Governments are carrying huge debt loads. Social unrest threatens us both at home and abroad. Our political races this year are even more acrimonious than usual. As an investor, you need to consider ways to protect your assets. Paper money is losing value as currencies are stressed, and government printing presses around the world continue to flood the market with currency. Stocks and bonds are paper assets whose value can fluctuate greatly depending on a number of factors like corporate earnings or interest rates.
Diversification is a strategy that can spread your assets over several classes and offer some stability in a volatile world and a volatile market. One asset class that is proven to offer some protection against volatility in the markets is precious metals.
Right now is a great time to buy silver. Silver is affordable, liquid, and available. Commonly purchased as one-ounce coins or rounds, silver is also available in multiple ounce bars and 90% silver coinage bags. Let’s look at seven reasons why now is a great time to add some silver to your asset portfolio.
1. Silver Is “Real” Money
Silver is a tangible asset whose value has never been zero. Paper assets can collapse and become worthless. Silver acts as a store of value with the potential for substantial gain. Silver has many uses in industry and the current price is below the cost of production. Anytime an asset falls below the price of production, it is a buy.
At the current price, silver should be considered as a long-term buying opportunity. Dollar-cost averaging is affordable and allows you to develop a substantial holding over a relatively short period of time by making regular fixed weekly or monthly purchases.
3. Insurance Against Monetary Policy
Since the economy tanked in 2008, the Fed and other world governments have a relaxed monetary policy through a series of quantitative easing actions. In essence, governments around the world have been printing money to try to re-inflate and stimulate the economy. Throughout history, these periods of printing have often been followed by periods of inflation or even hyperinflation. Currently for example, as a result of flawed economic policy, Venezuela is experiencing hyperinflation and commodity shortages.
In times of economic uncertainty, precious metals tend to outperform all other assets. During the last bull run in metals, silver was by far the best performer in the sector.
4. Heavy Industrial and Medical Demand
70% of silver inventory is used annually for industrial and medical applications. There are literally hundreds of industrial and medical uses for the metal and use is growing. Silver is extremely beneficial for use in medical applications due to its anti-microbial properties. In addition, because it’s the most electronically and thermally conductive metal, its use in the past twenty years has exploded as an array of electronic and digital products like cell phones, cameras, laptops, mirrors, and monitors (which all use trace amounts of silver) have come to market. Once it’s used in these products, it is effectively removed from stockpiles never to return. As the information age continues, silver use will only increase in the coming years.
5. Shrinking Stockpiles
The above-ground supply of silver has been shrinking steadily and this is unique among virtually all industrial metals. Demand has exploded and production cannot keep up. Demand in 2012 was about 880 million ounces per year with annual worldwide mine production at 760 million. Scrap silver has been making up the difference but as industrial use continues to grow, production will not be able to meet demand.
6. Supply Uncertainty
Today, the majority of silver is mined in countries with unstable political systems, under-developed infrastructure, and labor unrest. The top two producers are Mexico and Peru. Both have fragile political systems and infrastructure unable to support increased production. The number six producer, Bolivia, recently nationalized the mines which will put strains on supply.
In both China and India, the populations have shown a huge appetite for gold and silver. As more citizens have reached the middle class, demand has continued to grow in both of these countries. In addition, as these economies mature, demand for consumer electronics and appliances, which use silver, will continue to grow in emerging markets.
7. Gold to Silver Ratio
One major buying indicator for silver is the price ratio between gold and silver. While this ratio does frequently change, it has always returned to the historical average of 12 to 1, or the price of 12 ounces of silver is equal to the price of one ounce of gold. The current gold to silver ratio is in excess of 70 to 1. The current price of silver makes it one of the most currently undervalued assets on the market today.
Find A Reputable Dealer
The best way to invest in silver is to work with a reputable dealer. Silver prices change daily. A reliable dealer will be able to sell you silver at the daily spot price, plus a slight premium. When the time comes to sell, this same dealer will buy at spot plus a slight seller fee.
A reputable dealer can help you set up a systemized investment plan, allowing you to build a position over time. The dealer will deliver your metal to your home. It’s important to take physical possession of your silver. A good dealer can also advise you on how to set up a precious metals IRA for your holdings.
Silver is an excellent way to diversify and protect your asset holdings in an increasingly uncertain world. It is portable, affordable, and liquid. From a purely industrial standpoint prices should rise as supplies dwindle and demand increases. At its current price silver is a great value investment with a lot of room to the upside. Now is definitely a great time to buy silver!