Property vs Precious Metal Investment

For the past few years, property investment has been a hot investment choice for many Malaysians. Most people have the impression that a typical property would be a landed double storey house. The problem is, such typical house is often too expensive for majority medium class working employee to invest. Hence we would turn to cheaper alternative such as apartment or condominium.

The most common method of investing in apartment or condominium is to buy one (or multiple) unit during developer launch, keep it for a few years and sell it off for a profit upon completion. This method has little hassle as property developers often bear the transnational costs – although the truth is property developers have already factored those costs into selling price, we will leave that for a separate discussion.

Take a look at precious metal investment. The most common forms of precious metal are gold and silver. Gold is the typical grade of precious metal, which you can see it as the landed double storey in property investment; silver is the more affordable alternative of precious metal, which you can see it as the apartment grade of investment.

How much cheaper is silver compare to gold?

At the point of writing this, gold and silver price over Maybank counter has been taken as following:

maybank gold & silver price

Gold is selling at RM138.22/gram while silver is RM2.16/gram. In other words, silver is approximately 64 times cheaper compared to gold. We call this as the gold/silver ratio. This can be calculated simply by dividing gold price by silver price.

In fact if you look into the history, silver has always been much cheaper compared to gold:

gold silver ratio

Regardless which point of the history you are looking at in the past 20 years, silver price was fluctuating between 86 times to 32 times cheaper compared to gold.

You can make profit base on gold silver ratio alone without worrying gold price and silver price individually. This could be achieved by buying silver when gold silver ratio is high, swap your silver to gold when gold silver ratio is low, then swap your gold back to silver when gold silver ratio is high. Continue the swapping, you could have doubled or tripled your precious metal possession given enough time.

(I discussed gold silver ratio with much greater practical details in my eBook)

So what are the difference between gold and silver?

  1. Central banks do not hold silver. Gold and silver have long been considered money in the history. However, central banks do not hold silver because for the same amount of money central banks require a much large storage to keep silver.
  2. Silver price is more volatile than gold price. When silver price goes up, it goes much large in percentage compared to gold price. Similarly, when silver price comes down, it comes down much large in percentage compared to gold price.
  3. Silver price is traded far lower compare than the physical ratio. The average mining ratio for gold and silver is 1 to 10. It means when a miner digs the earth, on average the miner would find 10 gram of silver together with 1 gram of gold. However the trading price for silver is approximately 64 times cheaper as of today. How long can this go on?
  4. From point #1, we know that gold is mainly kept by central banks. However silver is mainly consumed by industrial application because silver is the best conductor of electricity. Gold is the 4th. Silver also has antibacterial properties which made silver widely used in medical field.

Silver is often seen as the poor men’s gold. In property investment, if you do not have a big budget to buy a typical double storey landed property for investment, you can turn to apartment or condominium. In precious metal investment, if you do not have a big budget to buy few kilos of gold, you can turn to silver.

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

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