Pros & Cons of Investing in Metals

Investing in gold and silver has a sense of security that is perceived as ‘real’. They are tangible objects that you can hold and feel the value of. With normal stock investments, it is a numbers game, with your money invested into nothing solid.

Gold and silver cannot be ‘made’ like company products. This simplifies the supply and demand way of thinking, because there is a fixed supply. All you need to worry about is the demand, and when hasn’t the demand for precious metals been high?

Gold is the only money that has never failed in the 5,000 year history of its use. In times of crisis, gold is the safest investment that also has the greatest potential to increase your wealth. Apart from the high use of gold in jewellery, it is also used in dentistry, electronics and satellites – to name but a few.

Silver meanwhile is second only to oil as the world’s most useful commodity. Aside from being money, silver has thousands of essential industrial uses. It is used in medicine, as a food additive, in solar panels, photography and across the automobile industry.

Gold and silver are therefore both attractive investments but as with all investment decisions, it is advisable to first consider the pros and cons of each.

Investing in Gold: Pros

  • The value of gold barely decreases over time. It may undergo some correction in price but over time, the value rises. The price of gold has tripled in the last 10 years.
  • Gold is the universal ‘safe haven’ investment. It is the only true item that can be held as tangible wealth, as opposed to stocks and other investments whose values could tank in an instant.
  • Gold items such as jewellery can be easily converted to cash from gold dealers.

Investing in Gold: Cons

  • At current prices, investing in a reasonable quantity of gold is out of the reach of many traders.
  • Like other precious items it is subject to theft.

Investing in Silver: Pros

  • Silver is protected against the effects of currency devaluation as its value is not tied to that of any currency. For this reason too, the loss of purchasing power of a currency does not affect the price of silver.
  • Silver is second only to oil as the world’s most useful commodity. It has wide industrial use as highlighted earlier thus its value will be preserved for decades.
  • Silver is cheaper than gold but has the almost the same value perception as a precious item as gold. You can invest in silver instead without breaking the bank.
  • Silver can be used as a medium of exchange in times of economic collapse.

Investing in Silver: Cons

  • Like allother commodities that are traded, silver is subject to price corrections which you need to bear in mind if you are not intending to hold it for a long time as this might work against you.
  • The rate of returns on silver investments is not as high as some other areas which is reflected in the listings of commodities on trading platforms.
  • It is not easily exchangeable for good and services. If you wish to purchase an item, you need to convert your silver to cash from silver dealers.
  • Like any other precious item it is subject to theft.

Understanding the pros and cons of silver and gold investment will allow you to make an informed decision on which of these two forms of ‘safe haven’  instruments will be more suited to your needs.