How Silver, Gold Markets Differ

Both gold and silver are precious metals with safe-haven appeal that do not pay dividends or interest and that require investors to pay storage costs. They have a rich history of use as currencies and are currently among the most commonly traded metals and assets in commodity trading.

Investing in silver and gold is a great way to diversify your portfolio and add more stability, especially during times of political and economic upheaval. High demand for gold and silver from the electronics and jewelry industry also makes both metals a great investment outside of their safe haven appeal.

However, despite these similarities, the gold and silver markets often behave in distinctly different ways. The result is that on average, gold and silver prices will trend in the same direction around 70% of the time on a daily basis.

One of the main differences between the two precious metals is that gold primarily functions as an investment and monetary metal. It is mined in significantly higher quantities in gold-dedicated mines compared to silver and is usually a primary earner for gold mines.

Up to 20% of all gold mined is currently stored in central banks around the world as well as official organizations such as the International Monetary Fund. Last year alone, central banks went on a historic gold-buying spree that temporarily caused gold prices to surge.

More than 20 million ounces of gold are regularly traded on the London Bullion Market Association (LBMA) compared to 200 million ounces of silver. The LBMA is the largest gold and silver trading market on the globe, and it held gold inventories of 9,032 metric tons with a market value of $558.7 billion at the end of January 2023.

Silver, on the other hand, relies on industrial production for most of its demand (45%) followed by physical investment (27%), jewelry (20%), silverware (6%) and photography (over 6%). Silver is also seeing increased demand due to the proliferation of ecofriendly technologies such as solar panels. As such, investment and monetary demand is not a primary driver for silver prices as it is for gold prices.

While most of the world’s gold is extracted from mines specifically meant for gold, only 30% of newly extracted silver comes from dedicated silver mines while the remaining 70% is a by-or coproduct of mining copper, lead, zinc and gold. For most mines, silver isn’t a primary earner but rather an extra income to offset overhead costs, meaning fluctuations in silver prices often do not affect silver production.

However, for companies such as Hecla Mining Company (NYSE: HL) that produce huge amounts of silver annually, this precious metal is a major earner, and any shifts in the market are watched closely since they affect the bottom line and shareholders.

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