Like its counterparts gold and platinum, silver’s intrinsic value has been recognized throughout the ages as a store of wealth and a hedge against economic downturns. Used as a currency for thousands of years, silver offers a unique combination of affordability, liquidity, and diversification benefits that has made it a popular choice for both investors and collectors. With its demand expected to remain strong amid both short-term and long-term economic uncertainty, silver provides a way for individuals and institutions to diversify their assets and guard against the threats of inflation and market volatility.
Like its counterparts gold and platinum, the intrinsic value of silver has been recognized throughout the ages as a store of wealth and a hedge against economic downturns. Used as a currency for thousands of years, silver offers a unique combination of affordability, liquidity, and diversification benefits that has made it a popular choice for both investors and collectors. With its demand expected to remain strong amid both short-term and long-term economic uncertainty, don’t underestimate the value of silver. Silver provides a way for individuals and institutions to diversify their assets and guard against the threats of inflation and market volatility.
Silver has historically protected against inflationary pressures as its value tends to rise during periods of rapid price increases. When demand for goods and services outpaces supply or a government prints money, prices rise, eroding the purchasing power of a nation’s currency – something average Americans have become all too familiar with in recent years. Buying silver, with its With silver’s price tending to move in lockstep with the cost of goods, it can act as a buffer against inflation and its associated price hikes. For this reason many have turned to buying silver.
During the stagflationary ’70s, when the US economy suffered years of double-digit inflation, the price of silver rose from $1.83 per Troy ounce to $30.13 per Troy ounce – a nominal return over 16 times the original price. The 1,546% increase handily outperformed all other major asset classes at the same time, even outperforming gold, which rose by 988% during the same period. With the Federal Reserve’s ballooning balance sheet and the looming debt crisis, many economists have poignantly warned that the US may be entering a period of prolonged stagflation similar to the one witnessed in the 1970s. Global de-dollarization that continues to gain traction with the BRICS currencies could further erode the value of the US dollar and make it increasingly difficult for average Americans to maintain their standard of living. In buying silver, individuals can help protect their wealth from inflation and guard against a weak dollar.
Unlike other precious metals, silver remains both historically undervalued and highly liquid – a unique combination that makes it an attractive choice for both short-term and long-term holding. At roughly 1/70th the price of gold, silver’s low cost per unit provides a cost-effective way to diversify and reduce risk exposure, while its liquidity ensures owners can quickly convert their silver bullion into cash if necessary. While silver tends to move in tandem with gold and other precious metals, the white metal’s comparatively low price makes it more accessible to individuals who may not have the funds to purchase significant amounts of gold. Silver prices today are well below their 2011 highs, making them a prime candidate for growth in the future, amid the backdrop of a potential global economic crisis and inflation.
The gold-silver ratio, a measure of the relative value of gold compared to silver, further supports the notion that silver is undervalued. The ratio, which stands at approximately 86 to 1 today, has historically averaged around 15 to 1, reflecting a much higher price for silver historically. Following the last three periods when the ratio exceeded 80, the metal’s price rallied 40%, 300%, and 400% respectively. With the ratio once again at a historically high level, advisors are seeing the current value of silver and are predicting that silver’s prices could replicate similar gains over the coming years.
In addition to its current undervaluation, silver’s favorable supply and demand dynamics make it an attractive long-term option for individuals looking to help protect and grow their wealth. Between its peak in 2015 and 2020, global mine production of silver fell by close to 15% – a decrease that was only partially offset by recycling and secondary supply sources. “Silver is in a shortage… and there is a notable drawdown in the available physical stocks held in New York and London’s physical hubs, more so than seen in gold,” said one precious metals analyst in response to the supply shortfall. While silver production has recovered modestly following a ten-year low in 2020, the metal’s supply-side remains constrained, leaving the door open for prices to move higher in response to increased demand.
Meanwhile, demand for silver continues to grow, amid a surge of interest from both private owners and institutional investors. Growing demand for buying physical silver such as coins and bars is becoming more pronounced, as more individuals and institutions look to diversify their savings with the metal’s low cost per unit – a trend that experts say should continue in the near-term. Demand for silver bars and coins soared by 36% in 2021, with similar demand increases in 2022. Industrial and technological applications, which account for roughly half of global silver consumption, are also on the rise, as the metal’s electrical and thermal conductance makes it ideal for use in numerous hi-tech applications.
With silver demand expected to grow by more than 15% over the next five years, many analysts remain bullish on the metal’s prospects, citing its favorable fundamentals and undervalued pricing as key drivers of its future performance. And with global economic uncertainty continuing to drive people towards store-of-value assets, silver looks poised for growth – particularly given the recent surge in demand from new markets like China and India.
While industrial demand for gold is relatively muted, standing at roughly 10-15% of total global demand, silver’s unique properties make it an essential metal in a myriad of industrial applications. In addition to its electrical and thermal conductive properties, silver is also antimicrobial, making it ideal for use in a range of medical and sanitation solutions. Silver’s industrial uses span a wide range of industries, from automotive and electronics to textiles, apparel and medical devices.
Having hit record highs in 2021 and 2022, demand for silver is expected to continue to rise in 2023, largely fueled by the shift to vehicle electrification and renewable energy, as well as the continued growth of the medical and sanitation industries. As silver’s wide range of industrial and technological applications become increasingly essential in our rapidly evolving world, demand is expected to strengthen – potentially pushing prices past their all time highs. And with over 85% of the metal used in industrial applications being discarded as waste, the supply of silver continues to remain constrained, creating an attractive entry point for those looking to capitalize on the metal’s historically undervalued prices.
With silver’s favorable fundamentals and a bullish outlook, many analysts believe that the metal offers a compelling long-term opportunity – one that could potentially yield substantial returns in an increasingly uncertain world. As geopolitical tensions threaten to escalate and economies worldwide are forced to grapple with the challenges of an uncertain future, now could be the perfect time to enjoy the benefits of owning silver, especially with its unique properties and low cost per unit.
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