Gold and silver investments: Which is better?

With recent bank closures, high inflation and an overall worrisome economic climate, many investors looking closer at their investments . Some are considering moving into safer assets that can hold their value and provide long-term financial protection.

For many, this means moving into precious metals like gold and silver. Both can be smart moves for investors. Gold has long been considered a good hedge against inflation, while silver can allow you to buy more due to its lower cost. 

There are other ways these precious metals diverge. If you're unsure which one you should invest in, here's what you need to know.

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When to invest in gold 

There are many scenarios in which you may want to buy gold. For one, it's a safe haven investment that holds its long-term value well. This makes it a wise place to put your money during times of volatility or high inflation.

"Right now, we are looking at the possible onset of a recession," says Joseph Cavatoni, market strategist and principal chief executive officer at World Gold Council. "If you look at gold performance in similar situations historically, it's the kind of asset that will perform well. In five out of seven recessions, it has done so."

Investors focused on long-term protection should consider gold. That's because it has an extrinsic value and is also in short supply. (Just keep in mind, your returns will likely be limited — particularly compared to riskier investments like stocks). 

Finally, gold can be wise if you need easy liquidity. There is always interest in gold, and its scarcity has kept it in high demand for centuries.

"Gold has substantially more liquidity than silver," says Drew Rathgeber, president and owner of Pro Gold Trader.

When to invest in silver

Silver might be a better option if you're on a tight budget. As of early April 2023, the price of gold was over $2,000 an ounce. Silver was only about $25 per ounce.

You might also buy silver if you're looking for a higher-risk, potentially higher-reward investment or if you're on a short time horizon.

In the last year, silver has fluctuated between $26.06 to just $17.83 and then back up again, notching a 31.5% drop from peak to trough. While this means a higher chance of loss, it can also mean bigger gains if you're willing to watch and sell at the right time. 

"Silver prices have historically been more volatile than gold, so for investors who are bullish on precious metals prices in the near-term and are willing to assume silver's higher price volatility, it could be a way for investors to gain exposure and further diversify," says Frank Trotter, president at Battle Bank. "If inflation continues at the levels we are currently seeing, then both gold and silver should benefit — gold somewhat more slowly with silver possibly running ahead for the next year or two."

The bottom line

If you have the funds, consider investing in both gold and silver. It help you further diversify your portfolio and provide potential upsides in both the short and long term.

As Trotter puts it, "Holding a proportion of gold and silver in any diversified portfolio has long been recommended by many analysts and asset managers."

Be sure to weigh other investment classes too. Silver and gold are relatively low-return assets, so if you want big profits, you may need to look elsewhere — or at least expose yourself to additional asset classes.

And if you're not sure what investments are right for your finances and goals or you just need help with your silver or gold purchase, speak to an investment professional. They can point you in the right direction.