There is a lot of economic turbulence right now. The prices of different stocks are fluctuating, with major currencies disobeying technical analysis because of ongoing sentiments. Although most seasoned investors are still finding a way of maneuvering the market, it could be a risky time to invest for newbies.
Looking at the financial news in the past few weeks, there have been inconsistencies in CPI (Consumer Price Index), Employment Claims, and even NFP (Non-Farm Payrolls), especially in the United States. Consequently, inflation has been on the rise even as interest rates continue to skyrocket to temper it. Factors such as geopolitical conflicts and huge government deficits make investors reconsider their investing options.
Whereas gold has traditionally been considered a safe haven investment, silver is coming in strong, offering a unique value proposition.
We will try to demystify silver as an investment option in this article. Hopefully, you will see silver for what it is: a great hedge against economic turmoil.
Here is how:
Limited Supply of Silver
Unlike many commodities in the market today, the production of new silver is quite constrained. The world’s biggest silver suppliers acquire it as a byproduct of other minerals like gold, zinc, and copper. In addition, there are very few primary silver mines which cannot practically match potential demand spikes.
The silver’s inelastic demand would mean that future demands will not be met, leading to an increase in silver prices. As a result, silver investors will be smiling all the way to the bank.
If you are on the fence about committing to silver bars or coins, now might be the best time to go in.
Increasing Industrial Demand
Silver is primarily an industrial commodity. For ages, it has been the major component in manufacturing solar panels, electronics, automotive, and batteries due to its high electrical conductivity.
Currently, there is a lot of buzz about clean energy. In the near future, electronic devices will be used on a large scale, leading to a potential surge in silver demand.
From the industrial perspective, all roads lead to more usage of silver.
A Hedge Against Inflation
When there is economic turmoil and increasing inflation, investors run to secure hard assets as a way of preserving their wealth. The biggest reason is that gold and silver have intrinsic value beyond any fiat currency. Central banks cannot inflate precious metal prices with monetary policies. Their limited supply prevents their debasement as well.
Currently, the world is dealing with inflation-related issues, leaving silver to be a viable investment option. The inflation rate reached a peak of 9.1%, and although it dipped later, it continues to remain a few points above average, making the dollar lose purchasing power.
If you Buy Silver Coins in Rochester MI, you are hedging against loss of value caused by inflation.
High Gold/Silver Ratio
Traditionally, silver has always traded at much lower prices compared to gold. As a result, it has remained to be more accessible price-wise. The gold power is being witnessed right now, with gold reaching the all-time high of $2,350 an ounce in April 2024, while silver was still under $30 an ounce.
From calculations, the gold/silver ratio is still above 80. For the longest time, this ratio has averaged 50s, meaning that this is the absolute best time to buy silver.
Portfolio Diversification
Every seasoned investor understands the vast benefits that portfolio diversification brings. The best diversification is one that combines assets that have different correlation, meaning a rapid change in market direction will not leave an investor vulnerable.
Here comes silver. Compared to other stocks like stocks and bonds, silver do not move in correlation to them. Holding onto silver will not only reduce the risk exposure during market volatilities, but also give you a direct ownership of an actual asset outside the banking ecosystem.
Conclusion
Investment is about how much you are willing to risk. If your risk appetite is considerably high, you will not have a problem putting all your eggs in one basket. If the basket bursts, well, you know the drill. Investing in silver will help you align yourself with critical industrial trends and cover yourself from the damages of inflation.
Caution: This article is not considered as financial advice, but primarily for information purposes.