Gold has been a hot investment lately. From early 2024, price has climbed steadily, hit a a record of more than $2,600 an ounce in September. Investors are flocking to gold for inflation protection and to capitalize the increase in value. But gold isn’t the only precious metal making waves.
Silver has also seen impressive gains, with prices reaching $32 per ounce recently. With both metals in good hands, many investors ask: Is gold or silver a better choice for my portfolio?
We spoke to three financial professionals to explore how gold and silver compare in various economic scenarios. The following insights can help you decide whether you should invest in gold, silver or both.
Learn more about the benefits of gold investment here.
Gold vs. silver: Which is better for your portfolio?
Experts agree that gold and silver have unique strengths in the portfolio.
“Gold is a clear leader when it comes to stability. It offers a proven track record of maintaining value, especially in times of economic uncertainty,” says Alex Ebkarian, COO and co-founder of precious metals dealer Kesetiaan Gold.
Silver, while more volatile, brings an advantage.
“It is a more affordable commodity … (and is classified as) a valuable one and industrial metals,” explained Brandon Thor, CEO of Thor Metals Group.
The dual nature can lead to price changes based on industry demand, offering higher return potential but with increased risk. This volatility can be beneficial for investors who can tolerate more risk in exchange for higher rewards.
Before incorporating these metals into your investment strategy, you need to understand how they perform during recessions, high inflation and periods of economic growth.
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In the recession
In a rough economy, gold often takes the lead – lives up to its reputation as a shelter. Ebkarian cites the 2008 financial crisis as a prime example.
“Gold rose more than 130%, from about $800 an ounce to $1,900 an ounce in 2011,” Ebkarian said.
Investors flock to stability during uncertain times.
Silver also performs well in recessions, but it’s a wilder ride. He notes that silver rose from $10 an ounce to nearly $50 an ounce in the same period — a 400% increase.
But this clear move comes with a catch.
“In a clear economic downturn, silver’s exposure to industrial output that could increase could limit upside,” Thor said. This is because silver has industrial uses that gold does not, making its price more sensitive to the overall health of the economy.
During periods of high inflation
When prices throughout the economy begin to rise, gold and silver often become alternative assets for investors.
Gold, in particular, has become an effective inflation hedge. To illustrate this, Ebkarian points to gold’s performance during the 2020 pandemic.
“As inflationary fears rose due to monetary stimulus, gold hit an all-time high above $2,000 an ounce, up 25% on the year,” Ebkarian said.
This underscores the role of gold is protection against currency devaluation.
Silver also rises during periods of inflation but with more dramatic changes. He noted that silver rose from $18 an ounce in early 2020 to more than $28 an ounce — a 55% increase. Silver investors may see higher potential gains in times of high inflation but should be prepared for a bigger ride.
In the midst of economic growth
During periods of economic expansion, silver is often in the spotlight.
“(This is due to) industrial applications in electronics, solar panels and other growth sectors,” Ebkarian said. Increased industrial demand could lead to silver gains as the economy recovers and grows.
Gold, on the other hand, “may underperform as investors’ attention shifts to higher-value assets (such as) stocks,” he said.
What precious metals should you invest in?
“That (you should invest) depends on (your) goals,” said Brett Elliott, director of marketing at the American Precious Metals Exchange (APMEX). “Silver is a higher beta investment than gold but has historically higher annual returns. Gold is often a superior inflation hedge.”
Ebkarian recommends investing in both (regardless of market conditions) for a multiple approaches. Gold is a wise primary choice if you want to grow and maintain your wealth. But “silver can be a smart addition if you want to complement that security with potential for industry growth,” he said.
Bottom line
Both silver and gold can be valuable in your investment strategy. But if you haven’t invested in precious metals yet, consider talking to a financial advisor to determine the right mix for your portfolio. Start small – perhaps allocating a small percentage of your investment to gold and silver – and build over time.