What are the benefits of silver
There’s no doubt that gold is the more established precious metal investment, however there are also many benefits of silver. With its myriad industrial uses, silver can outperform when economies return to growth, as well as being an essential hedge in times of downturn.
Silver has a diverse array of applications:
|Currency coins||Jewellery||Tableware||Utensils||Disinfectants||Chemical Reactors||Catalytic converters|
|TV Monitors||RFID chips||Mirrors||Switches||Photographic film||Silver Nitrate Solutions||Electrical contacts|
|CDs||Hearing aids||Conductors||Calculators||Computers||Micro biocides||Cell phone batteries|
Demand for silver is surging, due to its combined appeal as a tangible safe haven asset and its various industrial uses. Many financial analysts, investing experts and even geologists have one belief in common: a silver shortage is upon us.
According to metal experts, despite the lack of global stockpiles, new technologies will continue to increase the demand for industrial applications of silver, placing further strain on global supplies.
Industrial silver demand has a greater sense of urgency than gold demand, because it is needed rather than simply desired. This dramatic shift in the silver supply-demand curve recently, has led to it fast-becoming a top-asset choice for cautious investors.
Gold – Silver ratio
Traditionally and generally speaking, the ratio between the gold and silver price has always been around 12:1. This means it took 12 ounces of silver to buy 1 ounce of gold.
That ratio is now closer to 80:1, which bucks the relationship that the two metals have had over the last hundred years and suggests that silver is massively undervalued.
Cheaper price of silver
As the gold silver price ratio is 75:1, silver is a far more affordable investment vehicle for an investor wishing to park funds in precious metals. Therefore, an investor can purchase a substantially larger quantity of the metal when compared to gold. If we compare the prices of the two metals, we realise that an investor can buy a kilo of silver for under £500, but the same quantity of gold would cost more than £30,000. This is an important factor that has enhanced the popularity of silver as an investment vehicle. It is affordable to small and medium-size investors and buying and selling of silver is easy.
Good performance of silver over the years
Fundamentally, silver investments have performed well over the last ten years. Silver has delivered positive returns over the last ten years. In 2011, silver reached a spot price of $48 per ounce, on the back of investors pouring money into the commodity in an effort to escape volatility in the financial markets. Therefore, we can see that silver like gold, isn’t just a commodity. It acts as a currency in its own right and provides investors with an effective route to hedge against market risks. Silver has also historically tracked gold over the years and is an important factor in increasing its attractiveness to investors. Silver has a good outlook for 2018, making it an attractive asset class for investors. Both gold and silver are expected to appreciate in the New Year as investors want to hedge away from risks associated with the falling dollar, the threat of crypto-currencies and traditional companies being overtaken by new and innovative industries.
Silver is cyber-crime proof
Most asset classes, including stocks, crypto-currencies, bonds, futures, cash in bank accounts, etc. are all traded through electronic exchanges over computers. This opens up the risk of cyber-crime as hackers grow smarter and more daring each day. Virtual accounts can be raided, exchanges hacked and viruses released to destabilise investors. However, physical assets like real estate, gold and silver are proof against the risks of a cyber-attack. This is an important consideration when diversifying your investment portfolio and indeed, one of the objectives of diversification is to reduce risk. Investments in precious metals can, therefore fulfil this objective too and it’s yet another reason to hold silver as part of your portfolio.
Buying silver coins or bars, separates that portion of your wealth from the banking system and protects it from the various counterparty risks posed by the financial institutions.
Capital Preservation & Inflation Hedging
As with gold, one of the major benefits of silver is as a safe haven. With huge levels of Sovereign debt and paper money printing, traditional currencies have devalued significantly. Physical, precious metals such as silver, should be considered as an alternative store of wealth. Political unrest in various global regions threatens the stability of investment markets, leading to many investors purchasing precious metals, to protect their portfolio capital values.
Due to the safe haven nature of precious metals, silver can provide essential hedging and balance, to a mixed portfolio of assets. An allocation of silver may enable an investor to increase their risk appetite in other asset classes, whilst balancing the overall portfolio risk. Owning silver physically, in the form of bars or coins, provides additional diversification from traditional paper assets, which have recently been threatened by the global downturn.
Silver has exploded in the precious metals market, especially since the financial meltdown of 2008. In 2009, silver investment increased by 184% in just one year! In several of its applications – such as medicine and photography – the silver actually expires after usage. This means that the total amount of silver available in the world reduces each day. With increasing global demand, it’s easy to understand why the potential for capital growth in silver is significant.