If you’ve ever followed Gold and/or Silver trends you’ve probably heard the phrase “gold is to keep, silver is to trade”. But why is that? Common sense would tell us that you keep when something is growing steadily and you trade when it is volatile, but is that really the case during a pandemic that has affected the entire world? Let’s take a look at basic facts about gold and silver as well as how they have behaved in response to COVID-19.
The total supply of silver each year is 1 billion ounces while new gold’s annual supply is 120 million. This makes for a bigger market for silver, but anyone with a basic understanding of supply and demand would understand why the price of silver would be that much lower than that of gold’s. Furthermore, having more supply to trade with each year makes this metal the perfect candidate for investors to play around, by basically buying low and selling high. This creates the volatility we see today. Something else to take into account when buying precious metals is storage. Since silver is cheaper than gold, for the same price you would get a higher volume of silver than you would gold, therefore costing you more in storage space. You may consider storing your own metals but there are guidelines and risks to this strategy, therefore storing companies seem like a better idea. Having said that, Silver has a much wider industrial use than gold does, therefore it is much easier to get rid of silver than it is to get rid of gold.
Now, as to how they’re behaving in 2020 amid the COVID-19 pandemic, Silver has fallen quite a bit due to 2 reasons:
- For a volatile metal like silver, people preferred to sell early while they still could, they do not see silver as a metal that can hold its own during the pandemic and so prices went down.
- According to a report by GlobalData, silver mines have been hit the worst by temporary shutdowns, much more than gold has. This hurts an already falling silver.
Right now silver is quite undervalued, but this doesn’t mean go buy it right now, we still have not seen the second wave of COVID-19 that experts and epidemiologists are anticipating. It is still unclear how the pandemic will progress in the near future.
Best thing to do right now is to wait and see what will happen with the pandemic and make a decision once it is safe to do so.
– Javier Ortiz