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Both gold and silver are attached to the sentimental value of Indians and are considered precious in Indian culture. In addition to this, investors are constantly attached to both these hard assets as they provide a hedge against inflation and economic downturn.

 

Rising inflation, holding of interest rates by the US Federal Bank, and the banking crisis in the US have caused silver and gold prices to go up globally. These developments indicate a rising demand for hard assets as investors are uncertain of the current economic scenario.

 

Since these metals are generally of high value, they are considered a better investment option than trading in currencies. However, if you have already decided to invest in hard assets, the question arises of which one is better: gold vs silver investment.

 

Read on to know about the aspects related to investment in silver vs gold, including how to own it, returns, and which one is the better investment avenue.  

Gold vs Silver: Different Ways to Own It

To compare both assets and know the answer to ‘Is it better to buy gold or silver’, you must understand the ways in which you can own them. 

1. The following are the ways in which you can buy or invest in gold:

  • Physical Gold: You can purchase gold in physical form, i.e., jewellery, coins, or bars. Gold coins and bars of standard sizes are available with jewellers, banks, and non-banking websites. Gold coins, in particular, are available on some of the e-commerce platforms. 

 

 Moreover, you can purchase gold jewellery from a nearby jewellery store. Note that the price of physical gold generally includes making charges and other applicable taxes. 

  • Paper Gold :Paper gold is an alternative way to invest in gold that saves you from any kind of making charges that is applicable to physical gold. One way to invest in paper gold is through gold exchange-traded funds (ETFs). 

 

Gold ETFs allow you to invest in physical gold in a dematerialised or electronic form. Simply put, a single unit of Gold ETF is valued similarly to 1 gram of gold. You can trade in them through National Stock Exchange (NSE) or Bombay Stock Exchange (BSE). 

 

The other way to invest in paper gold is Sovereign Gold Bonds (SGBs). SBGs are government securities issued by the Reserve Bank of India in consultation with the Government of India.  

  • Digital Gold: Many payment applications allow their users to buy gold in digital form, starting from as low as 1 gm/unit. These applications are tied up with the MMTC-PAMP (a joint venture between MMTC, a PSU, and Switzerland's PAMP SA. 

2. The following are the ways in which you can buy or invest in silver:

  • Physical Silver: One of the most popular ways of buying silver is in its physical form. You purchase silver coins and bars from banks, NBFCs, and even some e-commerce platforms. At a jeweller’s shop, you can get jewellery, along with coins and bars.  

  • Silver ETFs: Similar to Gold ETFs, this investment also allows you to hold the silver in dematerialised form. You can trade them on the stock exchange market. 

  • Future Contracts: You can also invest in future contracts that allow you to buy or sell silver at a certain price at any future date. It is a great way to make high returns if you are certain that prices of silver will rise in the future. 

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Long-Term Returns: Gold vs. Silver

You must look at the long-term returns that these assets have provided. From 1925 to 2020, the price of gold compounded by 4.87% annually.

 

In the same 95-year period, the price of silver grew by a compound rate of 3.46% annually. 

Inflation Hedge: Gold vs. Silver

If you are wondering, “Is gold or silver a better investment to safeguard savings from the effects of inflation?”, it helps to know that both work fairly well. 

 

Both silver and gold are considered as a hedge against inflationary forces. There is a strong relationship between inflation rates and gold. When the inflation rate hikes, the gold prices also follow suit, and vice versa. 

 

While the relationship between silver rates and inflation is also high, their movement is not as dependent as is the case with gold’s price. 

Speculative Uses: Gold vs. Silver

People use gold as a store of value, as only 10% of the globe’s gold supplies are directed towards industrial applications. Hence, the value of gold majorly depends on the needs of investors.

 

On the other hand, silver performs better during periods of economic downturn because 65% of silver’s demand is generated through industrial use. As such, it would be fair to say that silver’s demand, at least from an industrial standpoint, is fairly consistent. 

Volatility: Gold vs. Silver

In the long run, silver prices, while market-dependent, are generally stable. However, in shorter terms, silver prices can be highly volatile, which makes gold a better investment option for short-positioning. 

 

In conclusion, the answer to the question, “Is it better to buy gold or silver?” depends on a number of factors. Analyse gold versus silver on different criteria to determine which investment option is the best one as per your needs.

FAQS on Silver VS Gold

If you are wondering, “Is silver stronger than gold”, then the answer is yes. When measuring how much it is dented by a diamond on a Vickers scale, silver is harder than gold. On the other hand, if you measure how easily the surface of the metal is scratched on a Mohs scale, silver performs better than gold.

Yes, in the short term, the price of silver can be highly volatile in comparison to gold.

Yes, silver’s volatile nature makes it a riskier investment as compared to gold.

Yes, you can diversify your portfolio by owning both silver and gold, which helps in minimising the risk involved.

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