Skip to main content

The Big Question: Gold or Silver?


A common question asked by someone considering an initial purchase of bullion-priced physical precious metals is whether they should concentrate their funds on buying gold or silver.

I consider ownership of bullion-priced physical gold and silver coins and ingots to be a form of “wealth insurance.” Similar to the reasons that people own home, life, health and vehicle insurance, the idea of owning some physical precious metals is as insurance against the risk of declines in value of paper assets such as stocks, bonds and currencies. For wealth insurance purpose, the allocation to owning physical gold and silver should only be a small percentage of one’s investment portfolio or net worth.

In years past, my general recommendation of how much of one’s investment portfolio or net worth should be allocated to physical precious metals was 5-10 percent of the total. In today’s turbulent markets, I now suggest at least a 10-20 percent allocation.

The wealth insurance position, as with other forms of insurance, is meant to be a lifelong holding, except that it will be assets that will eventually be passed down to one’s heirs. Depending on one’s judgment of the financial markets, an investor may wish to allocate additional funds to acquiring gold and silver bullion-priced coins and ingots as a trading position.

Once the overall allocation to wealth insurance has been decided, the next question is how much for gold, silver, platinum, palladium and numismatic items. I do not recommend any of this portion be devoted to platinum, palladium or numismatics. These latter two metals are industrial and not financial assets, whose values are mostly dependent on supply and demand for manufacturing purposes. Numismatic items may, but not necessarily, fit well for serving as protection against calamities in the paper financial markets (stocks, bond and currencies), but have wider buy/sell spreads than bullion-priced products. If someone has an interest in such assets, they should be acquired outside of the wealth insurance holdings.

In considering how much of your wealth insurance position to allocate to gold or silver, there are multiple factors to consider.

Financial: Gold is overwhelmingly a financial asset. Governments, central banks and official organizations (such as the International Monetary Fund) have alleged physical custody of 15-20 percent of all gold ever mined in history. At one time, the U.S. government held about 2 billion ounces of physical silver, but that is long gone. There are no central banks now with any significant reserves of physical silver. The high percentage of paper currencies that were redeemable for specie over history could be turned in to receive gold rather than silver. Silver, in contrast, is about half financial and half industrial in its applications, meaning that its price can be influenced both by financial and industrial considerations. Since the price of silver has been relatively lower than that the of 16:1 gold/silver price ratio of centuries past, that has sparked significant research in recent decades into the use of silver for industrial applications, focusing on its antibacterial and electrical conductivity capabilities. As a consequence, industrial silver demand has grown to completely replace the former demand for silver in photography, x-rays and for flatware and looks to further increase in the future.

Market Size: About 100 million ounces of gold are mined each year. At current prices, that is about $180 billion in annual production. Current annual silver mining output is around 1 billion ounces. At current price, that market size is just over $20 billion per year. According to the London Bullion Market Association, the world’s largest bullion market, it trades about 20 million ounces of gold a day (over $36 billion at today’s prices) and around 200 million ounces of silver (more than $4 billion at today’s prices). Obviously, gold is the far more liquid market.

Gold/Silver Ratio: A lot of attention is paid to the ratio of the price of gold to silver. For many centuries, the ratio was approximately 16:1, meaning that an ounce of gold had the same value as 16 ounces of silver. There are still people who think the long-term destiny for the ratio is to get back to 16:1. Over the past 30 years, the gold/silver ratio has been much as 120:1 in March 2020 and as low as 30:1 in April 2011. In my non-scientific guesstimate from watching precious metals markets for almost 50 years, I project that a long-term equilibrium of the gold/silver ratio would be in the range of 35:1 to 40:1. When the ratio is higher than that, I think that is a signal that silver is the better metal to purchase. If the ratio was lower than that, then gold would look like the better value. At today’s COMEX close (June 22), the gold/silver ratio was over 85:1, but it you look at the prices of bullion-priced physical gold and silver, the real world ratio was only a little over 60:1.

Price Volatility: Because gold is a far larger market, its price tends to be less volatile than that of silver. If precious metals prices are generally rising, silver will almost certainly rise by a greater percentage than gold. In a falling market, though, silver will also tend to decline by a heftier percentage than the yellow metal. On March 18, 2020, the COMEX closes for gold were $1,477.50 and silver was at $11.74. As of the COMEX close on Wednesday this week, the price of gold was up 24.1 percent from then while silver soared 82.3 percent.

Long-term Supply and Demand: Over the decades, I am convinced that there has been a long-term shortage of physical gold and silver coming onto the markets. There have been market manipulations to make it appear that there are more physical inventories than is reality. In the gold market, central banks for years were net sellers of gold reserves and would also lease out their reserves so as to make it appear there was a greater quantity of physical gold available than there actually was. As for silver, there has been a pattern in recent years where commodity futures market traders have sold contracts short (promising to deliver physical metal at the contract price upon contract maturity to the counter-party on the long side of the contract). Then, in the week or so before the contract matures, these traders buy back this short position and offset it by selling short a new contract for settlement further into the future. This trading pattern also creates the image of a greater inventory of physical silver than there really is.

Putting these and other factors together, I am confident that future gold and silver prices will be higher in the near future than they are today. Between gold and silver, I am more in favor of owning silver. However, my crystal ball isn’t always clear. As a result, I recommend owning some of both metals. Between the two, I suggest that about 3/5 to 2/3 of the total value of your wealth insurance be allocated to silver while 1/3 to 2/5 be held in gold.

Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, 2017 Exemplary Service Award, 2012 Harry Forman National Dealer of the Year Award and 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild (including twice in 2020), Professional Numismatists Guild, Industry Council for Tangible Assets and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at Some of his radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio archives posted at