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Silver and gold have long reigned over the precious metals industry, and the popularity of each depends on a lot more than whether you like sun-kissed luster or silver brilliance.

Worldwide reserves of silver amount to 560,000 metric tons, with the US claiming 25,000 tons of it. Global silver supply is at 1,004.3m ounces, and it is currently selling at a price of $15.65 per ounce.

Global production of gold aggregates to 3,260 metric tons, which is considerably lower than silver. The US accounts for 210 metric tons of this. The value of gold is currently pegged at $8,950m.

Gold has remained one of the most coveted precious metals; a large fraction of that reputation is attributed to its rarity. This blog explains all the other reasons why silver is valued relatively lower than it.

Intrinsic Value

Compared to other high-priced commodities, precious metals also have a very high intrinsic value. In economic terms, this means that the price of the metal in USD only offers a relative value, i.e., how many dollars can buy a set amount of gold.

Apart from this, the metal is also popular because of its aesthetic and decorative uses in jewelry pieces and other valuables. The reason silver is priced lower is because it offers lesser intrinsic value compared to gold.

Rarity

Rarity is a crucial factor that in determining the prices of silver and gold. Imbalances in gold supply and demand push its price higher. In the case of silver, the metal ores are not as rare.

Because silver is so plentiful, the abundance of supply pulls the price down. It also depends on the ease of extraction and mining hazards.

Since much of gold and silver exist in the form of alloys, extracting pure metal becomes a difficult process. This is why both are valued high.

Demand-Driven Factors

The demand for each metal also affects the prices that are set for each in the market. Apart from investments in precious metals, gold and silver are used for industrial purposes.  

Be it for jewelry or precious wares, there’s a high demand for these metals—even higher for gold. Because the demand for gold is more inelastic than for silver, dealers can charge higher prices without losing potential customers.

Store of Value

Because the demand for gold is considered unfaltering, people deem it a safe store of value. Buying gold (or silver) protect money against inflation.

This is another reason why the demand for gold, as compared to silver, is so high. Since gold offers a better hedge against economic instability, it’s also priced higher than silver.

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