Why buy gold and silver as an investment? Many investors choose gold and silver as investment assets because both are precious metals with a value that tends to rise.
In the world Olympic sports competition, Gold and silver and also bronze, are the three types of precious metal that serve as awards for athletes’ victory.
When the global crisis occurred a few years ago, where many companies went out of business.
Employees were affected by the reduction in labor, but the value of gold still shines and not affected by inflation.
Even some gold traders have gotten high profits when the price of gold jumped dramatically.
This article will discuss some of the reasons Why buy gold and silver as an investment?
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- 1 The large industrial market for gold and silver
- 2 Gold and silver ratio
- 3 Gold vs silver difference matter most for investor
- 4 How to invest gold and silver?
- 5 Is Gold a good investment in 2020?
- 6 Is Silver a good investment in 2020?
- 7 FAQ
- 8 Final thought
The large industrial market for gold and silver
Gold and silver are now available on the forex and CFD trading platforms.
Many brokers support these two assets in pairs, where Gold in the symbol is XAUUSD. And Silver with the symbol XAGUSD.
TenkoFX broker also provides these metal instruments. You can buy and sell underlying gold and silver assets as long as the market is open.
Gold industry demand
In the industrial world, gold is widely used for various purposes, but the most demand is for jewelry. For some people, they believe that gold is a luxury item and has valuable jewelry, will elevate one’s level to others.
The use of gold is not only in the industrial world, but also gold is an asset that is easily exchanged for money, so it is worth money. Gold in certain religions is a symbol of purity, like a Buddha statue made of gold.
While in the medical world, some people use gold teeth to replace toothless teeth, and some experts make cosmetics with the gold-based components. They believe that gold contains collagen which can reduce wrinkles.
The demand for gold for the industrial world is also a lot, so the price of gold could arise if demand increases.
The function of gold in the industrial world including.
- In the world of electronics, gold is one of the conductors in making electronic components, because it does not rust make it durable.
- Reflective Radiation of Sunlight in Glass, Gold can also be used in the manufacture of special glass, ranging from thick glass in high rise buildings to protect from a reflection of solar radiation.
- Building Coatings, The use of gold as a coating for buildings has been popular for a long time, and the evidence can be seen from various historic buildings with ornaments or layers of gold.
Gold as safe haven
Unstable world financial conditions cause fears of increasing risks if holding currencies. It has been tested by time and time that gold can withstand the risk of a currency decline.
Large countries such as China from their investments in the USD. They mostly to buy gold, because of fears of a weakening of the USD under certain conditions.
Most central banks have gold as a country’s foreign exchange reserves. And to this day gold is still a valuable asset being sought by investors.
Silver industry demand
Like gold, silver is the second precious metal to be an investment asset. The value of silver which also tends to increase makes this metal an alternative asset after Gold for future investment.
According to Wikipedia, there are many industries that need silver as a material for making products.
In the air conditioning, water purification, dentistry, photography and electronics, glass-coated industries, and other industries.
In solar energy, silver is used to manufacture solar panels, which are the chosen reflectors. Scientists have conducted research that making solar panels using silver.
It makes the cost and weight of solar panels lighter, and relatively easy to install. Silver can also be used as air conditioning, where scientists have found a mirror-like layer.
Where the initial layer made of silver can be air-conditioned due to the nature of the sun’s reflector on silver.
For water purification, silver serves as a deterrent to bacteria and algae growing in filters, in hospitals, spas, swimming pools, many of which use silver in their sanitary channels. In the medical field, using silver for dental fillings.
To make these dental fillings with a mixture of silver powder and other metals such as lead and gold mixed with mercury to make hard-paste that can be adapted to the shape of the cavity.
This mixture will start to harden in a matter of minutes and be hard permanently within a few hours. In the electronics industry the role of silver functions as a conductor.
And to make PCB boards, cables and so on, some people believe that using silver make hi-fi quality is better. There are still many other industries that utilize the function of silver.
Gold and silver ratio
Many traders look at the value of gold relative to the value of silver to find clues about the direction of the price of this metal. Dividing the current price of gold with the current price of silver will form a current ratio.
Another way to think about this relationship is to ask, at current prices how many ounces of silver does it take to buy an ounce of gold? Over the past four decades, the silver-gold ratio has traded as high as 93: 1 in 1990 and as low as 15 5: 1 in 1979. The median level is 55: 1.
Although there have been periods in which the ratio has been extended it tends to return to the median level from time to time. One can interpret whether silver and gold are cheap or expensive by using this relationship.
When the ratio is above 55: 1 silver tends to be cheap when compared to the price of gold. If the ratio is below 55: 1 gold tends to be cheaper than the price of silver.
Gold vs silver difference matter most for investor
Most investors will pay attention to how gold vs. silver differs for investment purposes, even though both are precious metals that can become investment assets.
The following is a summary of the difference between gold vs. silver which is a matter for investors.
Silver price more volatile than gold
According to gold silver dot com, the total annual silver supply is around one billion ounces, while the annual gold supply reaches 120 million ounces.
Even though the total silver supply is more than the gold supply, the opposite market capitalization is true.
Silver prices are cheaper, currently, the price of silver is at the level of $ 17.xx while the price of gold is around $ 1638 per troy ounce.
Multiple price difference causes greater market capitalization of gold than silver.
Small market capitalization is the reason why silver prices are more volatile than gold. With low prices, making price changes easier when large transaction volumes occur.
That is why in the daily movement of silver up or down faster than gold. For traders who prefer high volatility, silver is a better instrument option than gold.
But this can also cause panic because once a mistake in determining trends and entries, the floating loss will quickly reduce equity.
Silver prices are more affordable
Cheaper and more affordable silver prices make one of the reasons why some investors choose silver behind gold. With a similar character as gold and silver is an asset of choice for investors.
If we buy physical silver, we will get a purchase certificate, and one day you can sell it again if you need cash. But if we have more money, then we can buy gold as an investment and also silver.
For the needs that require large funds, we can sell gold, but if only requires small funds. Then we can sell silver without having to sell gold.
With an affordable price, silver is the choice of investors with a low budget.
Silver needs more storage space
The high price difference between gold and silver is the reason why silver requires more storage space. With the same amount of money, buying gold and silver will require more silver storage space.
If you buy gold you can hold it in your hands, but buy silver with the same amount of money, you can’t hold it with your hands. For example, currently, the price of gold is $ 1640 per troy ounce, and silver is $ 17 per troy ounce.
So if you buy gold, you only get one troy ounce, but if you buy silver gets 96 troy ounces, this requires more storage space and more expensive shipping costs.
Silver, higher for industrial use than gold
Around 12% of the industrial supply comes from gold. While the industrial supply that comes from silver is around 56%, in our daily lives we find many items made from silver.
Most of the electronics in your house use silver in it, though you might not know it, and also in the medical world, there is a lot of equipment that uses silver.
Because silver demand is higher in the industrial world if the high demand for silver is an implication of good economic conditions. But the decline in silver demand is an implication of weakening global economic conditions.
However unlike gold, millions of ounces of silver are lost every year, because of broken goods, the need for silver supplies often increases.
Silver stockpiles fell, gold stockpiles rose
Central banks more stockpile gold as foreign exchange reserves, but not in silver, the government has only a few silver stockpiles.
The price of gold that is higher than silver is one of the reasons why the central bank prefers gold, and most governments will hold silver if needed. If the government makes a high purchase, it can cause silver prices to rise or spike.
How to invest gold and silver?
Gold and silver investment itself can be used in two ways, whether to buy bullion gold and silver or buy through ETF (Exchange Traded Funds).
Physically buying bullion gold and silver will be far from risk, you can save safely without worrying about falling prices. Whenever you need cash, you can sell it back to the store where you bought it.
If you are an investor with large funds, buying bullion gold will be far safer than silver, but if you are an investor who likes to take risks then silver is an asset worth trading.
High price volatility compared to gold is the main attraction for trading gold through ETF or broker that provides gold and silver metal instruments. If you are an expert in trading with margin trading, you can get profits faster by trading silver through the trading platform.
If you are a TenkoFX client, you will find this silver asset with the XAGUSD symbol. Even with a higher spread than the major pairs in general, but its attractive volatility, making this pair many choose.
Is Gold a good investment in 2020?
The deteriorating condition of the US economy caused the USD currency to tend to weaken. Growth in the value of gold has started since April 2020, where significant prices have risen with a strong trend. Even the current price of gold is setting the highest new record in history where the price has reached $ 2074 per troy ounce.
This growth is due to the public demand that gold is a safe haven during the pandemic. Issues related to the US policy to give stimulus of large funds over 2008 also play a role in causing inflation when economic growth rates are low.
If America is not able to get out of recession, it is still possible for gold to return to its glory. There are even analysts who predict the price of gold can reach $ 3000 for the next few years.
Is Silver a good investment in 2020?
For Silver, the bullish trend also dominates price movements. There seems to be a similarity in the movement to this Gold for Silver. After falling to its lowest point in January at 16,626, slowly but surely the bullish movement started to dominate. This is because prices are considered to be the lowest and many investors are starting to buy at low prices.
Significantly a new trend is forming and during this month the upward movement for Silver has reached the level of $29,856. In the bullish trend, silver has not yet formed a new high from the historical high of $49,770 in 2011.
1. Is it smart to buy gold and silver?
Gold and silver can function well as a store of value or a hedge.
However, a good store of value and investment are two different things.
According to Warren Buffett, the biggest problem with gold and other precious metals as investments is that they are unproductive assets and specifically, gold does not create wealth.
2. How can I invest in gold and silver?
The easiest way is through the ETF (Exchange Traded Funds).
Or through a forex and CFD broker that provides gold and silver instruments, (TenkoFX for example), but you can also buy gold and silver bars at trusted merchants.
3. Why silver is a bad investment?
The biggest risk of silver investment is the loss of a bar or coin being held or loss of value due to market changes. If investing through ETFs, the greatest risk is losing money due to losing trades.
4. Why gold is a bad investment?
The value of gold, in large part, is based on worries, Investors buy it when they think the currency is faltering or the whole economy is faltering.
In a low inflation environment, gold and other metals will not help you.
5. Are gold and silver good investments?
Gold is a better investment for other precious metal investors, the main advantage of silver is that it is much cheaper than gold.
Gold and silver is a metal that many investors choose because it can be a solution when there is a world recession because the value of both tends to be stable and some consider it to be a safe haven.
Buying gold and silver bars is also a low-risk investment method, although both have advantages and disadvantages, this investment solution is still considered good.
Especially in the midst of global conditions that many worry about coronavirus outbreaks that have spread to many countries outside China.
Gold and silver investment can be an alternative to currency investments, which are vulnerable to changing global conditions.
At the end of this week, gold and silver have set a record high in 2019, and it is still possible that the value will tend to rise in the long run.
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