With inflation continuing to increase and interest rates also growing, investors are looking for means of diversifying their portfolios in a bid to shield their investments. A good way to do this is investing in safe-haven vehicles such as gold and silver to offset losses made by other investments.
For centuries now, gold has been used to hedge against economic turmoil, but did you know that silver also offers a great value proposition? Below, we look at compelling reasons for adding silver to one’s portfolio.
Growing industrial demand
Silver has numerous applications in a range of industries, including automotive and battery manufacturing, as well as solar technology and electronics manufacture. The metal’s popularity is attributed to its various properties, including its ability to conduct electricity.
As the adoption of clean energy continues to increase and the use of electronic devices grows, silver’s demand is expected to increase exponentially. In turn, the increasing industrial demand could support higher metal prices over time. This means that adding silver coins or bars to one’s portfolio while the metal’s prices are low could be a smart move.
Limited silver supply
New silver supply is limited, especially when compared to other commodities. Currently, the bulk of the silver supplied globally is a byproduct of the extraction of other metals such as zinc, gold and copper.
With only a few primary mines producing silver, supply can’t easily increase to meet possible increases in demand. Limited supply may boost future silver prices if demand surpasses available supply. This will allow investors to gain from this increased value.
This makes now an opportune for investors to add silver coins or bars to their investment portfolios.
Hedge against rising inflation
During inflationary periods and economic turmoil, investors may benefit from adding silver to their portfolio to preserve their wealth. The metal cannot be inflated by policies implemented by the central bank and has intrinsic value unlike fiat currencies. Additionally, silver’s limited supply protects it against debasement.
High gold to silver ratio
Historically, silver has traded at lower prices on an-ounce basis in comparison to gold. This makes it a more accessible metal, particularly if price is a major factor.
Currently, the price of silver stands at $24.67 an ounce while gold is going for $2,165.40 an ounce. This means that the two metals ratio is over 80, which shows gold is significantly more costly than silver.
For a long time now, this ratio has averaged around the 50s. With a ratio above 80, this may be a sign for investors to purchase silver while its price is still affordable.
For those not particularly inclined to investing in physical silver, stocks of silver mining companies such as Hecla Mining Company (NYSE: HL) could also be an option, though those stocks would be prone to the volatility that comes with shifting market forces such as geopolitical events.
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