Why is Silver Cheaper Than Gold
In the past, precious metals were used as the currency driving the global economy, with gold, silver, copper, and bronze coins being used as early as Babylon of 2000 B.C. Emperors engraved their likenesses onto different metals to show their wealth and power. Since the introduction of paper money, precious metals have no longer been a direct currency. Instead, they are held as valuable financial assets.
Both gold and silver are popular precious metals amongst investment dealers. For long-time investors, they are a great asset option to diversify an investment portfolio to stay secure during accelerating inflation and economic uncertainty. Gold is considered the most valuable metal, followed by silver.
A look into today’s spot values for gold and silver tells us gold is approximately 80 times more expensive than silver. Why are these two metals priced so differently? This blog will discuss why gold is much more expensive than silver, but before that, we will look into how these precious metals are priced.
How Is Gold Priced?
The price of gold is fixed at London Bullion Market Association every day, with participants like Barclays, Standard Chartered, Goldman Sachs, JPMorgan Chase, and Morgan Stanley fixing the price. The consumers, mainly industry, jewelers, and precious metals investment companies, either buy directly from bullion traders or over-the-counter (OTC) markets, which do not diverge too much from the bullion rates. Bullion trading serves as the source of information for demands, determining the spot pricing for gold.
There are also future contracts stored on an exchange that represents future demand. This also impacts the pricing for gold. The bullion considers the present and future supply and demand along with investor sentiment about profits to determine gold prices. A lack of certainty about future demand will likely reduce the price as investors consider that risky investment.
How Is Silver Priced?
Like gold, silver is priced through buyer sentiments and demand and supply.
Commodities like gold, silver, crude oil, wheat, etc., are all secured in future contracts that forecast their future demand. The spot price fixed for silver is the theoretical price of an ounce that is available immediately. The price at a precious metal exchange trader for bars or other silver products will differ from that price globally.
While there are many exchange centers globally ̶ London, China, Zurich ̶ the biggest impact on silver’s spot pricing is by the COMEX division of the New York Mercantile Exchange as a significant number of future contracts are traded here. Geopolitical events, currency fluctuations, bank interest rates, and trade deficits can all affect the prices of silver.
Gold Vs. Silver: Chemical Properties
While buying gold and silver coins are both considered good investments, the two have slightly different properties, which set a precedent for buyer sentiment that resulted in gold costing more than silver. Some of these properties will be discussed here.
Both gold and silver are metals that can conduct heat and electricity. However, gold retains its luster longer than silver, i.e., its conducting function last longer than silver’s because it does not tarnish easily. Since gold is one of the most unreactive metals known, it can last years without reacting with air or water to retain its shine.
Gold is also very malleable, i.e., it can bend easily into different shapes and hence, an ideal candidate for jewelers who use beautiful and long-lasting substances for their products.
Most importantly, gold is much rarer than silver. Historically existing as a status symbol for the rich ad powerful, gold was hard to mine with pre-industry methods. Technological advancements may have made mining more efficient, but the demand for the warm-colored metal remains high. This high demand, coupled with limited reserves, gives gold an edge over silver and drives the difference in their pricing.
Which Is A Better Investment?
Despite differences in prices, both metals are highly valuable assets for investors who seek to diversify their portfolios.
Gold has been used as a hedge against inflation previously because its price rises with inflation. Its value also fluctuates less than silver. However, the comparatively affordable silver makes it a less risky investment alternative.
For a truly diverse portfolio, secure your retirement with gold and silver holistically. If you are looking to invest in gold and silver coins, we are a precious metal investment dealer you can buy gold and silver coins from. Our company also facilitates you in securing insured gold and silver IRA accounts. Simply give us a call to get started.