People have used silver and gold as stores of value for centuries. They are among the most prized investment asset classes. So, why do the markets price gold and silver so differently?
In the past five years, gold has traded between $1,197 and $2,067 an ounce. For silver, that range has been $12 to $29.
Gold and silver enjoy high levels of popularity among investors because of their historic roles as safe-haven assets. Holding onto the metals during times of political and economic crisis can shore up and protect the value of your portfolio.
In this article, we examine the main reasons for the large difference in gold and silver prices.
Price of Gold vs Silver: Why They’re So Different
The state of the economy affects both gold and silver prices. Influencing factors include the strength of the US dollar, central bank interest rate moves and risk aversion in the market.
There are eight other factors which affect silver prices and gold prices which are:
Available supply
Analysts expect miners to extract 1.055bn ounces of silver this year. By 2025, traders anticipate that the global gold supply will be 4,800 tonnes.
Roughly, the total silver supply is 6.8 times that of the total gold supply.
Use cases
The main uses for gold are as an investment asset and for jewellery. It has industrial applications too like its uses in iPhone circuit boards, astronaut visors and medical testing kits.
Investors and jewellery makers also value silver greatly. Demand for silver from manufacturers and industry is much greater than demand for gold though.
For example, solar panel manufacturers use silver to create photovoltaics and Tesla’s car batteries rely on the metal too.
The price of silver is more exposed to the health of the global economy given its greater industrial exposure.
Historical value
As well as being rarer, people and investors view gold as the more valuable asset from a monetary perspective. This dates back to the times when countries used both precious metals as currencies.
Before the widespread adoption of the Gold Standard, there was the Silver Standard.
Silver as an investment and store of value goes back a long time. That’s according to Kinesis writer Alex Boast:
“Silver enjoys a millennia of history as money. It has been used as a store of value, a medium of exchange and – thanks in part to the tokenisation of the asset – a unit of account.”
Weight
One of the main reasons countries moved to the Gold Standard was the sheer weight of silver. People needed to carry a lot of it around to purchase goods and services.
Gold is a much denser metal and its value is far higher than silver. People could carry fewer gold coins around and spend the same amount of money as they did when they used silver.
Its denseness also makes gold much easier to manage. If you have $1m worth of bullion or coins, you’d need a lot less storage space for gold. Banks and vaults prefer gold for that reason as do the shipping lines and hauliers that transport the precious metal.
Chemical composition
Gold is one of the least reactive chemical elements. That means, unlike silver, it doesn’t corrode.
It’s this robustness that partly explains its enduring appeal as a store of value.
Liquidity
Market traders buy and sell vast quantities of both gold and silver each day. There is a high level of supply and demand for both. However, the size of the gold market dwarfs that of silver.
The London Bullion Market Association published figures on the difference in trading volumes in gold and silver. On a given day, the market handles $37bn of gold transactions a day. The silver market is significant too at $5.2bn a day, roughly 14% of the size of the gold market.
The gold price is also a lot less volatile because of the sheer size of the market. To move the silver price meaningfully, you can do so with much lower trading volumes. A recent example of this is the silver squeeze sparked by members of the Reddit community in early 2021. An attempt to do the same with the gold price would be almost certain to fail.
Price
One of the reasons many analysts believe the price of silver is going up is because of its high popularity with retail investors. A key factor in this is its lower entry price point.
If you want to invest in silver, the trading range over the past five years, as mentioned earlier, has been $12 to $29. That’s much lower than the $1,197 and $2,067 trading range for gold. Buying silver is more manageable for smaller portfolios.
Lower markup
Silver is also popular because it has a lower markup than gold.
This means buyers pay a silver price that’s much closer to the spot price than they do with gold.
Gold and Silver Price Charts
Gold and silver are very popular among investors and are both traded very well. As a result, there are a large number of websites where you can track the daily movements of both metals.
You can view up-to-the-minute live data on the physical gold and silver bullion market on the Kinesis website. To view the live gold and silver pricing, you can visit these live price chart pages that display the gold price and silver price – in 24-hour, weekly, monthly, and yearly views.
Investors regularly monitor the amount of silver needed to buy an ounce of gold. If there is a divergence from the norm, this indicates that one metal is trading undervalued and the other overvalued.
In the past decade, gold has steadily trended higher. Now it generally takes about 85-95 troy ounces of silver to buy one ounce of gold. 15 years ago, that was 60 ounces.
Kinesis offers users the chance to trade both gold and silver through its unique digital asset-backed currencies. Gold and silver respectively back the gold KAU and silver KAG digital currencies. Beyond owning physical gold and silver bullion, KAU and KAG are backed by the physical metals, respectively and deliver a monthly passive income to holders and traders.
Find out more about Kinesis.
Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
