Is Silver More Rare Than Gold?
In one word: no. Gold is clearly the rarer and more precious of the two metals, both in the earth‘s crust and in terms of above-ground supply. But silver still plays a vital role for investors given its affordable price, dual precious and industrial metal properties, and potential supply constraints.
Let‘s examine in detail the relative rarity and investment attributes of silver and gold. This guide will equip you with expert insights on the precious metals‘ fundamentals so you can decide how they fit into your portfolio.
Geological Scarcity – Gold is Much Rarer
Geologically speaking, gold is around 20 times rarer than silver in the earth‘s crust. The estimated abundance of these metals is:
- Gold – 0.004 parts per million
- Silver – 0.079 parts per million
That means for every 1 million tons of average crustal rock, we‘d expect to extract:
- 4 grams of gold
- 79 kg of silver
Clearly gold is the rare bird when it comes to geological scarcity. It‘s found in lower concentrations globally despite modern prospecting techniques.
| Metal | Abundance (ppm) | Annual Production |
|---|---|---|
| Gold | 0.004 | 111 million oz |
| Silver | 0.079 | 893 million oz |
Intuitively, we can see that metals with very low crustal abundance are harder and more costly to source. We must process vastly more rock to extract tiny amounts of gold. This table highlights that discrepancy.
So in nature, gold is around 20-25 times rarer than silver, giving it exceptional value. But how do their above-ground supplies compare?
Above Ground Stocks – Gold is 10 Times Rarer
Due to its superior value retention, almost all the gold ever mined remains above ground in some form. The same cannot be said for silver which is sometimes consumed in industrial uses.
According to experts, the above-ground supply ratios are:
- Total above ground gold: around 244,000 metric tons
- Total above ground silver: approximately 1.6 million metric tons
However, over 130,000 tons of above ground silver are locked away in forms like jewelry and tableware. This silver is not readily available to markets.
After adjusting for this, the above ground investment-grade supply ratio is around 1:10 in favor of gold. So while more silver exists above ground, much of it is effectively lost or unavailable.
When we look at pricing, we can see these rarity fundamentals at play…
Gold Commands a Substantial Price Premium
The gold-to-silver price ratio averages around 70:1 to 90:1 in recent years. Currently it sits around 82:1, meaning:
- 1 oz gold = $1,920
- 82 oz silver = $1,920
This means the market values gold 82 times higher than silver per ounce. This price premium echoes gold‘s greater rarity.
Interestingly, gold is priced at a much higher ratio to silver than its crustal abundance ratio of 20:1. This demonstrates gold‘s perception as the more precious metal.
The chart below shows how the gold/silver price ratio fluctuates over time:
| Year | Average Gold/Silver Ratio |
|---|---|
| 2022 | 79:1 |
| 2021 | 69:1 |
| 2020 | 86:1 |
| 2010 | 62:1 |
| 2000 | 55:1 |
Gold consistently maintains a substantial premium thanks to its rarity and desirability. But how do their markets look from a supply/demand perspective?
Gold Supply is Far Lower Than Silver
In 2021, total mine production of gold and silver was:
- Gold: 111 million oz
- Silver: 893 million oz
For context, the 10-year average annual mine output is:
- Gold: 114 million oz
- Silver: 838 million oz
So the market produces 8-9 times more new silver annually than gold. Combine this larger silver mine supply with above-ground stocks, and gold is clearly the rarer metal economically.
Another insight is that gold sustains a higher price despite lower demand. In 2021:
- Gold demand: 123 million oz
- Silver demand: 1,029 million oz
Gold‘s rarity and value density support its premium pricing even with less demand than abundant silver.
Do These Metals Play Different Investment Roles?
Gold and silver appeal to investors for similar reasons:
- Precious with intrinsic value not tied to any government
- Monetary metals used historically as currencies
- Safe havens from economic and systemic risks
- Inflation hedges due to limited supply
However, there are some key strategic differences between gold and silver:
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Gold is primarily a monetary asset and long-term store of value against currency depreciation. Half of demand comes from investors.
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Silver has sizable industrial demand accounting for 50% of total usage. This gives it added sensitivity to technology growth cycles.
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Gold prices tend to be less volatile than silver‘s due to lower market beta. Gold is the purer safe haven play.
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Silver has higher correlation to stocks and industrial output. This makes silver more economically sensitive with higher growth potential.
Put simply, gold satisfies constant capital preservation needs while silver offers additional upside leverage.
Forecasts Suggest Strong Gains for Both Metals
Current economic uncertainty has investors flocking to traditional safe havens like precious metals. This positive backdrop has analysts forecasting robust gains for gold and silver prices in the coming years:
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Gold potentially reaching $2,500/oz by 2025 and $5,000/oz by 2030 per projections. This would represent real returns of 8-15% at current inflation.
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Silver meeting upside targets of $40/oz in 2024 and $100/oz+ by 2030 based on various predictions. Returns could reach 15-20% annually if achieved.
However, some argue gold may outperform if financial market volatility and tepid growth persist. Its pure wealth preservation qualities and liquidity become more crucial in that environment.
On the flip side, silver could deliver exponential growth if use in new technologies like EVs, solar and 5G really ramps up. Any supply shortages from byproduct mining would be another catalyst.
So while both metals appear attractive, gold offers stability during storms while silver provides more torque on the upside. Blending both is optimal for investors.
Will Precious Metals Supply Tighten in the Future?
With silver integral to so many industrial applications today, the potential for supply crunches down the road is a legitimate concern.
Around 70% of annual silver supply comes as a byproduct from mining lead, zinc and copper. Declining purity grades are impacting production of these base metals, likely translating to lower associated silver output.
Most pure silver mines are unable to operate profitably at current prices either, limiting investment in new mining capacity. Analysts warn mined silver supply could peak within the next decade if prices languish.
Meanwhile disruptive demand shocks from new green technologies could drive pronounced deficits. Unlike gold, silver is consumed in many fabrication uses which permanently destroys inventories.
Conclusion – Go For the Gold and Silver Blend
After reviewing the facts, it‘s clear that gold is the scarcer and more valuable metal both geologically and economically. The gold-to-silver price ratio averaged around 80:1 reflects this.
However, silver should still comprise part of a precious metals allocation. Its affordable price point provides better accumulation potential. And silver‘s unique supply/demand profile gives it ample room for exponential price upside – especially if new industrial uses take off.
For most individuals, holding a mix of gold for stable value and silver for growth potential makes sense. Precious metals diversify portfolios from fiat currency depreciation and systemic risks over the long run.
So while gold remains the monetary king and anchor, consider silver the high-torque multiplier for your precious metal holdings. Together they can help weather whatever economic storms loom ahead.