When investors begin to think about investing in precious metals, their thoughts naturally turn to gold. Gold has a long history of use as a monetary metal and as an investment asset. It is the precious metal that mainstream financial media loves to talk about. And it has an enduring appeal that makes it incredibly attractive for those looking to protect their assets. But gold isn’t the only precious metal that can help investors, and if investors ignore the others, they could risk missing out on potential gains.
Silver is the other major precious metal that is sought after by investors, but it often gets short shrift. You might hear silver mentioned in passing after watching a news segment on gold prices, or maybe you’ll hear a small piece of analysis on the silver price every now and then. But the lesser amount of attention paid to silver doesn’t mean that it’s not worth it for investors to pay attention to silver.
Given the current price of silver, its relationship to gold, and its prospects for the future, the gains to be made by investing in silver could very well exceed those that can be made in gold. Here are five reasons silver could be a great investment today.
1. Potential for Price Appreciation
Many investors like to focus on big numbers because that makes them feel rich. Just look at Berkshire Hathaway stock, at over $300,000 per share, or gold, which recently broke through the $2,000 barrier. Then look at silver, at just under $25 an ounce. Is it any wonder that the higher-priced assets get the most attention?
But the fact that silver’s price is so low means that the potential for high percentage gains could be greater. After all, if gold rises in price by $50 an ounce, that’s only about a 2.6% gain. But a $3 gain in the silver price is a nearly 13% gain, five times the gain for gold.
Historically, we saw silver gain more than gold during the aftermath of the 2008 financial crisis, as gold nearly tripled in price, but silver nearly quadrupled in price. With silver undervalued with respect to gold right now, we could see a repeat of that performance of silver versus gold in the near future.
2. Surging Industrial Demand
Unlike gold, which sees the majority of its demand from the jewelry and investment sectors, roughly half of silver’s demand comes from industry. Historically, silver demand came from the photographic industry, as it was heavily used in photo film. As film was replaced by digital cameras, the silver price went into a slide for a number of years. But now silver has rebounded as industry continues to find new uses for it.
One of the most promising uses for silver today is in photovoltaic cells, i.e. solar cells. Silver is crucial in the production of solar panels, and as demand for solar panels increases, so does demand for silver. The photovoltaic industry continues to try to reduce the amount of silver required for each solar panel, but overall demand for panels will likely still result in a significant increase in demand for silver. California recently mandated that all new home construction must contain solar panels, and if similar mandates spread worldwide, expect silver demand to increase too.
3. New Uses in Technology
Silver’s use as a conductor makes it a natural fit in all sorts of electronics. And its low price in relation to many other metals makes it a natural choice for new technologies.
From catalytic converters to electric car batteries, researchers are constantly finding new ways to use silver. And as the number of uses for silver increases, so too will silver demand and the silver price, benefiting those who have already invested in silver.
4. Silver Supply Is Falling
Much silver production from mines comes not from primary production but from secondary production. Mines that produce lead, zinc, tin, nickel, and other base metals very often have silver mixed in with those other metals. And as demand for those base metals ebbs and flows, so does silver production.
In fact, the last several years have seen the beginning of a slow downward trend in silver mine production. Silver recycling from other sources has also been decreasing, and the trend for the future appears to be a gradual decline in production, while demand looks set to increase. That imbalance will impact the silver price and should cause silver to continue to grow.
5. Silver Is Undervalued
Silver and gold have long been used as monetary metals, and for long periods of time their values trade in a relatively stable relationship. In recent years the ratio between the silver price and the gold price has hovered between about 30:1 and 50:1, meaning that the gold price is 30 to 50 times higher than the silver price. But lately the gold price has been over 100 times higher than the silver price, and currently is about 80 times higher than silver.
That means that silver is undervalued relative to gold, which gives investors a great opportunity for growth. When the economy continues to weaken, and the silver price increases as more and more investors flock to silver as a safe haven asset, that price ratio will decline. If gold increases to $2,500 an ounce, don’t be surprised to see silver hit $50 an ounce, more than double its current price, as investors stock up on precious metals. Keep an eye on the gold-silver price ratio to figure out when it might be the right time for you to buy silver.
How to Invest in Silver
Just as with gold, those who want to invest in silver can do so through an IRA, in this case a silver IRA. A silver IRA allows investors to invest in physical silver coins or bars, while still enjoying all the same tax benefits as any other IRA. You can even roll over existing retirement assets from 401(k), TSP, IRA, or similar retirement accounts into a silver IRA, allowing you to lock in your existing retirement account gains while subsequently benefiting from an investment in silver.
Goldco isn’t just a gold IRA specialist, we’re a silver IRA specialist too, and our experts have helped thousands of investors just like you benefit from investing in silver. If you want to learn more about a silver IRA and the benefits of investing in silver, contact Goldco today so that you can put silver to work in protecting your retirement savings.