Investors are facing a fair share of economic challenges right now, including persistent inflation and the high interest rates meant to temper it. And, there are other factors, like geopolitical conflicts and ballooning government deficits, that are further impacting the economy and the investing landscape.
Today’s unusual economic climate has, in turn, led many investors to look for ways to diversify their portfolios to protect their wealth and portfolio returns. One of the best ways to do that is to invest in safe-haven assets, like precious metals, to help offset losses from other investments.
While gold historically takes center stage in terms of precious metal investing, silver can also offer a unique value proposition. That’s because, like gold, silver has long been a hedge against economic turmoil — and there are other good reasons to consider adding it to your portfolio today, too.
There are a few reasons why you may want to add silver bars and coins to your portfolio right now. These include:
There’s a limited supply of silver
Unlike many other commodities, the supply of new silver is quite constrained. Most of the world’s silver supply comes as a byproduct from mining other metals like copper, gold and zinc. And, with few primary silver mines in operation, the supply cannot easily ramp up to meet potential spikes in demand.
This supply inelasticity could amplify future silver price increases if demand outpaces available supply, allowing investors to benefit from the increase in value. So, if you’ve been on the fence about adding silver bars or coins to your investment portfolio, now may be an opportune time to do so.
There’s increasing industrial demand
Silver is also a highly useful industrial commodity. For example, it has numerous applications in sectors like electronics, solar panels, batteries and automotive manufacturing due to its excellent electrical conductivity and other properties.
And, as clean energy initiatives accelerate and electronic device usage proliferates, the demand for silver is poised to surge. In turn, the rising industrial demand could support higher silver prices over time, so adding silver bars or coins to your investment mix now, while silver prices are low, could be a smart move.
Silver can hedge against inflation
In times of economic turmoil and high inflation, investors often flock to hard assets like precious metals to preserve wealth. That’s because silver and gold have intrinsic value beyond fiat currencies and cannot be inflated by central bank policies. Their limited supply also helps protect against debasement.
And, given that we’re still dealing with inflation-related issues, investing in silver could be a wise choice. While inflation is down from its recent peak of 9.1% in June 2022, it remains stubbornly high at 3.2%. That, in turn, is causing the dollar to lose purchasing power. But by putting some money into tangible silver, like bars or coins, you may be able to hedge against the loss of value caused by inflation.
The gold/silver ratio is high
Silver has historically traded at much lower prices than gold on a per-ounce basis, making it more accessible than gold in terms of price. And, that’s particularly true right now, as gold prices are currently hovering above $2,000 an ounce while silver prices are just under $25 an ounce.
That means the gold/silver ratio is above 80, indicating that gold is about 80 times more expensive than silver. The gold/silver ratio has a long-term historical average in the 50s, so a ratio this high could be a sign that it’s the right time to buy in at an opportune price.
Silver can be used for portfolio diversification
Investing in silver also provides valuable diversification benefits for your overall portfolio. That’s because silver prices do not move in perfect correlation with other assets like stocks and bonds, so adding an allocation to silver can help reduce overall risk and volatility. And, by holding physical silver bars and coins in your investment portfolio, you have direct ownership of a tangible asset outside of the banking system.
Whether it makes sense to invest in silver, and how much of your portfolio you allocate to silver, will depend on your financial situation, goals and risk tolerance. However, given silver’s status as a critical industrial material, a safe-haven asset and a potential hedge against currency devaluation and inflation, it merits consideration right now as part of a well-diversified investment strategy.
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