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10/07/10 --- When people think about metals to invest in, silver and gold often come to mind first. This article takes a look at silver versus gold investment, including the history of their prices.
PRACTICAL USES
In addition to their use for investment purposes, gold and silver both have many practical applications. This helps to bolster their long-term value in comparison to things like paper money, rare 8-track tapes, or antique books.
Silver is used in jewelry, high-end eating utensils, some coin-cell batteries, and various industrial purposes. Its application in camera and x-ray film has decreased in recent years, due to rising use of digital photography and silverless films.
Gold is applied in the production of computers, special coins, and various luxury items. It is also used in plated cable connectors (for electronics) and some tooth fillings. The sale of such items may reduce as the price of gold continues to rise.
INVESTMENT COST
Purchasing an ounce of silver costs less than 1/50th of an ounce of gold, and almost anyone can afford to buy a few silver coins - such as the Mercury dime. Even a small amount of gold will involve extra costs for security precautions and insurance.
The price of silver may not appear to have changed as much as gold, but its value has actually increased about the same amount in the past twelve years, by percentage. Splitting a large investment between these two metals may help decrease the risk.
To some extent, silver and gold prices follow similar patterns. Both gold and silver skyrocketed around 1980 before falling, and both increased significantly in recent years. They are affected by various world events, inflation, investment, and supply/demand.
However, silver doesn't always go up or down in tandem with gold. In late 1997, for example, gold fell significantly while silver's price increased, due to decreased supply. It's important to remember that some events effect both metals the same way, while others do not.
POSSIBLE GAINS
One way to compare silver versus gold is to look at the net earnings produced by an investment of equal amounts in each metal, although history won't necessarily repeat itself. Perhaps someone bought two ounces of gold and 118 oz. of silver in 1998.
Both would have cost $590, for a total of $1180. Today, the gold would be worth about $2680 and the silver $2643 USD. Thus there was little difference in the gains from each investment, and the net earnings would total $4143, minus fees and other costs.
Also See...
Life Insurance: Still a Good Investment?
Is Your Gold Truly Safe?
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