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Why it's better to invest in Silver than in Gold?

Apr 04 2016
Gold or silver - a common question among investors in precious metals. Gold was investors first choice in the last two decades for two main reasons – as a tool of protection against financial and political crises, and as a protection against inflation.
But time has changed. The yellow metal provides no more protection in difficult times, and the world is facing a new reality, threatened by deflation.
So why is silver a better investment alternative?
Silver has lost a great part of its value in the last few years, being one of the worst performing assets in 2014.
Compared to gold, silver is trading at ratio of 80, quite close to its highest level in six and a half years.
As we may see at the table below, the ratio increased twice to its extreme of 85 (in the last fifteen years), and then fell sharply, losing almost half of its value.
In 1991, when silver reached its bottom, the ratio reached its historic peak of 100.
In 2007, the average ratio was 51. In April 2011 it decreased to about 30 and then started to increase for reaching its present values of about 80.
The long-term ratio between the two metals is 15. So silver looks quite undervalued compared to gold at the moment.
And here are some interesting facts about the ratio:
The ratio was at 12.5 – 323 years BC.
During the Roman Empire, it was 12.
In 1980, when was the last major cycle of appreciation of gold and silver, this ratio was only 17.
And some other interesting facts about silver (from Wikipedia):
 - Since 2000 the price of the silver has increased by 9.8% annually, compared to 10 percent per year for gold.
 - In its best year – 2010, silver price rose 77%. In 2013, however, the price lost more than one third of its value (35.9 percent).
 - Words used for silver and money are the same at least in 14 different languages.
 - In ancient Egypt silver was even more valuable than gold.
 - Silver has the highest electrical conductivity among metals.
 - One gram of silver can be pressed into a sheet 150 times thinner than paper.
 - Before 1797 the British penny has been made of silver.
Except as a tool of protection against inflation and political turmoil Silver is also widely used in industry (a fact that makes the silver price much more sensitive to the state of the world economy).
Unlike gold inventories, those of silver decline. It may contribute to shortages in the future. Currently gold is about five times more common than silver based on global stocks of both metals.
Perhaps the most serious flaw in the silver price is the ability to manipulate. Market players have long suspected that some of the big players have a significant impact over the price of the metal. 
Volatility in the price of silver is another drawback, particularly for more conservative investors. Beside disadvantage however, volatility may be also an advantage. For example, to reach its peak from 2011, the price of silver should increase almost 3 times. To do the same, gold has to rise “only” 75%.
TAGS: invest  investment  silver  gold 

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