Is silver the new gold for investors?

Silver, often called 'poor man's gold,' has delivered an eye-catching year-to-date return of nearly 30 per cent, outpacing gold's 24.63 per cent, as of November 3, 2024. These numbers might tempt you to jump on the silver bandwagon. But before you decide, consider the below two questions.

1. Which metal offers better returns?

For most investors, precious metals act as a safety net—a hedge—against market volatility. We typically want this portion of our portfolio to offer stability and protect our wealth rather than giving wild returns.

Silver has shown a wider range of returns in any five-year period from November 2019 to November 2024, swinging from -2 per cent to as high as 21 per cent. Gold, on the other hand, has demonstrated a narrower range of 7 per cent to 19 per cent.

That said, both metals, on average, have yielded around 12 per cent returns over the same five-year period.

Additionally, while the yellow metal has moved in the same direction as silver over five-year periods, it has outperformed silver in 11 out of 17 years.

2. Which is more volatile?

While returns are one part of the equation, risk is the other. The two metals show a big difference when it comes to price stability, measured by the rolling standard deviation.

For silver, this measure of risk was over 25 per cent nearly 90 per cent of the time. In other words, silver experienced big price swings, making it more unpredictable. On the other hand, gold was much steadier, with its risk level between 11 per cent and 14 per cent.

So, while gold and silver may have delivered similar returns, the yellow metal achieves these with far fewer ups and downs.

Our take

Historically, gold has delivered a narrower range of returns and is less volatile than silver.

So, gold is better.

We at Value Research consider gold as a tool for portfolio diversification, particularly for investors who feel unsettled by the volatility in equity markets. However, do note that it is not a wealth builder.

Secondly, if you already have some gold in your portfolio, is there any real advantage to adding silver? The answer leans towards no. Silver has shown wider return swings and is more volatile. Plus, it took silver nearly nine years to hit a new peak in August 2020.

Also read: SGBs are costly now. How else can you invest in gold?