Investing Investing Basics

Gold, Go Home: 14 Convincing Reasons To Invest in Silver Instead

Why are seasoned investors bidding farewell to gold and embracing silver?

By Heather Bien

Edited by Eric McWhinnie

Updated Dec. 17, 2024

Historically, gold has been seen as a more valuable investment than silver, with 26% of Americans saying gold is the strongest investment.

But that doesn’t mean silver isn’t without its benefits. While it can be seen as volatile, particularly over a short period, silver is often considered an inflation-proof option for investors looking to boost their bank accounts.

To get to the facts on silver and whether it’s a wise investment, here are 14 considerations before you add this shiny commodity to your portfolio.

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Silver is more affordable than gold

Silver is significantly more affordable than gold at $31 per ounce as opposed to $2,000 per ounce, making it appealing to investors looking to enter the precious metals market at a lower price point. Just think of how much a gold bar is worth.

You’ll still get some of the benefits of gold if you’re buying a hard asset that you can hold, but you won’t pay thousands of dollars for a tiny physical amount the way you would with gold.

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Silver can be easier to sell

Due to its lower cost, silver can be easier to offload quickly in small sums, which is a plus for those needing to free up liquid assets quickly, particularly for everyday spending.

Given its low price, you may not sell silver for a down payment on a house, but it could be helpful to sell for day-to-day purchases.

Silver makes a wonderful gift

Want to start a tradition of gifting an investment to a younger relative? Silver is a great place to begin since it’s more affordable and can easily be given in amounts you can hold in your hand. Look at coins or bullion for a physical investment that can be gifted.

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You have options to invest in silver

While coins, jewelry, or bullion might be the first items that come to mind when you think of silver, there are several options for investing in silver.

There are futures, ETFs that own silver or silver miners, and silver mining stocks. Each of these comes with risks beyond silver’s volatility, so do thorough research on the securities you’re considering.

Silver has a strong industrial demand

Throughout your day, you probably use multiple items made with silver and don’t even realize it. And we don’t just mean jewelry. Silver is known for its industrial demand, from batteries and solar panels to auto parts.

In fact, 56% of silver’s total supply goes to industrial uses, which means during booming economic times when industrial demand and manufacturing are high, silver prices may get a boost.

Lower premiums on silver

When buying silver bullion, you won’t pay a raw price or what dealers call a spot price. Instead, you’ll pay a premium, which is the price you pay over the spot price. However, on silver, these premiums tend to be lower than gold, creating a lower entry barrier.

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Silver has a smaller market share than gold

While the total amount of new silver each year is close to one billion ounces — compared to gold which is a mere 120 million ounces — its value is so much less that its market share is dwarfed by gold.

Gold’s overall market value is 12 times bigger than silver. This smaller value helps lead to its volatility since market swings are felt more significantly.

The use of silver at home is rebounding

Demand for the silver you use on your table is rebounding after it took a dip throughout the pandemic. Silver bowls, silverware, vases, and more are being used again for entertaining, which could help drive silver prices up.

Silver doesn’t follow the stock market

Silver is often seen as a hedge against inflation and the stock market because it tends to follow its own rhythm and has historically performed well over long periods.

It can be a smart way to diversify a portfolio because it may be up when stocks are down and can be more liquid than other options.

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You can buy junk coins to invest

A coin collector will probably turn down the chance to buy dimes, quarters, and half dollars issued before 1965. They have no collectible value on the coin market.

However, they do contain valuable amounts of silver. Next time you get change, you might want to look at the dates on your coins.

Silver investments should be kept to no more than 5%

While silver can diversify a portfolio because it differs from stocks and other investments, it shouldn’t be used to heavily weigh your portfolio toward precious metals.

It’s a volatile choice, and silver shouldn't make up more than 5% of your portfolio if you're seeking a diversified portfolio.

Silver takes up room

Because silver’s value is low compared to gold, you’ll need significant storage space to accommodate all the silver needed to amass tens or hundreds of thousands of dollars of value. A safe deposit will hold about $2,300 of silver currently.

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Silver’s outlook is shiny

Silver’s outlook is shiny for 2024, particularly when you look at the gold-silver ratio. That’s determined by how much silver you need to purchase one ounce of gold.

When the gold-silver ratio exceeds 80, it means that silver is historically undervalued and could rise. Right now, it is 86.

Silver stockpiles are small

Silver prices could skyrocket if there were a run on silver thanks to industrial demand or supply chain issues. This is partly because the government no longer stockpiles silver now that it’s not used in coins.

Bottom line

If you decide to invest in silver, remember it’s a commodity. It won't pay interest or dividends or create income before selling it. Plus, you’re relying on someone else's demand to buy it when you are ready to sell.

It’s also extraordinarily volatile even if you do find a buyer. In 2011, silver reached nearly $50 per ounce — and it hasn't reached that price since. When building wealth, a diversified investment portfolio is typically the smartest strategy for most investors.

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