Gold or silver?

Mon, 16 May Pre-Open

   Previous Close   

   09:30 am   

   11:30 am   

   01:30 pm   

   Closing   

In times of volatility like those seen nowadays, investors turn their attention to the safety havens. This safety haven has historically been gold. But in recent times, another precious metal has taken the spotlight. That precious metal is silver. Silver has witnessed an unprecedented rise in its prices. This led several to believe that this metal is the new gold.

But over the past month, silver has seen its prices fall by nearly 30% in a single month. If such a decline was seen in our stock markets, there would have been more than one investor having a panic attack. But interestingly, the silver investors are not panicking. Instead they state that this is but a momentary blip that presents an excellent investment opportunity. Especially for those who had missed out on the rally earlier.

Therefore, we ask a question. Should one still invest in silver or switch to gold?

Wall Street Journal has tried to answer this question by pointing out some basic facts about the rally seen in the two metals. We thought we would highlight some of these which can help an investor decide as to which of the two metals is worth investing in.

Silver has seen its prices increase by a whopping 80% over the past one year. This is after taking into account the recent decline in prices. At the same time, gold saw its prices increase by 23%. The slow and steady pace at which gold prices went up reinforce its status as a safety haven. Moreover, it is a thumb rule, if prices shoot up suddenly, then there would be some correction at some of time or the other. And this is exactly what seems to be happening to silver. Another indicator that supports gold's status as a safety haven is the fact that central banks accumulate gold as a reserve. No one has ever heard of them accumulating silver reserves for the rainy day.

Having established gold's status as the safe metal, one then wonders if silver is worth investing in for a long term. Well the answer to this is yes. Silver has industrial uses and as a result has seen its demand increase in recent times. With supply remaining constrained, the prices are expected to go up over the long-term. However, owing to the fact that silver is cheaper than gold, smaller investors have used this as way of investing in the precious metal markets. At the same time, silver is a comparatively smaller market. Due to a combination of these two facts, prices of silver tend to be more volatile as compared to gold. Nevertheless, both metals present an excellent opportunity particularly at times like these wherein stock markets behave like cardiac monitors.