The precious metals market is constantly fluctuating, with the spot prices of metals shifting from day to day. While there are numerous precious metals that could be discussed, from platinum to palladium, there are two metals that are most important to discuss: gold and silver. Gold and silver prices have fluctuated greatly over the course of U.S. history, from the embattled diplomatic conversations of the 1800s over establishing the gold vs. silver standard to the market value shifts caused by the World Wars of the 1900s.
In recent years, especially the past two decades, the silver and gold market has seen some notable fluctuations, from the inflation following 2008 to the market crash following 2011. Beyond the market variations brought by historical events, how do gold and silver prices compare and differ today? Furthermore, what are some of the key differences that investors should consider when investing either in gold or silver?
Gold and Silver Prices
Although the value of both gold and silver have decreased since 2011, there have been differences between the two. Over the past few months, the gold spot price has hovered around $1300/ounce, while the spot price of silver has had slight shifts around $15/ounce. Why does the price-per-ounce of silver and gold vary so much?
One of the most commonly accepted beliefs within public discourse is that there must be more above-ground silver than gold; however, this belief is not true, as estimates state that there are approximately 5 billion ounces of above-ground gold while current estimates believe there are approximately 450 million ounces of above-ground silver. If this idea doesn’t hold up, then why is gold more expensive?
Although there are many specific reasons for this, the most basic answer is that gold is often more sought out, whether by centralized banks and investors, for its use as an “unbanked” currency and for its prestigious use in high-end jewelry. One of the most basic reasons behind this is the U.S.’s decision to move away from bimetallism at the end of the 19th century for the gold standard.
Premiums and Fees
When considering purchases dependent on gold and silver prices, you’ll also want to think about the additional fees due to the premiums placed on precious metals purchases. The idea presented is the premium over spot price: bullion dealers wouldn’t make any money selling bullion at its exact spot price, so premiums are added on.
Between gold and silver prices, the common rule is that premiums will begin varying around a $1,500 investment—the approximate spot price of gold for the past few years. When buying metal in quantities smaller than one ounce, you should expect to pay a larger premium. So, while $1,500 will get you a decent amount of gold with a lower premium, you should expect a much more significant premium on gold purchases less than one ounce. For purchases greater than $1,500, say $10,000 worth, you should expect to pay a much greater premium on silver than you would gold.
Volatility and Affordability
When considering whether you’d prefer gold or silver due to their prices, you also want to consider their general prices and recent market shifts. Based solely off of their spot prices, larger quantities of silver are more affordable. At a lower cost, you can purchase a physical, monetary asset that is similar to gold, making it beneficial for first-time investors.
However, while the gold and silver prices differ enough to make silver good for first-time investors, there is another characteristic to consider: silver is more volatile. Over the past few decades, the spot price of silver has both increased and decreased more significantly than gold, with the spot price of silver falling by -72% since 2011, while gold only decreased by 45%. While a cheaper investment, silver’s volatility can make it difficult to determine when you might want to sell off your assets, making gold a more stable investment. However, in the event of a bull market, silver can provide you with greater growth on your original investment. Planning on investing in silver or gold in the near future but have a few more pertinent questions? Take a closer look at our bullion buying guide or reach out to one of our representatives to talk about your plans.