Investing in commodities such as silver and gold helps you accumulate and preserve wealth, and these reasons explain why.
In this article:
- Diversification of Investment
- Protection for Your Investment Portfolio
- Precious Metals Are Tangible
- Gold and Silver Have an Inherent Value
- Gold and Silver Have a Limited Supply
- Industrial Use Continues to Grow
- They Can Make Investing More Convenient and Competitive
Silver and Gold | 7 Reasons to Start Betting on Them
1. Diversification of Investment
One of the primary reasons to start investing in silver and gold is diversification. Why does this matter?
A single investment class can fall at any time. If you have all or most of your money invested in it, you could potentially lose everything you worked hard for all these years.
The beauty of diversifying your investments lies in the saying “When one market falls, another rises.” All you need to do is to retrace the history of any financial crisis and how much people lost due to it to understand why.
It’s important to keep in mind that all trading markets are dynamic. Both supply and demand can affect the value of precious metals, just as it can affect all other types of investments, including alternative ones such as cryptocurrency.
To expound on this point, consider data provided by the website Gold Price, which shows that the performance of gold dipped from 2016 to 2018.
The same trend happened with silver. In fact, since 2013, its value declined.
Overall, though, gold and silver had positive performance from 2002 through 2018. They posted a percentage change of 273.84% and 205.72%, respectively.
Investing in precious metals can be one of the ways to grow your investment with diversification. Additionally, they have proven themselves over the course of history to be some of the most dependable assets.
2. Protection for Your Investment Portfolio
Here’s the painful truth about savings and investments: they may not be enough. One of the simplest reasons is because of inflation.
What is Inflation? It refers to a phenomenon characterized by increasing the price of goods and services. A significant component to this is currency devaluation. In other words, $1,000 today may have half the buying power in the next 50 to 60 years.
It makes sense because when the market prices of commodities go up, you’re able to buy fewer items with the money you have.
For the savvy investor, the goal is never only about diversification. It also revolves around beating inflation.
Gold and silver are an excellent investment hedge since they tend to increase in value over time, especially so during periods of high inflation.
Silver and gold prices do not rely on the same factors that tend to control the value of regular paper currencies issued by most governments today.
The value of paper currency can become dependent on the decisions of the Federal Reserve and other central banks. For example, these entities may choose to print a lot of money to stimulate the economy. However, an increase of supply of a currency often will lead to its devaluation.
3. Precious Metals Are Tangible
For a lot of people, investing means putting money in the stock market, certificates of deposit, or bonds. There’s nothing wrong with that.
However, these are not tangible assets. It can take some time before you can convert these investments into cash.
For example, if you invest in bonds or CDs, you may have to wait for about three to five years before receiving a return. For CDs especially, you may have to pay for an early termination if you want to withdraw early. Besides, most types of savings accounts do not beat the inflation rate.
When you buy gold and silver, you have the option to get coins or bars. Converting them to cash can then become easy.
You can sell them directly to the market, and it shouldn’t be difficult because of constant demand. To illustrate the demand, the US Mint is currently producing more American silver coins now.
4. Gold and Silver Have an Inherent Value
History is a witness to the long-standing importance or value of gold and silver. Take, for example, the First Opium War.
This war between China and the United Kingdom was partly due to the scarcity and need for silver. While the English demanded tea, silk, and ceramics, the Chinese wanted silver.
After some time, the UK didn’t have enough silver to trade. To offset the balance, they auctioned opium in exchange for the metal. Politics and bad decisions became a full-on battle that lasted for almost three years.
Today, silver and gold are still forms of money and many government mints, including the US Mint, use them to make collectors’ or bullion coins.
Gold and silver also derive their value from their characteristics. Gold, in particular, is malleable, which means you can shape it in many different forms, such as jewelry.
This precious metal is also popular for its high conductivity and its anti-corrosive properties. It is durable and can last for many years.
5. Gold and Silver Have a Limited Supply
Silver and gold are not an exception to the basic law of supply and demand.
When the demand is high but the supply is low, the value of the product increases. It also declines as the need for it decreases but the availability is abundant.
The supply of precious metals, such as gold and silver, is not infinite. The World Gold Council revealed that only 54,000 tons of the metal are underneath the Earth. About 70% is already above the surface in different forms.
This generates increasing questions of continuous supply, especially when mining becomes difficult. It can increase the production costs of mining companies, which then boost the silver and gold prices in the market.
Here’s the good news, though. If the production of new supply were to significantly slow down, owning these metals now may give you a significant advantage.
6. Industrial Use Continues to Grow
The growing industrial use of silver and gold also boosts their demand. Aside from jewelry, gold is a raw material for manufacturing computers and glass. People can also use it to make dentistry materials.
One of the promising uses of gold is in nanotechnology, which is a field in technology involving very small particles, no more than 100 nanometers.
With modifications in their structures and tolerances, scientists can use them in a variety of applications. These include cosmetics, defense, medicine, energy, and agriculture.
The demand for this type of technology is massive. According to Research and Market, it will reach a market value of over $122 billion by 2024.
Silver is a popular component in electronics, batteries, solar panels, and medical applications.
7. They Can Make Investing More Convenient and Competitive
According to a Discover survey, there are at least two reasons why Americans don’t generally invest. First, they don’t have the money. And second, they often lack the financial know-how.
The second point seems to corroborate the result of a GuideVine research involving 1,000 men and women who are at least 30 years old. Among them, less than 50% can explain the definition of 401(k). Meanwhile, a whopping 48% don’t know the meaning of interest, and 34% said they don’t understand inflation.
When it comes to financial literacy, you need three essential things: learning materials, sound investment advice, and an easy way to start investing.
Silver and gold can be one of them.
There are different refiners of gold, such as Valcambi, Sunshine Mint, and Johnson Matthey. Bullion bars and coins are even available on eBay.
Based on market data as of December 12, 2018, gold is $1,245.30 per ounce. Silver is only $14.67.
Unlike stocks, you don’t have to open a brokerage account or set up a robo advisor. Unlike bonds, you don’t need to hold a bonds certificate, which you are more likely to lose than the precious metals.
When you buy silver or gold, you can keep them at home or let a bank do it for you. You can get them when you’re ready to trade or sell them in the market.
Are you considering investing in gold and silver? Watch this video by Birch Gold Group to know how to invest in them:
All these benefits of gold and silver mean one thing: stocks are not the only forms of investment you can make.
Note, though, there’s no such thing as the perfect investment. If you want to invest in gold or silver, get the right advice from the experts. Know the pros and cons when you buy gold and silver. Understand the various investing strategies.
Do you think investing in silver and gold is a smart investment? Share your thoughts with us in the comments section below.
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Editor’s Note: This article was originally published on November 20, 2017, and has been updated for quality and relevancy.