Gold versus Silver and their importance as investment assets

Gold versus Silver and their importance as investment assets

Gold and silver have been two of the most valuable metals in the history of mankind. While the first one found much use as a currency and as ornaments, silver found much use as ornaments and premium utensils and cutlery. Both have had their hay days in history, with silver finding more industrial applications as time progressed while gold retained its importance as a preserve of wealth. However, as the industrial age progresses, and more are more reserves are discovered, gold seems to ahead of the race as more and resources of this metal are being discovered compared to that of silver.

 Gold – The Yellow metal, though having lost the crown of the being the most valuable metal in the world, still holds many of its cherished properties which had made it the most valuable for a long time during its course in human history. The metal only with only a few industrial applications has caught the fancy of the human race for thousands of years like no other commodity on earth. its shining yellow color and Its lustre has always attracted woman and has been a symbol of wealth for the rich and affluent. This metal over the course of its history, has been stolen, traded, hoarded, fought war over and even been used as currency during its long history. The latest in its avatar is its application as an investable asset class.

The physical property of gold that gives it its shine and luster is its resistance to corrosion from all known corrosion processes which would make other metals lose their sheen and lustre. The metal even after prolonged usage as an ornament or as a utensil or after being stored in a humid place for a long time,  does not lose its yellowish shine, though there are other metal alloys also that exhibit the same properties, the metal remains the oldest known elementary metal to exhibit this property. The modern age while still mesmerized by its glitter, has however, been able to find some novel industrial usage for this metal.  But it is mostly because of the metals acceptance as a currency and as a storage of wealth that its demand and value continues to grow.

For a significant period of time in history the gold standard was prevalent, or the use of gold as the underlying to value any currency in the world currency exchange system, the standard however, has now lost its relevance in the modern currency system, but its acceptance as a currency alternative and a valuable commodity of trade has not faded even a bit. The metal is still considered the most stable of all assets, an asset of all weather, providing safety, security and most importantly liquidity. Underpinning this property the metal now has assumed a role of an asset to resort to during times of financial distress, and as a hedge against capital market volatility. In recent times the physical trading of this metal has also increased exponentially, however, it has been far surpassed by trading in gold derived financial instruments being traded for a variety of purposes and becoming some of the most traded financial instruments of the modern times.

Silver – The metal enjoyed its hay days for quite some time in its history, second only to gold in its value. This metal had also seen its days being used as a currency and as premium silverware. Like gold this metal also corrodes less against most corrosive processes which is the reason why in the mid ages it was very popular as silverware until the advent of other advanced alloy metals like stainless steel. Other than that, this metal has also seen extensive use in medicine, in medical devices and other health care aids as it has strong disinfectant and antimicrobial properties.

It is also used extensively in electronics for the manufacture of semiconductor devices, circuits and other devices. The unique properties of the metal of high electrical conductance and less susceptible to corrosion make it one of the most preferred metals for high performance use in electronic circuits, to be succeeded by copper. Powdered silver in a paste form is a suitable alternative to copper plating for the manufacture of Printed Circuit Boards (PCB).

Silver halides and nitrates were used extensively for the early photography in polaroid photographs, however with the advent of Digital photography their use has been limited to a large extent these days. Other than that silver is also used extensively in the Indian subcontinent as a food decorative, thin film of this metal is coated over premium food materials and is usually consumed with it having no effect on the human body. But perhaps the most important physical characteristic of this metal which has been responsible for much of its value is it high ductility. The metal can be ducted to very thin sheets and wires without getting ruptured or broken, making it possible to make fine ornaments and films from it. It is this property of this metal that is not available with majority of other metals that man has found easier to make fine utensils and ornaments out of it.

Silver, however, is nowhere close in bullion value to gold, while gold even at today’s date derives much of its value from its usage as a financial instrument and as a repository of value, silver derives much of its value from its novel industrial and other applications. Silver’s investment value can be seen more in lines of other new generation precious metals like platinum, rhodium, palladium and the like. The metal is getting short in supply as not much of new stock is mined and actually a significant amount of this metal that is being used today is recycled silver. The prices of this metal have seen a see-saw pattern during the past five years, it touches US$ 18.50 per ounce levels in March 2017 then fell to US$ 14.50 per ounce levels in September 2018 and then went back to US$ 18.38 on 26 August 2019.

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