Looking for ways to prepare for future uncertainties? A solution for some may be investing in precious metals, such as gold and silver. Here’s what to know.
For thousands of years, investors have turned to both gold and silver it may provide a hedge in a potential economic or market downturn, as well as during sustained periods of rising inflation. Understanding the different uses of the two metals, their economic sensitivities and technical characteristics can help you determine which metal may benefit your portfolio.
Here are four factors to consider when deciding to invest in gold or silver:
More than half of all silver’s demand comes from heavy industry and high technology, including smartphones, tablets, automobile electrical systems, solar-panel cells and many other products and applications, according to the World Silver Survey. As a result, silver tends to be more responsive to economic changes compared to gold.1 When economies take off, demand tends to grow for silver.
The volatility in silver prices can be two to three times greater than that of gold on a given day. While some traders see this as an opportunity, such volatility can be challenging when managing portfolio risk.2
While silver may diversify your portfolio with moderately weak positive correlation to stocks, bonds and commodities, gold is considered a more powerful diversifier.3 The yellow metal has been consistently uncorrelated to stocks and has had very low correlations with other major asset classes—and with good reason: Unlike silver and industrial base metals, gold is less affected by economic declines because it has fewer industrial uses.
Per ounce, silver tends to be less expensive than gold, which recently hit record highs, making silver more accessible to small retail investors who wish to own the precious metals as physical assets. Gains in silver value tend to lag those of gold.
One of the attractions of gold and silver is that there are many ways to invest in each of them:
Holding bars and coins can have downside, though. For one, investors often pay a premium over the metal spot price on gold and silver coins because of manufacturing and distribution markups. You should also consider storage and even insurance costs.
Connect with your Morgan Stanley Financial Advisor to determine how adding gold or silver to your portfolio might help you achieve your long-term financial goals.
Footnotes
1 Yahoo Finance, History Suggests Silver Could Follow Gold’s Rise, April 2025 – https://uk.finance.yahoo.com/news/history-suggests-silver-could-gold-133005476.html
2 Bullion Vault, Gold Volatility Top Silver’s the Most Since 9/1, May 2025 – https://www.bullionvault.com/gold-news/opinion-analysis/gold-volatility-price-silver-stocks-140520252
3 The Street, Analyst revamps gold and silver outlook ahead of 2025 - https://www.thestreet.com/investing/stocks/analyst-revamps-gold-and-silver-outlook-ahead-of-2025
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Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.
Diversification does not guarantee a profit or protect against loss in a declining financial market.
Physical precious metals are non-regulated products. Precious metals are speculative investments which may experience short-term and long-term price volatility. The value of precious metals investments may fluctuate and may appreciate or decline, depending on market conditions. If sold in a declining market, the price you receive may be less than your original investment. Unlike bonds and stocks, precious metals do not make interest or dividend payments. Therefore, precious metals may not be appropriate for investors who require current income. Precious metals are commodities that should be safely stored, which may impose additional costs on the investor. The Securities Investor Protection Corporation (SIPC) provides certain protection for customers’ cash and securities in the event of a brokerage firm’s bankruptcy, other financial difficulties, or if customers’ assets are missing. SIPC insurance does not apply to precious metals or other commodities.
Investing in commodities entails significant risks. The commodities markets may fluctuate widely based on a variety of factors including changes in supply and demand relationships; governmental programs and policies; national and international political and economic events; war and terrorist events; changes in interest and exchange rates; trading activities in commodities and related contracts; pestilence; weather; technological change; and, the price volatility of a commodity. In addition, the commodities markets are subject to temporary distortions or other disruptions due to various factors, including lack of liquidity, participation of speculators and government intervention
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