Learn Why Silver Is Cheaper Than Gold

Considering that gold and silver are the two most popular precious metals when it comes to investment, the huge difference in prices is quite surprising. One would expect silver to be a lot closer to gold in terms of price, but that is not the case.

However, does the relatively low price of silver make it a bad investment choice? The precious metals market seems to think otherwise. Silver bullion remains one of the most reliable options for investors looking to diversify some of the money locked in their retirement accounts into a precious metal IRA.

Compared to the instability of any Fiat currency these days, silver is still the preferred option for securing a large amount of money over a long period. 

If you are considering silver as an investment option, this article has some useful information that will help you to make a more informed decision. Read on to find out more about silver prices and why they are much lower than gold on the world market.

The History and Uses of Silver

According to archaeological research, there is evidence of silver mining activities by early Turkish and Greek civilizations that dates back to 3000 BC. Ever since then, silver has been mined worldwide and has found use in many industrial, medical, financial, and technological sectors.

One of the advantages that silver has over other precious metals is that it is not only found throughout the world but is also a major component of most naturally occurring minerals, such as tetrahedrite and argentite. This means acquiring silver is much easier than, for example, gold.

Historically, silver coins have been used as regular currency by many ancient civilizations. 

Most countries still mint silver coins to this day. Although no longer used to trade, these coins, such as the American Eagle Silver coin or the Canadian Maple Leaf Silver coin, are still highly sought-after.

Silver was also very important in the advancement of photography as we know it today. This is because silver nitrate was one of the most important chemicals used in the development of photos due to its extreme sensitivity to light.

In finance, silver coins, bars, and bullion are used as a hedge against inflation by shrewd investors looking to diversify their investments. Banks and governments are always on the lookout for affordable sources of silver to help boost their stockpiles as a way of strengthening their currencies.

Silver has also found many uses in medicine and technology, through the advancement of nanotechnology. Silver particles have a lot of desirable antibacterial and electrical conductivity attributes that doctors and scientists have regularly exploited.

Some of the Important Facts About Silver

Here is a brief summary of some of the facts about silver that you may find interesting:

  • Element symbol and atomic number – Ag 47
  • It is not ionic but has covalent bonds and a radius of 144 pm
  • Density – 10.49 g/cm3
  • Melting and boiling point – 961.78 °C (1,861.4 °F) and 2,162 °C (4,014 °F)
  • Spot price – between $18 and $19 per ounce

Five Reasons Why Silver Is so Cheap

The fact is that silver is not necessarily cheap, because all precious metals cost quite a lot of money to purchase. However, silver only seems cheap when it is compared to the price of gold, which is currently trading at more than $1,652, compared to around $18 for silver.

When faced with such a huge difference in market value, silver does certainly seem to be the more affordable option of the two. 

However, considering how both metals have been historically important in coinage, and have a lot of uses in technology, why is there such a big gap in their valuations? The answer to this question can be summed up for the following reasons:

1. Lower Demand

As important as silver is today, its demand pales when compared to gold. It seems the only time that silver is of equal importance to gold is in the medical field, where silver nanoparticles and surgical instruments are very important to doctors. 

Everywhere else, gold is the preferred option. Gold jewelry is a lot more expensive than silver, yet it sells in much higher quantities. When faced with the option between stockpiling silver or gold, most governments would readily choose the latter.

Even individuals looking to open self-directed IRAs would opt for gold unless their budget does not allow it.

All these factors combine to increase the demand for gold until it surpasses that of silver by a very larger margin.

2. The Supply Seems Endless

Rarity plays an important part in determining the value of precious metals. The scarcer the metal, the higher the spot price will be. It is for this reason that the abundance of silver deposits around the world plays against it. 

The only way that the price of gold would drop to anywhere close to that of silver is if there was a huge discovery of gold reserves somewhere. However, that is unlikely to happen any time soon.

3. Aesthetics and Status

There is no denying that when it comes to beauty and aesthetics, silver is simply no match for gold. 

However, this is purely objective and a lot of people actually prefer silver jewelry to gold. Fashion trends also play a key role in this and as the world continues to move away from bright colors to the more binary tones of black and white, the use of silver in jewelry should rise.

Matching the demand for gold will be difficult though, because in many cultures gold is a status symbol. Consider even the awards given for various achievements in sports, art, music, etc. Gold is always the first prize and silver second.

4. Storage Requirements

When it comes to storage, you will need a lot more space for silver than you would need for gold. Furthermore, when you consider that one gold bar has the same value as roughly 90 bars of silver bullion of the same purity and size, you will get a good idea of what we mean by storage requirements. 

It is simply easier to stockpile gold than silver. When investors consider the storage fees that they will be charged by IRA custodians, the storage requirement for silver becomes a big disadvantage.

5. The Mining Process

One of the factors that affect both the value and the availability of precious metals in the mining process. As it stands, with the current technology used in the mining industry, it is far much easier to mine for silver than it is for gold.

This means getting gold from the ground costs a lot more and is a much slower process, which only serves to increase its value when compared to silver.

  • How Silver Is Mined

Depending on how close to the ground the deposits are, silver can be mined using either open-pit or underground mining methods. 

After the silver ore has been removed from the ground, the silver is then extracted through the cupellation process, which involves heating it on a bed of ash until it melts, allowing the silver to be extracted. 

Things To Consider Before Investing in Silver

There is no doubt about it, despite not being as valuable as gold, silver is still a very good investment option. While at times the spot price of silver, gold and other similar items does fall, it has historically remained stable.

However, customers who wish to purchase silver for investment purposes but do not have enough experience with something like this need to consider the following:

  • Silver prices do fluctuate at times, meaning you have to make sure you look for the lowest dollar price before placing your order to protect yourself in cases where the price drops suddenly.
  • Think about how you are going to store it. Not only is it unsafe to store a large amount of silver in your home, but the IRS also requires all metals funded by a self-directed IRA to be stored at an approved site.
  • Which type of silver will you want to buy, be it coins, bars, or bullion? In either case, the IRS demands purity of not less than 99.9% for all silver intended for use as part of a precious metals IRA.
  • How much are you willing to spend on buying silver products? Most experts suggest diversifying not more than 10% of your individual retirement account towards the purchasing of precious metals.

Conclusion

With the many applications and desirable properties that silver has, it will continue to be one of the most important commodities in the global economy. If you are looking for a worthy investment alternative to gold coins and bars, silver is a good option despite the big price difference between the two.

Frequently Asked Questions

What Is Better To Buy, Silver or Gold?

Gold is a lot more valuable and is easier to store and liquidate compared to silver. However, if your budget does not allow you to buy gold, then silver is a great choice. It is the better option for investors who have limited funds.

What Is the Most Expensive Metal?

Among the four major precious metals preferred by investors, palladium is the most expensive because of its extreme rarity. The other three metals, in descending order, are platinum, gold, and silver.

Is Silver a Good Investment in 2022?

Yes, silver is a great option for investment in 2022 because it offers very good returns on investment compared to many other investment choices. It also has significant industrial and medical applications, which means in a strong economy it will always be in demand.

Will Silver Ever Surpass Gold?

The one thing that silver has working against it is that it is easy to mine and is found in many regions of the world. It is for this reason that it is unlikely to ever surpass gold in terms of demand or value.

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Peter Grantham

Peter has been an avid investor in for all his life. Over that time he has accumulated a wealth of knowledge and experience including stocks, bonds, real estate, retirement, precious metals, cryptocurrencies and business investments. You can get in touch at my email: info@mygoldsilverbitcoin.com As the owner of this site "My Gold Silver Bitcoin", he aims to bring his knowledge and experience to new investors and seasoned veterans. My mailing address is: 41847 Moen Grove, Greenton, Arkansas, 80976

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