Investment in precious metals has been one of the oldest forms of investment known to man. It’s one of the most reliable and stable form of holding money. Value of precious metals like Silver and Gold has stood the test of time, as their attractiveness never faded. With global economic uncertainty increasing over the last few years, there has been a rush towards safe havens of investments like Silver, leading to a surge in silver prices.
Silver: A Hedge Against Inflation
Silver, along with other precious metals, is a good hedge against inflation and currency devaluation. In an inflationary scenario, the purchasing power of your dollar goes down. However, any such declines in currency are offset by rise in Silver prices, hence preserving the purchasing power. This makes this precious metals a great asset to preserve capital, and more importantly, your purchasing power.
Silver, Why Not Gold?
Whenever the topic of investment in Silver is raised, the inevitable question is, why not Gold? Gold has historically been seen as a better investment avenue than Silver. However, the very same reason is now making silver attractive again. Higher demand for Gold has led to higher production of the precious metal, the result of which is that currently the Gold inventories are higher than the Silver inventories. Silver has great industrial use and that has led to depletion of the inventories over a period of time. Hence, lower supply of Silver should push the prices up for the precious metal.
Also, the rush for Gold has led to sharp rise in gold prices over last decade, taking the Gold to Silver price ratio to ~55 levels, significantly higher than historical ratio of 15-20. Analysts expect this ratio to normalize again and revert towards the mean levels.
Silver And Its Usage
Silver not just used in jewelry, but it also has wide range of industrial applications because of its unique properties. Silver happens to be one of the best conductors of electricity and heat. Silver is best reflector of light, it’s a great lubricant and it’s a useful catalyst and alloy. Silver is used in soldering, making photographic films, mirrors and various electronic items. Silver is used in solar energy generation, making bearings and high end batteries. It is also used in water purification. Given the extensive use of this precious metal, the demand for the metal remains strong and is expected to grow quite significantly. Moreover, given the fact that it’s not easy to ramp up its production easily in a short span of time, expect silver prices to head north.
Buying In Silver As Investment
If someone is looking to buy silver as an investment, there are various investment vehicles available. One could invest in silver by buying Silver bullion bars, which can be bought over the counter from major banks. Also, one could buy smaller sized silver coins. If somebody doesn’t want to take hassle of storing this precious metal, he/she can buy the Exchange traded products like silver ETFs. Keep in mind that you don’t actually own the silver in that case.
So, Silver Is A Sure Shot Winner?
Not necessarily. Performance of silver differs in various stages of economic cycles. The recent economic turbulence has led to a surge in Silver prices as investors are looking for safer heavens. However, with onset of economic recovery, silver may not remain one of the preferred investment destination and hence its returns may moderate. However, in the long run, fundamentals for silver are placed at a sweet spot where demand is likely to grow faster than the supply and hence, who knows, today’s silver may just become tomorrow’s Gold!