Is Silver the new Gold?

And should you invest in it?

Well, if you had invested Rs. 1.08 lakhs in silver in the year 2000, you would have 10 lakhs today!

That’s a 10X growth in 23 years - an annual growth of 10.16%.

Not bad.

The CAGR for Gold, in the same timeframe though, has been 12.19%

[Source: Bankbazar]

“Ankur, you’re the one saying that Gold has given better returns. So why would I even talk about Silver?”

Valid point, my friend. But hear me out.

There are a few aspects which you can check to decide for yourself whether you should invest in silver.

Let’s look at three of them.

Now, coming back..

Demand

While gold has usage mainly in conductors and electronics industries, silver is used in automobiles, manufacturing and medicine too.

And while gold has a lot of consumer-facing demand (of course, all our women love the shiny metal; and so do our parents!), silver’s demand is mainly industrial.

And that’s a major reason why silver is more volatile - When a country’s economy is not doing well, silver may tend to fall in price. Because when the economy is performing poorly, industries are performing poorly, so demand for silver is low.

On the other hand, in a fast-growing economy, silver may rise faster than gold, thanks to higher industrial demand.

Supply

Silver is more abundant than gold - there are 20 times more silver deposits in the world than gold deposits.

That explains why in spite of having high industrial usage, silver is cheaper compared to gold.

Gold:Silver ratio

This ratio compares gold and silver prices.

Now historically, this ratio has been in the range of 65-70. But currently, the ratio is 80.

This means that the value of silver with respect to gold, is lower than what has been observed historically, and there is room for an increase.

In fact, analysts are also predicting that silver prices (currently about Rs. 73,000) could rise to 85,000-86,000 in the near future.

So should you invest in silver?

Well, short answer is, it depends on you. I’m no analyst to say what’s going to happen.

But I’m considering investing in silver, because

1. Our economy will grow at a good pace again, so demand for silver may increase, increasing its prices in the near future

2. It helps me diversify

3. I’m trusting the analysts who have predicted what will happen with silver prices 😛

But that doesn’t mean you have to invest too. My job is to lay down facts and give you insights. The rest is up to you 😁

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That’s it folks!

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