Do you know what the wealthy added to their investment portfolio last year? It was silver.

Record sales of the grey metal were reported from many mints as investors made a beeline to stack up physical silver in their coffers. The US mint sold a record 47 million American Eagle silver coins in 2015, which is higher than the previous year’s 44 million ounces. Silver Maple Leaf Coins, sold by the Royal Canadian Mint, rose 75.9 per cent in the third quarter of 2015 from a year ago.

In Australia, the Perth Mint recorded over 50 per cent increase in silver sales to 11.6 million ounces in 2015.

At around $14/ounce — a six year low — demand for the grey metal grew to unprecedented levels in 2015. Demand for gold coins also increased, but not as much.

Think precious metals and both gold and silver pop up together. But silver is not in the same league as gold as a diversifier. It is far more volatile and hence more risky. If you are looking for a safe haven to hedge the equity and real estate assets in your portfolio, then gold should be your choice, not silver.

You need a strong set of nerves to invest in silver as it is far more volatile than gold. Despite outdoing gold in rallies, it tends to take a deeper cut in a bear market. For instance, gold prices have declined 45 per cent since 2011 but silver crashed 70 per cent in this period.

The grey metal’s price has been volatile historically too, but, of late, there have been wild swings. From an average of 27 in the past decade, the gold/silver ratio — that calculates how much an ounce of gold equals silver in ounces — is at about 70 now. This indicates that the decline in silver prices has been much faster than the fall in gold prices.

The size of the silver market is too small to withstand sharp surges in demand or supply or excessive speculation.

With an annual supply at around 1,060 million ounces, the silver market’s size is $15 billion (at $14/ounce).

But the gold market is 10 times as big. With about 4,278 tonnes of the metal in supply in the market in a year, the total market value of gold is over $160 billion.

Silver is different from gold, not because it is more abundant on the earth’s crust, but also due to the fact that it has more industrial demand.

It is the most conductive metal and is widely used in the electronics industry and in luxury jets and cars.

It is also used as an antimicrobial additive to wall paints, cosmetics and clothing fibres.

Industrial demand comprised about half the total demand for silver in 2014. Industrial demand for gold — from electronic, dentistry and other industrial uses — constituted just 10 per cent of the demand.

Use of silver by European industries has been falling since 2011, due to a weak growth in the auto sector. It is the same in North America, as well as Japan, says a report from a leading precious metal analyst.

China, a big industrial hub and large consumer of silver, too has been reporting lacklustre growth in demand for the metal from its industries.

In 2014, demand for the grey metal from the country’s industrial users was just 3.5 per cent.

So, prospects for silver, going ahead, to a large extent depend on the state of the global economy. This way, it is not an asset that can offer diversification from risks of holding equity.

Gold is a store of value and considered as good as money. But silver isn’t as safe. Central banks keep adding gold to their war chest. In times of uncertainty like the present, the demand from central banks becomes a critical support for the yellow metal’s price. This advantage is absent in the case of silver.

In fact, governments sell their silver in times of economic and political ambiguity as the metal’s prospects get clouded by industrial demand. Remember the phrase, ‘selling the family silver’?

In the first nine months of 2015, central banks bought about 425.8 tonnes of gold. In recent years, many developing nations, including China and Russia, have been diversifying their reserve assets (from dollar) and buying more gold.

For the reasons explained above, silver is not seen as a safe haven. If your portfolio is loaded heavily with dollar assets or equities, with much of them being industrial or commodity stocks, gold may offer a better diversification than silver. But, if you have an appetite for risk and want to try your luck with the metal, you can still go ahead.

Unlike in other developed markets, there is no option of buying silver ETFs in the country. So, the only way is to buy physical bars/coins or silver futures contract traded on the commodity exchanges and keep rolling over the contract every month.