With the Diwali season just around the corner, the investment bug must have started biting you and you must be looking for some decent investment options. Dhanteras, which is a festival celebrated just before Diwali is often considered to be an auspicious occasion for buying utensils, automobiles, electronics and what not.
The main highlight of Dhanteras are precious metals, namely Gold and Silver. The jewelry shops are decorated well in advance for attracting and welcoming customers. But the confusion which often troubles potential buyers and investors is of choosing one out of gold and silver. The yellow metal Gold Investment is more costly when compared to silver and holds more significance. But silver is in fact a practical investment option which has the potential to yield good returns. There is a significant increase in the demand and supply in the recent times owing to the astounding properties of silver like ductility, malleability and high conductivity.
Silver and Gold are amongst the most lucrative investment options for investors not only because of their lustrous beauty but numerous other factors. But is there really much difference apart from these between the two? Which one should you actually prefer for buying this Dhanteras? Today we will talk about important distinctions between the two which you must be aware of because these can actually have a huge impact on your portfolio.
So, without further ado, let us discuss about some of the important distinctive properties between both these precious metals and try to find out the perfect investment for you this Dhanteras.
Let us now discuss about all these factors in details and try to figure out the perfect investment for all your needs
The price for Silver is Highly Volatile
As we have discussed previously, the pricing for commodities work on the principles of demand and supply. The supply for silver for each year is nearly 1 billion ounces whereas the annual supply for Gold is only around 120 billion ounces. A rise in supply creates a larger market for silver, which is nearly 8 times bigger than that of Gold. But considering the pricing of silver against that of Gold, the value of annual supply for silver is much lower than that of Gold. Considering the current pricing, the value of annual supply of Gold is nearly 12 times more when compared to Silver.
The price for Silver is highly volatile when compared to Gold. It requires a lower amount of money to have a major impact on the price of Silver, more than any other asset class including Gold. It means that in case of a bear market the prices for silver will fall more than those of Gold and in case of a bull market they will rise more than that of Gold. Buying silver at the perfect price point can add an extra boost to your portfolio.
Gold is Costlier than Silver
This is a very obvious fact but is also very important. Physical silver is a hard asset and also a tangible one, which means that it is something which cannot be hacked. It also has a limited or null counterparty risk. Also, physical silver has never been defaulted on. The main advantage of silver over Gold is that you can capture all the same benefits of Gold at a relatively lower cost. Probably this is the reason, silver is referred to as the poor man’s Gold.
Also, when it comes to selling, gold can be your key for large financial needs, but silver comes to rescue for smaller ones. For example, you own a Gold bar and a silver bar of the same weight. Obviously, the value of Gold bar will be very high when compared to silver. When it comes to selling you can choose the Gold one for larger financial needs whereas you can choose the silver one for your smaller financial requirements.
Storage Costs for Silver are High
Silver may be much more affordable, but it comes with a catch, it requires a lot more storage space when compared to Gold. The reason being the lower cost. You can easily hold a Gold bar worth INR 50 lacs in one hand but to hold Silver worth the same value you will require a large box or rack. As per a recent study, it takes 128 times more storage to store silver when compared to Gold of same worth value.
Since it requires more space, the incurred costs for storage in the form of bank lockers and depositories will be higher. The difference applies to transportation as well. Transporting silver worth 50 lacs can be very expensive and cumbersome whereas Gold bar worth 50 lakh can be easily transferred in your handbag.
Gold Stockpiles are Rising whereas Silver Stockpiles are Falling
This is an important distinctive factor which may not have an immediate importance to you, but it may have huge behind the scene impact on your portfolio in most of the cases.
The governments around the world used to have huge inventories of silver, but today only India, US and Mexico have stockpiles of this metal. The main reason for reduction in silver holding is the fact that it is no longer used in making coins. However, the industrial usage of silver is very high.
Conclusion
Gold and Silver are two investment options which hold very high sentimental value especially for Indian investors. However, it is important to note that these traditional investment instruments also have various risks associated with them. If you are still confused to choose the perfect investment bet for your investments this Dhanteras, it is better to consider the advice of a certified investment advisor, who can guide you in choosing the prefect investment bet for your needs. Happy Investing!
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