8 Reasons Why Investing in Silver Makes More Sense Now
In an ongoing old debate about gold versus silver as a better investment. Why is now the best time to buy silver?
Gold has been the dominant precious metal in investment portfolios for as long as we can remember. However, with a historical difference in the gold-to-silver ratio, the growing demand for silver in industrial applications, and silver’s role as money, the hedge against inflation makes a strong case for the white metal.
Our analysis indicates why silver is an ideal choice if you’re planning to diversify your portfolio by adding a precious metal.
1. Silver is at record low prices (Gold: Silver Ratio).
The first and foremost significant reason is the historically low price of silver. At the time of writing, gold was valued at $1771 per ounce, whereas silver spot price was at $21.70 per ounce. With these prices, the ratio comes out to be 80:1. We are still at the highest recorded differences in the gold-to-silver ratio.
To put these numbers in perspective, the gold: silver ratio stood at 75:1 in 2003 and 28:1 in 1980 (gold at $594.90 and silver at 20.98). Throughout history, the Roman Empire had officially set this ratio at 12:1. In its history, the U.S. government set this ratio at 15:1 during the Mine Act of 1792.
2. Silver is extensively used across different industries.
Silver has widespread industrial usage, with sectors including semiconductors, smartphones, computers, digital cameras, batteries, water purification, and many others using metal in production. Research indicates that industrial use accounts for more than half of the global silver supply used today. This number will continue to increase.
3. Growing solar power is pushing the demand for silver even higher.
Another primary reason behind the growing demand for silver is its use in the photovoltaic industry. With countries such as China and India investing more in solar power, the demand for metal has witnessed consistent growth. A ScienceDaily report finds that every solar panel uses up to 20g of silver, accounting for 6.1% of the overall production cost of a panel.
4. Silver is affordable in comparison to gold.
A stark difference in the prices of gold and silver makes the latter a suitable investment choice. An individual investor can buy a kilogram of silver for $650, whereas an ounce of gold would cost $1,900+. The affordable prices of silver allow us to stock up on the white metal to save and protect our wealth.
5. Silver is making a comeback as real money.
A growing number of US states accept precious metals, including gold and silver, as legal tenders. The current tally includes Arizona, Indiana, Kansas, Missouri, Oklahoma, Louisiana, South Carolina, Tennessee, Texas, Utah, West Virginia, and Wyoming.
One must note that silver and gold have always been considered instruments of value, even in the US constitution. Article 1, Section 10 of the US Constitution states, “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.”
6. A growing supply deficit makes it the right time to buy silver.
A consistent supply deficit is another reason that could push the prices of silver higher in the future. A close look at the historical trends, especially the past couple of years, reveals a deficit in the global silver supply. Investing in a rare commodity always makes sense to an investor, especially when the commodity has a limited supply.
7. Silver is known historically to preserve value and offer a hedge against inflation.
For investors seeking safe-haven diversification, it will bring relief to know that silver has been used as a carrier and preserver of value for several centuries. All the historic scriptures mention the importance of silver and gold as commodities. There is no reason to doubt the worth of silver when our entire history vouches for it.
Also, both silver and gold appreciate in proportion to the ongoing inflation. We can rest assured that our bag of silver will always have the same purchasing power.
8. Silver holds intrinsic value (unlike currency).
The most significant difference between precious metals like silver and gold and a dollar or any currency is the actual intrinsic value held by the former. Since most international currencies, including the USD, have moved away from gold standards, they are no longer equivalent to silver and gold. None of the central banks’ policies will impact the value of silver, giving you the best safe-haven diversification for your investment portfolio.
How to add silver to your investment portfolio
Now that we understand the actual value of silver as an investment and safe-haven diversification instrument, let’s find out how we can add it to our portfolio.
- Silver bullions or coins: One of the easiest and most common ways to purchase silver is to buy silver bullions or coins. We recommend checking prices across multiple dealers and referencing an index like London Silver Fix to find the spread. Choose dealers who are a part of reputable industry councils.
- Junk silver: Another way to add silver to our portfolio is to buy junk silver or US currency released before 1965. These coins contain up to 90% silver. We can buy junk silver bags from $100 to $1,000.
- Silver miners: If we aren’t thrilled about having physical silver, investing in silver mining companies is another option. We can purchase stocks of silver mining companies. These stocks tend to move in tandem with silver prices. Silver miner ETFs such as SIL is a great start.
- Silver ETFs: Adding silver ETFs to our portfolio is another way to benefit from the growth in silver prices without owning the physical metal. iShares Silver ETF (NYSEMKT: SLV) is an excellent option.
With an ongoing pandemic and turbulent stock market, investing in silver is an excellent choice for retail investors. We can start with as little as $100 or $1,000 and grow our pile as our budget allows.