Gold has different semantic and cultural values worldwide, and its importance in the investment market cannot be overemphasised. One thing is clear—people all over the world are in love with the yellow metal—but why? In India, gold investment represents prosperity and enhances the status of people who regularly wear gold. However, gold is probably the only ‘material’ not affected by inflation and provides a good hedge cover during peak market volatility. Alternatively, silver, too, is a good hedge against a crashing market. However, its supply, being much greater than gold, cannot surpass the importance that the latter wields in the market.

• Gold bonds like ETFs protect you against market fluctuations effectively.
• Silver ETFs have been rolled out so you can begin your investing journey without the fear of incurring significant losses.
• Silver is more affected by market volatility than gold because the former is used more extensively in industries.

The comparison between gold and silver can be tricky because both have their good and bad days. However, before making a gold investment, take a look at these factors.

Volatility

Silver is more volatile than gold for the very reason that it has a more extensive industrial use than gold. Since industries are connected to the market, they are also affected by the volatility of silver. For the same reason, silver can be seen as an excellent investment choice when things are going well. On the other hand, gold has a limited supply and is thus considered a good hedge against inflation.

Liquidity

Liquidity refers to the ability of a commodity to generate cash without dramatically increasing its market value. Both gold and silver have high liquidity because of the favour they find with investors. Nevertheless, gold has a slight edge here because it has a demand unparalleled by any other precious metal.

Demand

The demand for both these metals is high because they are excellent electric conductors. Not only does gold investment mean jewellery flaunted at weddings, but it is extensively used in thermal and electronic industries. In addition to these industries, silver is also utilised in medicine and other manufacturing industries.

Also, 60% of mined silver goes into the production industry—indicating high industrial demand—which is why market volatility can adversely affect stocks and shares connected to silver via industries.

Storage

Storage of gold and silver is a big concern for industries, apart from their price difference. Furthermore, silver needs more storage space than gold because the former is less dense, taking up more space for the same weight. Moreover, while gold can remain unchanged for years, silver is susceptible to tarnishing, thus adding to the already challenging aspect of storage. Gold investment is thus much more advantageous from the storage point of view.

Stockpiling advantage

Gold is much more expensive than silver, and about 14 grams of gold can buy 1 kg of silver. The current gold-to-silver ratio is 84.68, which is a healthy rise in value for gold in recent times, barring the pandemic years when it shot up much higher. Moreover, gold investment is safer than silver investment because the government always backs up the former in situations of crisis.

As an investor, your primary point of concern should be the viability of either metal from the growth perspective. Stocks and bonds related to either metal can be found in the portfolios of many investors, regardless of the market condition at any point in time.

Gold features in exchange-traded funds (ETFs) and are often used as a hedging mechanism. Moreover, Sovereign Gold Bonds (SGBs) are safer investment alternatives and can be pledged for collateral margin while trading, thus offering more scope for capital appreciation. As already mentioned, gold is a safe-haven asset. The falling rate of the dollar is reflected in the rising rates of gold.

Gold investments can be critical in times of a failing market. If you have investments in gold stocks via short-term ETFs, you can respond to the volatility of the market by quickly selling these stocks and minimising your losses. Later, when times are better, you can buy better stocks from the proceeds.

While gold investment seems to have a clear edge here, silver ETFs have also been rolled out. Thus, you have yet another option to invest without shelling out lakhs, and you can begin your investing journey!

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