silver investing

Wealth Secrets: Investing in Gold Yes, but Why Silver Investing?

Everyone has seen the ads on TV and billboards and radio – just about everywhere – about gold investing; but what about silver investing? Why is gold investing more hyped up and advertised than silver investing?  Are there some wealth secrets you don’t know about?  Don’t they both achieve the same objective?

Yes and No. 

Gold and Silver both can both be a store of value and even a means of exchange (several states are trying to enact laws to make gold and/or silver actual legal tender as a secondary or a backup to the US dollar, meaning you can purchase goods and services by paying with gold or silver coins, etc).

  • Gold has a higher price and naturally gets more attention.
  • Gold of course has been used primarily as jewelry (especially in countries like India) or as a means of holding wealth, as a reserve. Fort Knox comes to mind as well as many foreign central banks that normally keep gold in reserve (which is supposed to back their currency; of course most currencies today are FIAT and not backed by anything but the faith of the people in the government’s abilities to regulate it’s own affairs properly – now you know why the US dollar is in trouble…).

Wealth Secrets – The advantages of Silver Investing

Silver on the other hand – sometimes referred to as white gold or poor-man’s gold – has a few other qualities that differentiate it from gold.

silver investingFirst of all, silver is also used as an industrial metal, meaning that it’s used industrially and CONSUMED in the production of things like solar panels, iPhones, hybrid cars, batteries, street lights, computers, etc. It hadn’t been economical to retrieve the used silver in such products previously because the cost to retrieve it was higher than it’s value (you probably didn’t realize your cell phone or computer had silver in it, right? That’s because it’s a relatively small amount although crucial for your phone or computer, etc to work).

So because more silver is CONSUMED each year than is mined or produced (Apple is anticipated to produce 25 million iPhone units for it’s initial iPhone 5 launch to give you an idea), the amount of silver in the world is declining, reducing supply (which increases price).

At the same time, the price of gold is out of reach for many people in the world but silver at 1/40th the price per ounce is a whole lot more affordable – so you’re also seeing a large increase in demand. (People in less stable 3rd-world countries often keep their savings in precious metals to protect their purchasing power should their government or currency collapse).

Also, should one need to use precious metals as a form of exchange, like if you needed to buy groceries or some other necessity, it’s a whole lot easier to get change for a $40 silver coin than it would be for an $1800 gold coin. So that’s something else to take into consideration.

Typically though, silver is not thought of so much as a way to store or hold wealth like Gold is because it is a much smaller market than gold (there wouldn’t be enough to meet the demand of central banks) but you would also need to store 40 times more silver than you would gold to achieve the same result. And when you’re talking about hundreds of millions or billions of dollars/euros/yuan in reserve, that’s a whole lot of silver you’ve got to store somewhere.

It is for these reasons and others that many predict the price of silver to rise faster than that of gold as inflation picks up and as the dollar depreciates. Over time, the ratio of silver to gold has averaged anywhere from 10:1 to 20:1 or so, depending on what factors you take into consideration. Regardless, today the ratio is closer to 40 or 45:1, down from about 60:1 which it had been at prior to the recent increase over the last couple of years. So should silver reach a ratio of 20:1 to gold, that would mean the price of silver would have to double in relation to gold to get back into equilibrium… However should the price of gold increase further as it has consecutively for the last 10 years and counting, the price for silver would be still more than double what it is today.

Given our current economic and monetary issues – the rising national debt, the out of control spending and borrowing from foreigners, the high unemployment rate, the stagnant economy, the declining dollar, etc, etc – I think it’s clear for many that until these issues can be resolved or at worst kept at bay, the prices for silver investing and gold investing will continue to rise over time. The fundamentals are easy to see.

Will the precious metals just go straight up?

Obviously not. There will spikes and there will be declines. The government will obviously do everything they can to keep the prices down by raising margin requirements, providing stimulus to the markets they want to go up, etc. Because they know that if gold and silver are going up, the problems are getting worse – and we all know they are already pretty darn bad.

Wealth Secrets – What should one do about silver investing or gold investing?

Do your homework. Learn more about the macro economic model, learn more about gold investing and silver investing and the role they have played as money throughout the ages (even in the US until 1973 when the US government decoupled the dollar’s gold backing). Don’t just stick all your money in gold or silver, you have to understand what is going on.

These are some of the strong fundamentals influencing the gold investing and silver investing sectors but things can change: governments go bankrupt, Fed chairmen can change their mind, congress can change laws. My advice is to do what you can do now because it’s hard to predict exactly what the future will hold. If you have an opportunity to make money now, you should by all means take it. Creating passive income – residual cash flow that comes in each month whether you work or not – can hep insulate you from market changes, good or bad. It takes time to create however, so the sooner you get started the better. Of course that will also give you more money to be able to do some gold investing or silver investing!

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  • Gold may rise to $ 1650 (R12 300) an ounce in early 2011 to demand an investment to compete with the dollar and other currencies. The carry trade has dropped the dollar as their currency of choice, Jim Sinclair, director of Tanzanian Royalty

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    It’s appropriate time to make some plans for the future and it’s time
    to be happy. I’ve read this post and if I could I wish to suggest you few interesting things or tips. Perhaps you could write next articles referring to this article. I want to read more things about it!

  • I think you are spot on. Vary your investment portfolio but you know you can’t beat some residual income each month either through clever investing in shares or through trading gold and other comodoties

  • Gold may rise to $ 1650 (R12 300) an ounce in early 2011 to demand an investment to compete with the dollar and other currencies. The carry trade has dropped the dollar as their currency of choice, Jim Sinclair, director of Tanzanian Royalty

  • Sadie-Michaela Harris says:

    Hello Hans
    Clear and informative post, good share 🙂
    I’ve been keeping my eye on the price of silver since we had a blog chat on this very subject a couple of months back… Interesting times!

    • Hey Sadie, you can say that again! For those people looking to enter the market, who may have missed the last run up in Silver, this has been a great opportunity to get in again. The fundamentals are as strong as ever and yet the prices are relatively low. Doesn’t get much better than that…

  • jewel says:

    Its an informative article.I learn a lot while reading this article..Thank for sharing your great idea..

    • old will hit at least $2,172, and $100 silver is inevitable. Is it unreasonable to expect such returns? Those are not unprecedented numbers. In 1980, gold hit $850 and silver hit $50. If you adjust those numbers for inflation since then, the metals will not make new highs until $2,172 (gold) and $125 (silver). We sold gold at $750 and $35 respectively in 1980, just two weeks before the peak. Not the exact top, but close is good enough. We started at gold $120 and silver $2. Howard Ruff, The Ruff Times,

    • A panicked flight to safety could push gold towards $2,000, although the central banks will dump gold on the market or make other attempts at suppressing the price advance. Jason Hamlin,