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Jul 14

A Complete Guide To Investing In Gold And Silver

Reading Time: 9 mins

Gold and silver are trustworthy value stores with a long history of value retention. Gold and silver have held their value over time because of their inherent scarcity. Unlike other stores of value, precious metals are exhaustible. Therefore, precious metals are more stable stores of wealth because their value is determined intrinsically. For these reasons, even today, many
investors choose to include silver or gold in their portfolios since they help spread risk and serve
as a safe haven for investors.

Although you could invest in other precious metals like palladium and platinum, gold and silver are the most popular and lucrative choices. Nevertheless, you should note that even though both gold and silver are desirable precious metals, they each have unique features. The gold and silver markets don’t always move parallel to each other, although there are some similarities.

Moreover, much like any other investment, gold and silver have risks. It would be best if you managed these risks as an investor to avoid a total loss. Risk management may entail investing in resources like Guardian Vaults Gold & Silver Storage for protection since security is an inherent risk that comes with owning physical gold and silver.

Before investing, do some research to understand how both precious metals work and the risks associated with either. Furthermore, below is a complete guide to investing in gold and silver. Read on.

Pros and Cons Of Investing In Gold and Silver

While silver and gold share some similarities, they’re ultimately unique. Therefore, investing in both precious metals has certain advantages and disadvantages. Knowing these can help you to make a more informed investment decision. Here’s a list of some of the pros and cons of investing in silver or gold.


1. Hedge Against Inflation
One of the biggest reasons investors choose to invest in gold or silver is that they hold their value well. Inflation is a permanent feature in the contemporary economy. The problem with inflation is that it erodes personal disposable income since an equivalent wage increase doesn’t always accompany the gradual price increase. So, investors structure their portfolios to minimize the effects of inflation by investing in things like gold and silver.

In the current economic climate, where there’s generally a lot of economic and political uncertainty, it helps to hold an asset like silver or gold in your portfolio because it dilutes the risk of your entire portfolio. In inflationary times, gold and silver will not be affected as much as other assets in your portfolio. This prevents you from incurring a total loss, especially if you have a relatively risky investment portfolio. Therefore, these act as a hedge against inflation since they protect the investor from a complete loss.

2. Safe From Being Hacked Or Erased
There are now digital ways in which you could invest in precious metals. However, should you choose to invest in physical gold or silver, you’re guaranteed that no one can hack or erase your investments.

The major concern with digital investments is that cybercriminal activity is on the rise. While most exchanges are secure, the chance that cyber attackers could access that system is there. And even if an exchange doesn’t encounter a breach, your credentials could get stolen, and someone could steal or erase your digital precious metal investments. But holding physical gold or silver bullion gets rid of such risks. You won’t have to worry about someone hacking into your profile.

3. Portfolio Diversification

Investors’ portfolios contain a variety of asset classes. Every investor has a unique portfolio. However, gold or silver investments are suitable for diversification because, as previously mentioned, both are good hedges against inflation. Furthermore, they help to disperse risk across your portfolio. Your investments in gold and silver will remain valuable during a recession, even if the value of your other assets plummets. Regarding liquidity, it depends on what form you own your gold or silver. Exchange-Traded Funds (ETFs), for instance, have greater liquidity than stocks. Regardless, the spot value of these precious metals holds well over time.


1. High Investment Costs
Typically, you’ll need to set aside a substantial sum of money to invest in gold or silver. Yes, you could choose less expensive options like ETFs. However, silver and gold are often pricey. But, if you had to make a distinction, silver would be the most popular option for most people because it’s less expensive and more accessible. As a result, for individuals just getting started or with limited capital, silver may be the best alternative. But, for those who have a little more to spare, you can invest in gold since it’s pricier and more desirable.

2. Strict Storage Requirement
Owning physical gold or silver comes with the risk of theft or loss. Therefore, it becomes essential for investors in precious metals to invest in reliable storage facilities. Some people may keep their gold or silver assets in the custody of institutions like banks. However, this implies that they would incur significant storage expenses. Some people choose to keep their precious metals in their private safe. However, you still need to spend money on an expensive, secure safe. The more gold or silver you own, the more you stand to lose in the event of a robbery or if a family member or friend simply steals from you. As a result, purchasing a secure safe is crucial.

Private precious metal storage facilities like the ones provided by Guardian Vaults are the best option to keep your possessions secure. These kinds of storage typically include temperature- controlled, theft-insured facilities, giving you security in the event of theft.

3. Lack Of Liquidity

Trading physical gold or silver isn’t easy. The exception is that you might be able to quickly sell off items like gold or silver jewelry at jewelers. However, if you own bars or coins, you must first engage with dealers to receive money, which can be time-consuming. You can’t just buy food using gold bars or coins. Therefore, a significant disadvantage of investing in precious metals is a lack of liquidity. However, investing in digital assets like gold ETFs or stocks can help you avoid this.

4. No Yield
Gold or silver don’t generate healthy cash flows compared to other assets like real estate. The only way to financially benefit from possessing it is to sell or trade it for a profit. The profit margins, though, aren’t always that high. Moreover, silver and gold do not increase in value quickly, unlike other asset classes. Also, earnings can take a while to manifest. For this reason, holding onto your silver or gold for a long time is required if you want to generate good money.

Factors Influencing Gold and Silver Prices

If you’re going to invest in gold or silver, you must understand what drives or determines the market price of either commodity. Below are the main factors that drive the prices of gold and silver.

● Supply and Demand

Now, because both silver and gold are limited resources, it means that their supply is limited. However, their demand is constant. The interaction between supply and demand forces is the one that ultimately determines their price. This interaction makes both gold and silver volatile investments. However, gold is relatively less volatile than silver because it’s perceived to be of great value. So even when economic decline hits a country, you can still expect gold to outperform silver. But that’s not always the case when the economy is performing well. Silver is less expensive than gold because it’s relatively more abundant. But it also means a greater market for silver which can affect silver prices. For example, silver is a relatively versatile metal with many industrial uses than gold. So, changes in global industrial production may affect silver’s demand and price. The relative abundance of silver is also another reason it’s more volatile.

● Economic Trends

Consumer spending increases when the economy is doing well. In contrast, the converse is true when an economy is doing poorly. Therefore, consumers will spend more on luxury goods like gold and silver jewellery when the economy is expanding, employment rates are high, and disposable incomes are increasing. This means that demand for such things rises when the economy is doing well. And when demand rises, so does the price of silver and gold.

● Inflation

Inflation refers to the gradual rise in commodity prices. The rate at which inflation occurs varies across economies. But what’s true across all economies is that inflation erodes the value of money. And inflation is usually associated with poor economic activity. So, when inflation rates rise, the demand for precious metals like gold and silver will also rise. This is because precious metals are known to be good hedges against inflation. Regardless of how the economy performs, these precious metals preserve their value well.

● Strength of the US Dollar

Since the US dollar is the world’s most widely used reserve currency, it significantly impacts gold prices. Plus, because central banks also store precious metals in their vaults, fluctuations in the US dollar value may likewise affect the prices of gold and silver. The US dollar has an inverse relationship with silver and gold. This implies that the demand for and price of gold and silver will typically decline when the US dollar’s exchange rate increases. However, if the exchange rate declines, gold and silver demand rises, pushing their prices.

Ways to Invest In Gold and Silver

Traditionally, if you want to invest in precious metals, you must invest in physical form. But nowadays, investors are exposed to other alternative forms of investment. Therefore, precious metal investing has become more flexible. Here are some of the options available currently:

1. Physical Bullion or Coins

This is the traditional way for you to invest in precious metals. Back in the day, this was the only option available if you wanted to invest in gold or silver. But even now, some investors prefer to invest in physical bullion instead of digital alternatives. You can buy physical bullion as bars or coins that come in different shapes and sizes. It’s relatively easy to buy physical gold or silver bullion because you simply have to contact a local dealer and make a purchase. But what you’ll buy depends on your preferences and budget. To avoid being duped, only buy actual gold or silver from registered merchants.

2. Exchange-Traded Funds (ETFs)

This is one of the digital forms in which you can invest in either gold or silver. The benefit of ETFs is that anyone can invest in them regardless of the capital outlay. So, it’s relatively easy to invest in ETFs. Stores of physical gold and silver usually back ETFs. ETFs also closely track the spot price of silver and gold. Therefore, ETF values closely reflect actual market prices. If you want to invest in ETFs, you can buy them from an exchange, and once you own shares in an ETF, you can always trade them at a profit at a later time.

Now, because ETFs are easily tradable, it means that they’re highly liquid. Therefore, they’re a
great addition to any investor’s portfolio. They’re more liquid than gold or silver bullion.
However, the downside is that you may have to pay a management fee, and you won’t have a
claim on the fund’s physical stores of gold or silver.

3. Stocks

You can invest in gold or silver stocks like any other ordinary stock. However, with precious metal stocks, you have to buy stocks from companies that mine them. But since precious metal mining is fraught with uncertainty, it’s one of the riskier ways to invest in gold or silver since there’s no guaranteed return on your investment. But if you want to keep yourself on the safe side, try to do some research before you blindly invest in any publicly traded company. Only invest in those companies that have an outstanding track record.

However, like with ETFs, you don’t have a claim on physical gold or silver. But you benefit in the sense that if gold or silver prices increase, the value of your stock increases too. Plus, if the company you invest in makes profits that year, you, as the shareholder, will get a chunk of those profits as dividends. So, stocks can be a fantastic way of investing in gold or silver.

4. Futures

Futures contracts are exchange-traded agreements wherein both parties acknowledge that the buyer will purchase the gold or silver at a predetermined price at a later date. Futures provide the advantage of flexibility because you’re not required to pay the entire contract amount up front. Depending on whether you think silver or gold prices will go up or down in the future, you can
take long or short positions on contracts.


Investing in precious metals like gold and silver is wise because they hold their value well. Precious metal investing comes with a lot of benefits. The most notable one is that of effectively diversifying your portfolio. But it also has its drawbacks. Therefore, it would be best that you do some research of your own before investing in gold or silver to understand the ins and outs of investing. Furthermore, since gold and silver have unique characteristics, you must decide which investment suits you best based on your preferences and budget. As a result, you may need to consult a financial expert before making an investment decision.

And while we’re at it…. are you keen to learn more about investing? If so, why not sign up to our fortnightly MoneyMagpie Investing Newsletter? It’s free and you can unsubscribe at any time.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. 


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