The global economic downturn resulting from COVID-19 has brought precious metals back into the spotlight as safe haven investments worldwide.
Prices for gold and silver skyrocketed during 2020 from mid-March as investors sought to protect their assets in uncertain times and when economies looked to take a downturn, but the two precious metals are far from equal.
If you're considering whether to gain exposure to either of these commodities through investing in equities, it's important to know the key differences between these commodities and the influences on their spot prices to assist in making informed decisions.
Gold Investment: Pros & Cons
Gold's reputation as a dependable investment option is well earned. While stockpiles of silver have diminished in recent decades, banks and governments around the world continue to hoard gold bullion, which is easier to store and maintain. With only 12% of gold demand being tied to industry, the asset is largely shielded from the economic cycle.
Even with an impressive gain in value of 16% in the first half of 2020, the performance of gold stocks can also appear modest compared to the more dramatic swings of other investments, so it can take time for investors to see considerable yields. This is precisely the stability that makes gold prized for long term wealth protection.
Silver Investment: Pros & Cons
While gold is largely shielded from economic shocks, silver is much more closely tied to the boom-bust cycle. This is because around half of the silver mined each year is used in industry, from electronics and manufacturing to medicine. As these industries suffer the effects of a recession, industrial demand for silver declines, and the full effects of COVID-19 on silver demand won't be clear for some time.
Even during brighter economic times, silver is a much more volatile asset than gold, being more vulnerable to price swings. Investing in physical silver can also be an expensive commitment, taking up 128 times the storage space compared to the same value of gold.
Investing in Gold Stocks
Both gold and silver are valuable assets in a diversified portfolio, but gold is the safer hedge investment, especially during a downturn. With buying and storing gold bullion being beyond the means of many investors, buying gold mining stocks is a more affordable alternative that offers many of the same rewards and other dividends as the mining sector continues to boom.
Barclay Pearce Capital client AuStar Gold Limited (ASX:AUL) is an exciting gold exploration, mining and production company with a portfolio of historical, near term development and current assets based around the Morning Star Gold mine located approximately 120 km east of Melbourne in the Walhalla to Woods Point gold field.
The company is focused on the mining and production of its flagship Morning Star gold mine that has historically produced over 830k oz of gold. Additionally, AuStar has 670 km2 of exploration tenements covering the Walhalla to Woods Point dyke swam with historic high-grade production totalling in excess of 6 million ounces of gold.
AuStar's vision is to become the next mid-tier gold producer in Australia.
Philip Amery, Chairman of AuStar Gold is available for an interview. Contact Donna Warner, Barclay Pearce’s Chief Marketing Officer: email@example.com
To keep up to date with their investor news, progress and for more information about gold investment as a whole, subscribe to the AuStar Gold Chairman's List.