Why Is Gold More Expensive Than Silver?

Silver and Gold

As evidenced by price, gold has been considered more valuable than silver throughout modern history.

As I write this blog, an ounce of gold costs over seventy-five times more than an equal weight of silver. Why the huge difference?

Is it Supply?

Silver can Develop a Pitted Look Over Time. This Coin Shows How Beautiful Pitting is after 100's of Years. After Ten Years Not so Much-Wikipedia

Economic theory states that as the supply of something increases, price tends to drop. Conversely, scarcity and demand drive prices upward. If this model is correct, the high cost of gold should suggest that it's less abundant than silver. But is it? Here’s where the story gets murky.

According to my unofficial research, the present supply of processed gold exceeds that of silver. Huh? If that were true, silver should cost more than gold, per the theory of supply and demand. Right? Partly. Even though there’s more gold sitting around, it’s still considered rarer than silver. Here’s more of the story:

Estimates put the amount of silver in the Earth’s crust at over seventeen times that of gold. Almost nine times more silver is mined per year. If this is true, why is there currently more gold than silver?

Is it What Gold and Silver Are Used for?

The majority of gold gets made into jewelry. The majority of silver is used industrially. Old gold rings and chains are rarely thrown away; they’re recycled into new jewelry.

Silver, on the other hand, is used in tiny amounts and not worth recycling. More often than not, it disappears into landfills.

Gold that was minded a thousand years ago is still around. Silver used for conductivity purposes in dated electronic devices... not so much.

Is it Demand?

Your Gold Ring is All About Love

Demand for gold is high. Higher than silver? Yes. I would guess that the majority of women reading this article are currently wearing gold jewelry. Per our theory, the higher the demand, the higher the price.

On the other hand, some financial advisers warn of an impending silver shortage due to the increased demand in the electronics industry. One went so far as to suggest that its price would near that of gold someday. Maybe silver is actually the better investment. But don’t ask me; talk to a Wall Street expert. Then again, you might be better off investing in index funds.

Do current metal prices reflect demand? Since gold sells for over 75 times that of silver, is gold seventy-five times more valuable? Is the demand 75 greater? Do seventy-five people buy gold for every one person that buys silver? That doesn’t sound right. Maybe silver is simply cheaper because there’s so much more of it hiding beneath the surface of the Earth. Per supply and demand theory, the more abundant a commodity, the less its cost.

Gold’s Properties

The Warmth of Gold is Just Yummy

Gold is a noble metal. It doesn’t tarnish, corrode, rust, or disintegrate in harsh conditions. Gold jewelry can be worn down by daily wear, but, by and large, it lasts lifetimes -- unless the garbage disposal or family dog eats it, that is.

Gold is a warm color. It stands out amongst colors commonly found in nature. There’s something stylish about the fact that a gold ring will stand out amongst the colors of the natural world.

Gold is heavy and dense – about twice as dense as silver, in fact. This means that, per volume, a little gold goes a long way. It’s more comfortable to carry around a hundred bucks worth of gold in your pocket than a hundred bucks worth of silver. Gold’s more portable.

Jewelry makers like working in gold. It’s soft, forms easily into different sizes and shapes, and is easy to engrave. Its relatively low melting point means that jewelers can use simple blow torches instead of nuclear ovens to heat and change the stuff.

The Perception of Value

Many colored gemstones are rarer than diamonds. Thanks to the marketing geniuses at DeBeers, few fetch higher prices. “Diamonds are a girl’s best friend” and “Diamonds are forever” were introduced by the company decades ago, before the glittery pieces of carbon were considered the go-to gemstone for wedding rings. One company changed women’s perceptions forever.

Our perception of value doesn’t need to be based on facts to change what we’re willing to spend on something. We’ve been taught since infancy that gold is beautiful. Gold is pretty. Gold is money. Gold is wealth. Gold rings symbolize one’s commitment to marriage. We’ve decided as a society — as a whole world! — that gold is more valuable.

And that’s my theory on why gold costs more than silver! Could I have left out something important? Absolutely! I’m not a geologist, nor am I an economist. I don’t work on Wall Street and don’t have any PhDs. All I know is that gold is a bitchin’ metal and goes for a lot more than silver!

Your Personal Jeweler,
Calla