Gold Or Silver? Which Is the Better Buy?

Author: Ian Davis - Bullion Manager

Published: 6 Dec 2018

Last Updated: 19 Aug 2019

Pros and Cons of Gold and Silver

On this page we discuss our opinions on the topic and try to give helpful un-biased information and advice. You will also find popular gold and silver products to buy at the bottom of the page. 

Gold 

Gold has been used to preserve wealth for as long as records exist. During economic downturns or uncertainty many investors turn to gold leaving equities and other investments behind. Gold is often used as a hedge against inflation (or currency devaluation) and provides a vehicle for preserving wealth rather than a get rich quick scheme. There are far more risky and alternative investments for making larger returns which include stocks (particularly AIM stocks), art and wine! We believe gold should form part of a wider investment portfolio and don’t forget many coins have a face value and are even exempt from capital gains tax. View all of our gold CGT exempt coins

Gold Bars and Coins

Silver Vs Gold Investments

It should be noted that the global hoard of gold exceeds that of silver, but silver remains more abundant in the earth waiting to be mined. This means more gold is in circulation (or depositories) and as such this helps stabilise the asset and reduce price volatility. If you are looking for a "safer" and less speculative investment gold would be our suggestion over silver. The difference in hoard size is probably due to overall gold demand exceeding that of silver and mining companies focusing efforts on gold exploration and extraction. Following the 2011 price correction in the market many silver mining companies were forced to cut costs with exploration for new sites taking a major blow. 

All this could change however if Jeff Bezos end up successful in mining asteroids for the unfathomable amounts of gold contained below the surface. 

Gold is well established as the choice of metal in jewelery. The World Gold Council has reported a 6% increase in global demand in Q3 2018. According to Metal Focus, India’s jewelery demand is estimated at 573.3 tonnes in 2018, up 14 per cent from 2017 and China is expected to see a 3 per cent rise to 646.9 tonnes. These two large consumers are expected to push global demand to 2,186 tonnes, a 3-year high. Whilst gold jewelery boosts demand and prices we advise you to read our blog on whether jewellery is a good investment for you.

Storage is a Key Consideration

From a practical point of view gold is far easier to store as it is denser than silver and as such requires far less space to store large monetary amounts. Not only is it easier to store but liquidating large amounts is often easier. For example, if you were to sell 1kg of gold you could expect to receive approximately £32,919 and if you wanted to cash in this much silver you would be looking at transporting 82kg!! Trying to move 82kg of silver inconspicuously can be tough! 

Gold and Silver Coins

In conclusion gold is a great option to preserve wealth and performs very well during economic uncertainty or recession. If you are depositing large monetary amounts gold is a better option due to the ease of storage and if you are comfortable cashing in larger amounts then again we recommend gold over silver.

Silver

Silver has many more industrial uses than gold and a recent development I discovered is that silver is used in bionic eyes. Scientists apply a layer of silver to a polymer membrane capable of supporting photodiodes which can turn light signals into electrical signals. These electrical signals are then passed to the brain via the optic nerve and there is great potential to restore sight to those who are blind.....quite an amazing feat! Aside from cutting edge healthcare silver is also used in cell phones, self-heating windscreens, solar panels and catalysts. Silver as a metal in jewelery has seen increasing demand particularly in India where the CPM group reports a 600% growth since 2006! 

Silver Coin Stack

Precious Metal Vs Industrial Metal

Price wise silver does not increase in the same way as gold during a recession or economic downturn due to its use in industrial uses. Over time prices tend to follow one another but gold certainly moves faster during a downturn. You can see this from our graphs below or our live prices page

Like gold, silver can also be real money! Many of the Royal Mint coins are legal tender and are CGT exempt. In the unlikely event that money is scarce or unavailable these coins could in theory still be traded as legal tender. Most of the time the intrinsic value outweighs the face value so expect to do some bartering! View all our CGT exempt silver coins

Unfortunately for UK investors silver is subject to 20% VAT making it rather unappetising for serious investors. If you were to realise a profit on silver prices would have to go up 20% at least for you to even break even unless you have a means to recover VAT! Looking at the historic prices and using the gold to silver ratio investors can see an opportunity when silver is priced low relative to gold. Be careful using this single metric as gold may simply be overpriced! 

VAT free silver has become a popular option in recent years where silver is delivered outside the UK into storage and as such is not subject to VAT. This option is great if you are not nervous about never taking physical delivery of silver. We do understand customers who want to take physical delivery as our preferred ownership method is physical bullion.  However, a major benefit of VAT free silver is that investors need not worry about hiding large volumes in the house or elsewhere as storage is taken care of.  

Due to the nature of the market silver tends to be a speculative investment with prices more volatile and price swings likely. If you are looking for a more secure investment, we would recommend gold! That said if you embrace the volatility there is more chance to make a profit and we recommend you look at historical prices and the gold to silver ratio to determine whether you believe the market is bullish or bearish. Remember that buying when prices are low increase your likelihood of a profit, but timing is everything! For the benefit of our customers we share news that this year alone we bought 30 metric tonnes of silver in a single transaction, so we are pretty serious when the right silver deal comes our way. We really do put our money where our mouth is and don’t write all this content simply for Google rankings!! 

Some silver investors will argue that silver is a good choice during periods of economic growth and gold during a downturn, but I don’t see it as a black and white. We tend to see investors piling into both gold and silver during politico-economic turmoil as was evident during the Brexit vote and 2008 financial crash. Our view is if the prices are good and not over inflated, and the premium low then the purchase is likely a good one. Having a black and white approach can impede your decision making in pursuit of the best deal. 

From a resource perspective silver is way more abundant in the earth's crust but the global hoard lower. We attribute most of this to gold's popularity, a desire to accumulate gold over silver and a reduced rate of exploration for new silver mines since 2011. That said, should consumer demand continue to soar we expect increasing prices until mining companies open new sites which would eventually drive the price of silver back down. Whilst new mining activities take place prices are likely to remain elevated until supply is increased. If you can identify this point then selling silver whilst prices are high would be recommended.  

Silver Is Cheaper Per Ounce

One of the major advantages of silver is its affordability. For example our cheapest one ounce gold coin are available from £1,154.75 and our cheapest 1 ounce silver coin are available from £15.78. Clearly a silver coin is a great option if your budget does not stretch to gold. Due to the lower intrinsic value cashing in smaller amounts of silver is easier than gold. In this case if you owned one-ounce coins and wanted to cash in a low amount you would struggle with gold. For example you can expect to get £1,114 for a 1 ounce gold Britannia which may be too much whereas a 1 ounce silver coin will fetch £13.

Silver Bar Stack

In bull markets silver tends to outperform gold and this is due to the fact that in a late bull cycle investors who can’t afford gold tend to pile into silver pushing the price up at the end. Caution is advised because when the market flips and becomes bearish silver also tends to fall faster than gold! This is one of the reasons silver is considered a speculative investment relative to gold. 

Like gold, global silver demand is increasing so there appears to be no end in sight to prices going up. Remember that everyone (including us) who cast "predictions" on the market is using opinion, sometimes informed sometimes not, and no one has a crystal ball. Your investment decision should be researched, well informed and be made by yourself. If you need any help, we recommend you contact a financial adviser.  We will continue to buy and sell silver everyday as part of our business operation as we believe it to be a good investment and sits comfortably alongside gold in our investment portfolio. 

In conclusion silver is a great investment choice and due to its lower intrinsic value is far easier to trade and cash in smaller amounts. As it is a more speculative investment, we would advise silver ownership alongside gold as the markets behave in slightly different ways. With silver you can find yourself sat on a nice profit (or loss) as price swings can be wild in contrast to gold but you will find gold the more secure option for preserving wealth. 

Live Prices and the Gold Silver Ratio 

Silver at times can be a "better" buy than gold. The historical gold to silver ratio is a good indicator of how the prices compare to each other. The graphs below will provide insight as to whether silver may be too cheap or gold too expensive. Ratios above 70 generally indicate silver as the better buy and ratios down to 40 and below would indicate a silver bull run and we would want to sell! As we write this the ratio is 85 which is an almost all time high. We are very keen to buy silver at the minute and shopping around for deals. If you are ready to sell silver, you can view our live buy back prices

In order to better explain whether you should buy gold or silver it is worth observing price changes over the past 25 years. It goes without saying that prices are of major influence when it comes to the choice of gold or silver, however, what is also of great importance is how the prices compare against each other. Notice from the graphs how gold and silver prices are linked showing almost the same percentage increase over the same period. Now look at the gold to silver ratio and how this has fluctuated, sometimes significantly, as prices of each metal respond to one another. This is important and presents an opportunity for the savvy investor if you can buy silver when the ratio is high and sell when the ratio is low. 

Gold Silver Ratio Over 25 Years 2

1 oz Gold Coin Bullion Best Value Secondary Market

OurChoiceSecMarket500-B-1

Quantity Premium % Total
1
2.5
£1,166.12

Price Per Item:
£1,166.12
2
2.4
£2,329.96

Price Per Item:
£1,164.98
5
2.25
£5,816.40

Price Per Item:
£1,163.28
10
2
£11,604.30

Price Per Item:
£1,160.43
25
1.9
£28,982.50

Price Per Item:
£1,159.30
50
1.85
£57,936.50

Price Per Item:
£1,158.73
100
1.6
£115,588.00

Price Per Item:
£1,155.88
500+
1.5
£577,375.00

Price Per Item:
£1,154.75

1 Ounce Gold Britannia Coin Bullion Best Value Newly Minted

1ozbritanniabestvaluenew500-B-1

Quantity Premium % Total
1
3.5
£1,177.50

Price Per Item:
£1,177.50
5
3.45
£5,884.65

Price Per Item:
£1,176.93
10
3.35
£11,757.90

Price Per Item:
£1,175.79
20
3.25
£23,493.00

Price Per Item:
£1,174.65
50
3.15
£58,676.00

Price Per Item:
£1,173.52
100+
3.05
£117,238.00

Price Per Item:
£1,172.38

Bullion Sovereign Best Value - Newly Minted

fullbestvaluebullionsovereignnewlyminted500-B-1

Quantity Premium % Total
1
4.5
£279.80

Price Per Item:
£279.80
5
3.8
£1,389.60

Price Per Item:
£277.92
10
3.7
£2,776.60

Price Per Item:
£277.66
25
3.6
£6,934.75

Price Per Item:
£277.39
50
3.55
£13,863.00

Price Per Item:
£277.26
100
3.5
£27,712.00

Price Per Item:
£277.12
250
3.45
£69,247.50

Price Per Item:
£276.99
500
3.4
£138,425.00

Price Per Item:
£276.85
1000+
3.35
£276,720.00

Price Per Item:
£276.72

Bullion Sovereign Best Value - Secondary Market

bullionourchoicesovereignssecondarymarket500-B-1

Quantity Premium % Total
1
3.5
£277.12

Price Per Item:
£277.12
5
2.8
£1,376.25

Price Per Item:
£275.25
10
2.7
£2,749.80

Price Per Item:
£274.98
25
2.6
£6,867.75

Price Per Item:
£274.71
50
2.55
£13,729.00

Price Per Item:
£274.58
100
2.5
£27,444.00

Price Per Item:
£274.44
250
2.45
£68,577.50

Price Per Item:
£274.31
500
2.4
£137,090.00

Price Per Item:
£274.18
1000+
2.35
£274,040.00

Price Per Item:
£274.04

1 oz Silver Coin CGT Exempt Newly Minted

2017royalmint1ozsilverroosterrev500-B-1

Quantity Premium Total
1
£2.30
£18.54

Price Per Item:
£15.45 (Exc. VAT)
£18.54 (Inc. VAT)
5
£2.20
£92.10

Price Per Item:
£15.35 (Exc. VAT)
£18.42 (Inc. VAT)
10
£2.10
£183.00

Price Per Item:
£15.25 (Exc. VAT)
£18.30 (Inc. VAT)
25
£2.00
£454.50

Price Per Item:
£15.15 (Exc. VAT)
£18.18 (Inc. VAT)
50
£1.90
£903.00

Price Per Item:
£15.05 (Exc. VAT)
£18.06 (Inc. VAT)
100
£1.85
£1,800.00

Price Per Item:
£15.00 (Exc. VAT)
£18.00 (Inc. VAT)
500+
£1.82
£8,980.00

Price Per Item:
£14.97 (Exc. VAT)
£17.96 (Inc. VAT)

1 Kg Silver Bar Metalor New

metalor1kilosilverbarobv500-B-1

Quantity Premium Total
1
£44.86
£561.01

Price Per Item:
£467.51 (Exc. VAT)
£561.01 (Inc. VAT)
10
£40.96
£5,563.30

Price Per Item:
£463.61 (Exc. VAT)
£556.33 (Inc. VAT)
25
£37.17
£13,794.50

Price Per Item:
£459.82 (Exc. VAT)
£551.78 (Inc. VAT)
50
£33.05
£27,342.00

Price Per Item:
£455.70 (Exc. VAT)
£546.84 (Inc. VAT)
99+
£29.63
£53,731.26

Price Per Item:
£452.28 (Exc. VAT)
£542.74 (Inc. VAT)

1 Kg Gold Bar Metalor New

Metalor1kilogoldbar500-B-1

Premium: 2.4%

Price: £37,490.90

100g Gold Bar Metalor New

Metalor100gGoldBar500-B-1

Premium: 2.69%

Price: £3,791.85

Further reading

You may wish to view all of our articles on our gold guide

You may wish to view all of our articles on our silver guide

This guide and its content is copyright of Chard (1964) Ltd - © Chard (1964) Ltd 2019. All rights reserved. Any redistribution or reproduction of part or all of the contents in any form is prohibited.

We are not financial advisers and we would always recommend that you consult with one prior to making any investment decision.

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