In their newest commodities report, the economists from Morgan Stanley, the bank analyzes the crucial differences between gold and silver. They start off by reporting that, as we go toward a post-covid world, many investors are seeking ways to prepare for the future. A solution some might have is investing in precious metals, like gold and silver.
The bank broke its report into 5 important areas that every investor should be aware of:
1) Silver may be more connected to the global economy
“Half of all silver is used within heavy industry and high tech industries. As a result, silver is more sensitive to economic shifts than gold is, which has limited uses other than jewelry or investment. When economies increase, demand usually grows for silver.”
2) Silver might be a better inflation hedge
“Historically, both silver and gold have made good gains when inflation is going up. Both metals are valued in USD, so when the dollar goes down in value, gold and silver usually rise since they lower in price using other currencies. Given more industrial demand, silver usually rises more than gold does with increasing inflation and a decreasing dollar.”
3) Silver has more volatility than gold
“The volatility seen in silver can be two to three times more than seen in gold on any given day. While traders can benefit, this volatility can be challenging when dealing with portfolio risk.”
4) Gold is a more powerful diversifier than silver
“Silver is a good portfolio diversifier with some weak positive correlation to stocks, commodities and bonds. However, gold is an even more powerful diversifier. It has consistently been uncorrelated to stocks and has given very low correlations to other top asset classes: Unlike silver and other industrial metals, gold is less moved by economic declines since its industrial uses are very limited.”
5) Silver is cheaper than gold
“Silver is a lot cheaper than gold, causing it to be more accessible to smaller investors. For those who want to just start building their portfolios, the price of silver might make it a much better investment choice to start with.”
Author: Steven Sinclaire
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