Silver has seen an impressive 41% price increase in the last 12 months*, but its shinier cousin, gold, which surged 45% in the same period, has stolen the headlines.
Is it time for silver to step out of the shadows and shine? Does it have more upside potential than gold in 2025? Here’s what you need to know before considering investing in the metal sometimes dubbed ‘poor man’s gold,’ ‘the devil’s metal’ and even gold’s angry younger sister.
Silver and gold spot prices are correlated; both assets are considered precious metals and store-of-value assets, and each has an inherent value that is not dependent on government policies. However, their market dynamics differ. Gold is widely regarded as the ultimate safe-haven asset, while silver’s price is more volatile due to its strong ties to industrial demand. This volatility makes silver a riskier investment, but it also presents greater upside potential—especially during periods of rising industrial use and economic expansion.
Here’s a look in a little more detail…
Silver’s Industrial Applications
In 2024, silver’s industrial demand reached a record high of over 700 million ounces (Moz) driven by its use in the photovoltaics (PV), electronics and automotive sectors. In contrast, technology-related applications accounted for just 6.6% of gold’s global demand.
Notably, around 20% of silver demand last year came from the PV industry. Photovoltaic materials convert solar energy into direct current electricity using semiconducting materials, and silver plays a crucial role in solar panel production due to its superior electrical conductivity. As solar energy installations continue to rise globally, silver remains a key material in the green energy transition.
Silver vs. Gold – The Pros and Cons
- Taxation
One of gold’s biggest advantages over silver is tax efficiency. In the UK, gold investment benefits from VAT exemptions, whereas silver incurs a 20% VAT charge, which can significantly impact investment capital.
- Volatility and Liquidity
Silver’s volatility can be a blessing and a curse. It has the potential for higher returns than gold but tends to have more extreme price swings. While both metals have liquid markets, gold is far more liquid due to its larger market size, higher demand, and greater global recognition. Gold’s price stability makes it more attractive for conservative investors, whereas silver appeals to those seeking higher-risk, higher-reward opportunities.
- Safe-Haven Status
While silver is considered a safe-haven asset, it does not enjoy the same level of stability as gold. During market turmoil or financial crises, investors tend to favour gold over silver for safety, often driving gold prices to record highs.
- Price Accessibility
One of the biggest advantages of silver is its affordability. Gold is significantly more expensive per ounce, making it harder for smaller investors to accumulate large positions. Silver allows for greater quantity ownership with a lower initial investment, which can be appealing for those looking to hold physical assets.
- Inflation Hedge
Both silver and gold act as hedges against inflation and silver’s price tends to rise alongside gold’s during inflationary periods. Investors and central banks traditionally turn to gold when the purchasing power of fiat currencies declines. However, silver tends to be more volatile than gold in this situation meaning it can offer higher potential returns but also comes with greater risk.
- Recession Performance
Silver’s strength as an industrial metal can also be its weakness during economic downturns. In a recession, industrial demand for silver may decline, potentially limiting its upside compared to gold, which is primarily driven by investor sentiment rather than industrial consumption.
Portfolio Diversification with Gold and Silver – Best of Both Worlds
The key to diversification is not only reducing risk but also offering exposure to new growth markets. Both metals can shine in an investment portfolio; gold can provide greater safe-haven benefits and tax advantages, and silver gives the zappier (and riskier) potential demand-driven upside. Given silver’s volatility an 80.20 split weighted to gold would seem a good rule of thumb.
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*Silver close price on February 23rd, 2024: $22.9505 – silver close price February 24th, 2025: $32.2518
Gold close price on February 23rd, 2024: $2035.57 – gold close price February 24th, 2025: $2949.36.
Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Buying physical gold as an investment involves risk, as the value of precious metal prices can be volatile. Historical financial performance does not necessarily give a guide of future financial performance. We recommend that you conduct your own independent research and seek professional tax, legal and financial advice before making any investment decisions.
