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Very shortly private investors will be able to buy silver for their portfolios as easily as they can currently buy gold. At the moment, you can invest in gold through a number of Exchange Traded Funds or ETFs. These include iShares Comex Gold Trust (LSE: IAU), which is managed by Barclays Global Investors, and the World Gold Council's Gold Bullion Securities (LSE: GBS). But recently, both outfits have announced plans to introduce silver Exchange Traded Funds to tap into investor demand for the metal. The main advantage of investing through ETFs is that they allow you to own the metal without having to take physical delivery. What's more you can easily buy the metal-backed trackers through traditional share dealing accounts. So, it is quite easy to mix metals into the same portfolio that hold other investments such as bonds, cash and shares. So, given that you will soon be able to invest effortlessly in either metal, which is the better investment? By and large, gold prices tend to be less volatile than silver. That's because all the gold that has ever been mined still exists in pure form above ground today. What this means is that in the event of a price spike, there will generally be plenty of sellers happy to take advantage of the price appreciation. For instance, it is estimated that central banks and private investors hold over 35% or some 47,000 metric tonnes of gold stock. So there should be no shortage of willing sellers. Interestingly, and perhaps a little surprisingly, there is considerably less free silver stock above ground. It is reckoned that excluding jewellery, there is only around 20,000 metric tonnes of the metal in free circulation. The reasons for this are two-fold. Firstly, it is more economical to stockpile an ounce of gold than silver given that the former is sixty times more expensive. For example, 47,000 metric tonnes of gold is equivalent to 2.8m metric tonnes of silver at today's price. And that quantity of silver will easily fill every room of 1,000 average sized homes from top to bottom! Another reason why there is less free silver available above ground is simply that it has considerably more commercial uses than gold. Consequently, most of the silver that is mined is already earmarked for industrial use. Apart from jewellery, which accounts for a third of industrial demand, it is also heavily used in photography and in the electronics industry. By contrast, gold has limited industrial applications, but it is considered by many of its fans as a risk-free way to store wealth. It is reckoned that gold can be used as a hedge against inflation and it may also provide comfort in troubled times. Curiously, there appears to be an implied correlation between the price of silver and that of gold -- in recent times gold tends to be around sixty times higher than silver. Consequently, as the price of gold rises then silver prices appear to follow suit. However, just because there is a tacit connection between the prices of silver and gold does not mean that the either metal is not overpriced. It is unclear whether the price of the two precious metals will carry on rising. A good time to have bought silver was in 1997 when Warren Buffett stockpiled some 130m ounces of the metal. This was reportedly on the back of dwindling supplies and projections for higher industrial demand for the metal. At that time Buffett paid around $5 an ounce for his silver hoard, though he had to wait more than six years for his silver bet to bear fruit. It just goes to show that buying low and selling high is a good route to greater wealth. However, the converse can lead to ruin if you're not careful. And I can't help but feel that this may be the case if you dip your toes in the precious market at current prices.
