How to invest in gold and silver

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If you ask professional investors what the best investment is, they’ll give you a ton of different answers: maybe it’s a particular stock, or an industry, or some complex combination of stocks and bonds and derivatives.

If you ask my mother, she’ll always give you the same answer: gold. 

Now, my mom may be right or wrong, but she is a part of a huge community of people obsessed with the value of shiny metals. Gold and silver are maybe the oldest forms of value humans have, and to this day still hold a lot of power over us. 

Here’s everything you need to know about investing in them. 

What makes gold and silver have value? 

This is a fun question to answer: the answer is simply “because we think they do.” 

Sure, gold used to be harder to mine in the past, and was the perfect metal for currency, since it doesn’t corrode and looks pretty. But these days, we have so much gold just locked up in vaults, and a ton that we know exists in mines, that the usual laws of supply and demand don’t really apply anymore. 

I could also get into a whole thing here about how the U.S. dollar used to be gold-backed, which means that for every dollar, a certain amount of gold had to be stored by the U.S. Treasury department, but that hasn’t been true since 1971, so it isn’t really relevant for us. 

It’s a similar story for silver: it does have some industrial applications like electronics, and a rise in demand can affect the price there, but mostly, it has value because people see it as a safe store of value. 

Investors that are really into gold — some call themselves “gold bugs”–, think gold is a safer store of value than even money itself. Their thinking is that if society collapses, gold could still be used as a universal currency. Need to barter for food or a boat to an island during the apocalypse? Gold will get you there. 

This leads us to our next question. 

What makes the price of gold and silver move? 

That last point I made about people trusting gold more than money is an important one, because it’s a big reason for why the price of gold moves. 

That idea of gold as a very safe store of value, a so-called safe haven asset, means that investors tend to buy it when the rest of the world is looking dicey. Are stocks suddenly crashing? Nervous people will buy gold. Does it look like the world is going to hell? Same thing. On the other hand, if interest rates start rising, or stocks do well, investors tend to sell gold, because they can get a better return on those assets, and don’t really feel the need to have a safe haven. 

Silver is a bit more complicated: it’s half driven by the same safe haven mentality that gold is, but it does sometimes have actual supply and demand moves, if for example the electronics industry sees a hype uptick in demand for the material.

Silver also is traded much less than gold, which means its movements can sometimes be influenced by other traders. A big institutional investor could influence the price of silver much more than gold any given day. 

How do I invest in gold and silver? 

There are a few ways you can test your mettle (get it?) at trading in gold and silver.

The simplest way, of course, is the Vivid app, where you can open a Metals Pocket and invest in the price of gold and silver immediately, 24 hours a day. 

You can also actually physically buy pieces of gold or silver. Many central banks will sell silver and gold coins or bullion (gold or silver that has very high purity, often in bar form) to you directly, and you can store it somewhere safe, waiting for the apocalypse to happen, or the price to increase. 

Another way is to invest in the companies that mine the material — they directly benefit from an increase in the price of the metals, so their share prices tend to move in the same direction. 

Whatever way you decide to do it, keep in mind that unlike what my mom says, there is no guarantee that either metal will increase in value, but that there are plenty of investors out there who still love investing in it.  

Any opinions, news, research, analyses, or other information contained on this website are provided as general market commentary, and do not constitute investment advice, recommendations nor should be perceived as (independent) investment research. The author or authors are employed by Vivid and may be privately invested in one or several securities mentioned in an article. Vivid Invest GmbH offers as a tied agent of CM-Equity AG the brokerage of transactions on the purchase and sale of financial instruments with the exception of those in the area of foreign exchange brokered by Vivid Money GmbH.