People often ask us, “Is it a good idea to invest in silver?”.
The short answer to this question, of course, is yes, but there are many reasons why adding silver to your portfolio is a good idea. Be it that you’re a first-time buyer or looking to add or diversify to your already existing portfolio, buying some silver is never a bad idea at any time.
Throughout history, silver has always been used as currency, in most cases far more than gold. Up until 1964, the US used 90% silver dimes, quarters, and dollars until they were axed under the administration of President Lyndon B. Johnson. These same coins are now highly collectible and often referred to with the misnomer “junk coins”, but with 90% purity, they are far from junk.
Some people call silver “poor man’s gold” but it presents a good choice for a would-be investor for several reasons which we will go through in some detail here. Precious metals are always a safe and prudent investment, but each has its advantages and disadvantages. Gold obviously is the most coveted by all but also comes with a hefty price tag compared to other options like silver, copper, or platinum. For the investor who is looking to hedge themselves against an array of negative eventualities and isn’t able to afford the outlay of potential gold investment, silver offers an excellent solution. Let's take a look at what silver can offer and the advantages it has over gold.
Protect Yourself Against Inflation
Tensions in the global political and economic climate are reaching new highs. There is a trade war with China and global pandemic. Internal political instability is rife and we have witnessed unprecedented economic shutdowns across the world. Central banks are printing money like it's going out of style and millions are losing their jobs. Factors such as these indicate that mass inflation could be next.
Savvy and prudent investors who prepare for the worst have always looked to gold and silver to safeguard them and their families against the ineptitude of government policy and the unpredictability of world events. You only need to look back in history not only in this country but abroad as well to see such cases--from the collapse of the Weimar republic in Germany and even to more recent examples such as Argentina and Paraguay in 2002.
Smart Argentinians and Paraguayans feared an imminent banking meltdown in their countries, so much so that many withdrew their money and converted them into hard assets like precious metals. They were right to fear because many banks did indeed default and close, even when they opened back up for business, harsh and draconian measures were implemented.
The currencies of the respective countries tanked, the peso, the guarani, and then shortly after the Brazilian real followed. Imagine not being able to access your money with banks closed, ATM’s frozen, and the value of your hard-earned savings depreciating daily.
It’s easy to think that something like this could never happen to us, but so did many Argentinians, and so did many hard-working Americans who had their savings wiped out during the Great Depression and, later, the housing market crash in 2008. The truth is that markets and economies are volatile and incredibly complex. Only those who diversify their wealth into real hard assets like physical silver can rest assured that they are recession-proof. This has been proven time and again.
Silver Has a Myriad of Practical Uses
What if I told you the very device you are reading this on right now likely has silver elements in it? In fact, most electronic devices contain this precious metal, ensuring constant demand across the world. Due to the silver’s chemical components, it has many practical applications, and electronics are just part of it. There are literally thousands upon thousands of industrial applications for silver, making it one of the most valued commodities.
Aside from its obvious present and ancient use in the crafting of valuable jewelry the medical usage of silver is exploding right now, regaining in popularity over the last decade. Coveted for its antibacterial and antiseptic properties, silver is used in a variety of health products. You may have seen many different types of colloidal silver products being produced and marketed, from dietary supplements to skin creams it’s believed to prevent and treat a whole host of medical ailments, from tuberculosis to Lyme disease. Given the current fear and paranoia surrounding pandemics, the demand can only rise further.
The best part in all this is that there isn’t currently any other element more economically viable than silver in relation to the wide spectrum of industrial uses it fulfills. Any appreciation in global prices has to be met by manufacturers as there simply isn’t any other choice. This is part of what makes silver such a fantastic and irreplaceable precious metal. Coupled with the relatively low price of silver, the small amounts used in products ensure that it is still economically viable for manufacturers to keep using it, even if global prices double or triple.
Silver is Easily Tradable
Silver has been used as currency for thousands of years and continues to be even though governments have stopped minting silver coinage as legal tender. Compared to gold, the lower value of silver per ounce makes it far more suitable for mundane transactions such as food and supplies in times of crisis. Smaller items such as unfairly named silver “junk coins” (old 90% silver coins from circulation) or 1 oz “rounds” are especially useful in disaster scenarios such as war or economic collapse. Their smaller weight makes it easy to keep on your person and accurately barter for essential items.
Popular and highly collectible rounds like the American Eagle or the Canadian Bull are a surefire way to preserve your purchasing power at any time. Not to be overlooked, plates and bullion are readily sought after all over the world and can be easily sold, making them a valid option when one needs to liquify their wealth. Regardless of how large or small, your portfolio may be, adding at least a little silver to it is a very smart and prudent move.
A Fraction of the Cost of Gold
We all know that gold is the most valuable and sought after precious metal, but silver often seems to fly under the radar of the potential investor. Silver is an extremely safe and affordable investment to make for even the most inexperienced and it’s a real investment you can hold in your hand at just a fraction of the price of gold. With that being said, it’s important to understand that it’s cheaper because silver prices are much more susceptible to global market trends, rendering it more volatile than gold. The market is far smaller and it only takes a handful of billionaires to change the market landscape. Silver is well known for soaring far more rapidly than gold in bull markets but will fall more in bear markets. Naturally, this can be an advantage to a savvy investor if taken into account.
Diversifying a portion of your wealth into this versatile precious metal is smart regardless of the market because at the end of the day it’s a hard currency just like gold. It can’t be created out of thin air like fiat paper money that the Fed prints. Silver will always hold and store value, sometimes more and sometimes less but it will hold. You only have to scan through history to see that silver has been used as currency far more frequently than gold. Unlike other investments that you may make, be it in stock or elsewhere, owning physical silver means that you’ll never risk default, just like gold silver cannot fail. So, by investing in silver bullion or coinage you can buy many of the same assurances and benefits that gold offers at just a fraction of the price.
The Silver Market is Tiny
You would be forgiven for thinking that global underground reserves of this precious metal are low, but surprisingly there is still huge potential for this market to grow. Despite the fact that silver has been mined and used for millennia we have only managed to mine a total of about 1.6 million tons with a colossal 530,000 million tonnes estimated still below ground!
Keeping this in mind it’s interesting to see that countries like China and India are buying up reserves of all precious metals, including silver. With large investments across the industry, they are even buying up mines and shares in mining companies. China is in the lead as the world's biggest investor in silver mining operations and on top of building up the largest silver stockpiles, it is encouraging citizens to buy privately. That can only mean one thing; with such a huge population and burgeoning middle class, there will be new demand in the coming years for already limited global supplies. If you couple that with the fact that global financial instability is rising then it doesn’t take a genius to see that we are about to enter another silver bull market. The time to invest in silver hasn't looked so good in a long time which leads us nicely into our next reason to buy silver.
Silver Looks Set to Reach Previous Highs
That's right, if we only look back to recent history we saw silver enter a bull market in 2011 as a direct consequence of the 2008 housing crash. Silver should be regarded as a long term investment but there have been times when investors were able to turn large profits in shorter time frames. Given the current global economic shutdown, it’s fair to foresee that more and more people will seek to relinquish worthless paper money and trade it in for real value assets like gold and silver.
At the time of writing the current price per oz is currently low at around US$15.00 but in the coming months and years, we could see this surge back to peaks like in 2011 when it traded as high US$ 55.00 per oz or even beyond depending on the severity of the recession about to unfold. Other factors could also indicate an imminent silver boom: JP Morgan had held a massive short position on silver in the futures market, keeping silver prices low. Many top employees have been charged with rigging the silver market with several of them pleading guilty and further investigations ongoing. This will help to balance out an uneven playing field, restoring supply and demand to normal projections and pushing prices up that have been kept artificially low.
Another potential factor could be global shortages with mining operations in decline and actual physical silver in circulation being low. Industrial demand for silver reached all-time highs in 2019 and given that in times of economic uncertainty silver always performs well it’s amazing that current prices are still so low. This really does present a phenomenal opportunity to buy in a low, hedge against the devaluation of the dollar, and turn a tidy profit in the near future.
Counter-Party Risk and Physical Silver Over Other Forms of Silver
As with any commodity, there are many ways to invest in silver. If you want physical assets these can come in several forms; “junk coins”, 1oz rounds, silver bars, and bullion of varying size and weight. On the other hand, you could also invest in silver mining stocks or physically backed Exchange Traded Funds known as ETFs or you could speculate on silver futures. Before you take any of these into account you need to consider counter-party risk.
Investing in mining stocks or ETFs can be sound investments and very profitable, but if your cause to invest in silver is to guard yourself against financial risk in a volatile market, then it really only makes sense to invest indirectly owning physical silver in one of the forms mentioned above. Investing in an ETF doesn't mean that you will be granted access to your shares of silver as generally ETF’s only operate on the performance of the price of silver on the market. Directly purchasing and owning silver from reputable brokers such as GSI Exchange is the only real way to avoid default and counterparty risk.
When looking for a safe and secure long term investment, silver often gets overlooked for its pricier cousin gold. But as you can see silver actually has many upsides and proves to be a far more versatile commodity. Yes, it is more susceptible to market volatility but sometimes this can be beneficial to a savvy investor. As a long term investment and store of wealth silver is only second to gold and unrivaled in hedging against economic upheaval.
Buying silver will protect your purchasing power just as good as gold but also protects you from counter-party risk from defaulting banks and global financial meltdown. Having a hoard of silver coins not only means that their collectibility is constantly increasing but also means that you have real money in hand, ready to be used as legal tender in times of disaster for provisions such as food and water.
Adding silver to your portfolio is a savvy and prudent way to hedge your bets, most experts agree that splitting a portion of your wealth into silver is a smart option. With the current Covid-19 pandemic reaching global scales entire economies are being devastated, making it increasingly more desirable to physically own precious metals such as silver and protecting your family against volatile fiat currencies.
If you’re an investor looking to turn a profit then the current global mayhem can actually serve in your favor. Low prices mean it's currently a buyers market, but with what looks like a global recession on the horizon people will seek the security that silver provides. Add to this that global industrial demand has just peaked and physical above ground reserves being far lower than gold it indicates that we could be about to see one of the biggest bull silver markets in recent times. Anyone with the foresight to get their hands on silver right now not only safeguards their lifestyle but could also be looking to turn a tidy profit in the coming months and years.
If you're still unsure whether investing in silver is the right move for you then make sure you check out our “Definitive Guide to Investing in Precious Metals”, to help clarify the finer points of some of the other options out there.