The Silver Bullion Trade

Unlike gold bullion, traders that buy and sell silver bullion play an entirely different game in the precious metal markets due to the fact that the ‘preferred’ precious metal is gold, this creates a ‘bend’ in the decision making process of investors as the appeal of profits have to be significant enough in order for investors to actually allocate resources for silver or silver related investments.
Gold and Silver Bullion

To start off with, the silver market is much smaller than the gold market and the demand for gold has always been much higher in comparison to silver. The prices of silver that is on average 20 dollars an ounce makes the total market net worth of its market relatively tiny, for example the total amount of silver that was mined in 2012 was about 800 million ounces with an estimate market value of 16 billion dollars, whereas the total amount of gold mined for that same year was 80 million ounces with an estimated market value of over 100 billion.

Another factor that plays against silver is storage; silver storage requires much more space than that required for gold buyers, which raises the cost of the already lower priced precious metal.

Although both gold and silver have been considered as money for eons, central banks do not hold gold reserves as they do silver. One factor that plays out in favour of the silver market is however the fact that since close to 20 % of the world’s total gold is held by central banks, these banks have a significant amount of influence or leverage over the direction of the prices that gold prices move in, especially in relation with the attractiveness of the dollar and fiscal policies that are dished out by major economies that determine or influence the decision making process that investors are subjected to when establishing their portfolios. Another fact worth noting is the fact that the smaller silver market causes the prices of silver to be much more volatile in comparison to gold and thus when prices of gold increase, the prices of silver increases much faster and higher in ratio and the opposite is observed when prices of gold drop.

In order to understand this concept better, imagine a small sail boat and a big tanker at sea and the waves considered as the market forces, even the slightest wind causing small waves would have an effect on the sail boat but leaving the tanker relatively status quo.

In comparison, both gold and silver are good investments and the usual question asked by most novice investors trying their hand at the precious metal market for the first time is “which of the two is a better investment?” , the answer depends on the objective of the investor, if the investor is looking for long term investments then both gold and silver are actually good investments, however, if the investor is looking for quick turnarounds via ‘short sells’ then it would be silver, if the investor is planning to make significant gains in the long run, then it would be gold.

However, here is a point that everybody should wrap their heads around, The reason for silver being cheaper than gold is due to the fact that it is 16 x more abundant than gold, however, gold is almost certain to be recycled, whereas silver is tossed out and mostly buried in landfills. Thus, it is not too far-fetched to realize that silver will also become scarce eventually and according to geologists, silver would become the first metal to become ‘extinct’ from its natural environment. Now that you are aware of these facts, make sure you consider them the next time you buy or sell silver bullion.

This article was kindly provided by Cash For Gold Melbourne, a Melbourne, Australia based Gold Buying Company.


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