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Gold is a popular investment these days. Since the beginning of 2024, its price climbed steadily, reaching a record over $2,600 per ounce in September. Investors are flocking to gold to protect against inflation and capitalize on its growing value. But gold isn’t the only precious metal making waves.
Silver has also seen impressive gains, with prices recently reaching $32 per ounce. With both metals performing well, many investors are wondering: is gold or silver the better choice for my portfolio?
We spoke with three financial professionals to explore how gold and silver compare in different economic scenarios. Their information below can help you decide whether you should invest in gold, silver, or both.
Learn more about the benefits of investing in gold here.
Gold or silver: which is the best choice for your wallet?
Experts agree that gold and silver have unique strengths in wallets.
“Gold is the clear leader when it comes to stability. It has a proven track record of maintaining value, especially during times of economic uncertainty,” says Alex Ebkarian, COO and co-founder of precious metals trader Allegiance Gold.
Silver, although more volatile, brings its advantages.
“It’s a more affordable product… [and is classified as] a precious And industrial metal,” says Brandon Thor, CEO of Thor Metals Group.
This dual nature can lead to price fluctuations based on industrial demand, offering the potential for higher returns but with increased risk. This volatility can be a boon for investors who can tolerate more risk in exchange for potentially higher rewards.
Before incorporating these metals into your investment strategy, it is helpful to understand how they perform during recessions, high inflation, and economic growth.
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In recession
In a difficult economy, gold often takes the lead – living up to its reputation as a refuge. Ebkarian cites the 2008 financial crisis as a prime example.
“Gold jumped more than 130 percent, from about $800 an ounce to $1,900 an ounce in 2011,” Ebkarian says.
Investors have flocked there seeking stability in times of uncertainty.
Silver also performs well in recessions, but it’s a wilder ride. He notes that silver rose from around $10 an ounce to nearly $50 an ounce during the same period, a whopping 400% increase.
But these sudden movements have a catch.
“In a pronounced economic crisis, silver’s exposure to potentially declining industrial production could limit its upside potential,” Thor warns. This is because silver has industrial uses that gold does not have, making its price more sensitive to overall economic health.
In times of high inflation
When prices begin to rise across the economy, gold and silver often become go-to alternative assets for investors.
Gold, in particular, has been a effective hedge against inflation. To illustrate this, Ebkarian highlights gold’s performance during the 2020 pandemic.
“As inflation fears intensified due to monetary stimulus, gold hit a record high above $2,000 an ounce, up 25% that year,” explains Ebkarian.
This underlines the role of gold as a safeguard against currency devaluation.
Money also intensifies during inflationary periods, but with more dramatic fluctuations. He notes that silver has risen from $18 per ounce at the start of 2020 to over $28 per ounce, an increase of 55%. Silver investors could see higher potential gains during times of high inflation, but should prepare for a bumpier ride.
Amid economic growth
In times of economic expansion, money often takes center stage.
“[This is because of] its industrial applications in electronics, solar panels and other growing sectors,” says Ebkarian. Increased industrial demand can lead to significant gains for silver as the economy recovers and grows.
Gold, on the other hand, “could underperform as investors’ attention shifts to higher-yielding assets.” [such as] actions,” he notes.
Which precious metal to invest in?
“Which [you should invest in] depends on [your] “Silver is a higher beta investment than gold, but it historically generates higher annual returns. Gold is often a better hedge against inflation.”
Ebkarian recommends investing in both (regardless of market conditions) for a diversified approach. Gold is a wise choice if you are looking to grow and preserve your wealth. But “cash can be a wise addition if you want to complement that security with industrial growth potential,” he says.
The essentials
Silver and gold can be valuable in your investment strategy. But if you’ve never invested in precious metals, consider speaking with a financial advisor to determine the right allocation for your portfolio. Start small – perhaps allocating a modest percentage of your investments to gold and silver – and expand over time.
