point of confusion.
A persistent confusion among retail investors is whether it is more beneficial to invest in gold or silver. Let’s find out whether gold or silver is a better option for a safety-oriented investor.
When the stock market declines, people often view gold and silver as safe-haven investments. The biggest misconception among retail investors is that silver provides the same safety as gold during crises. Historically, gold has established itself as a monetary metal. When situations like war or financial instability arise globally, central banks and investors worldwide turn to gold. On the other hand, silver has a dual identity. Silver is not just a precious metal but also a crucial industrial metal.
Approximately 50 to 60 percent of total silver demand comes from industries like solar panels, electronics, and electric vehicles (EVs). This means the price of silver depends on global manufacturing and economic activity. If a global economic recession occurs, industrial demand for silver decreases. In such a situation, instead of behaving like gold, silver starts acting like base metals such as copper, often accompanied by significant price declines. Therefore, from a safety perspective, buying silver instead of gold may increase risk rather than reduce it.
When investing in silver, people often mistake its high volatility for a big earning opportunity. Advertisements and market news frequently exaggerate its rallies, but over the long term, this volatility acts like an invisible tax.
Looking at the data, silver prices peaked in 2011, after which they fell by up to 50 percent. It then took a decade for silver prices to rally back to that level. Meanwhile, examining data from 1990 to 2024, gold delivered an annual return (CAGR) of approximately 10.6 percent, while silver was limited to only 7.6 percent. This lower return for silver also came with much higher risk and volatility.