If you’re aware of the precious metals – silver, gold, and platinum – you might be aware of the different properties they each have. For example, platinum has a very high melting point, while gold is particularly soft and malleable. Though they have many commonalities, when compared to each other, these precious metals have a range of differences that have a lot of implications for the trading of each of these commodities.

One such implication is that the precious metals differ in value. You might ask yourself what makes silver so different from gold, but the truth is, gold is far more valuable than silver. Platinum, likewise, is far more expensive to purchase, in accordance with its high level of scarcity.

So when we get to the question “why is silver cheaper than gold?” it helps to remember that the differences between all of these precious metals is even more pronounced when we stack them up against each other. And that’s exactly what we’ll do here. Here’s the first answer to why silver is cheaper than gold:

Looking at the Precious Metals

First, it should be understood that all of the precious metals have some innate value that is considerable compared to other commodities. When you consider that one troy ounce of gold will yield hundreds of dollars, it puts the relative value of these metals into true perspective. Gold and silver are the most popular of the precious metals, largely because they function very well in a number of ways, especially in terms of decorative purposes.

Each of the precious metals is rare, and it can be easy for prices to temporarily diminish if new ores are discovered. For example, after the discovery of the New World, silver was so plentiful for the Spanish Empire that it caused rapid silver inflation, having an unforeseen negative impact on the economy.

Rarity

One of the most crucial elements that go into making silver cheaper than gold is the rarity of the metal itself. Gold is simply rarer than silver – much rarer – and this imbalance in supply and demand between the two metals makes up most of the difference in their prices. For example, if it large gold ores were discovered tomorrow that made gold more plentiful than silver, it’s likely that gold would see a drastic drop in price, especially if suddenly gold becomes more plentiful than even silver.

The difficulty of extracting precious metals also plays a role in their rarity. Aluminum, for example, is a relatively cheap metal because it is abundant, but it is also a little difficult to extract. Much of the silver and gold discovered is actually alloyed with other metals, which usually requires separation of the two metals in order to produce pure silver or pure gold.

The Value Ascribed to The Metals

Rarity, however, is not the sole decider of value – it is only one side of “supply and demand.” The demand for gold and silver is relatively high – higher for gold than it is silver – and this plays a role in driving up prices as well.

The use of gold and silver in jewelry, in particular, helps drive up prices – more so for gold than for silver. Because demand is high, the prices can be increased without the market suddenly turning away from the precious metals. The demand for jewelry on a yearly basis makes silver and gold highly valuable commodities, even though each of the precious metals do contain a number of industrial uses as well.

For many people, commodities themselves are valuable because they represent a way to store money in a safe, consistent way. Consider that having $100 dollars in the bank wouldn’t be a good investment of the dollar lost 50% of its value. For many people, buying up these commodities helps them keep their money over the long-term, working against inflation in order to keep their investments stable.

Many people will buy up silver or gold bullion in order to hedge against this kind of inflation, while others will simply do it in order to meet their needs to collect the valuables. For many, gold is a more valuable collectible as well, further enhancing its value. People buy bullion of all of the precious metals, however.

Selling Silver or Gold

You can get more insights into the value of silver and gold from Sell Gold HQ and learning more about how you can sell scrap silver and scrap gold for a quick sum of cash. We will help teach you how metal brokers will take the silver and gold you provide them and recycle them for industrial use.