When financial crises are on the horizon, investors look to safe havens in order to protect their investment assets. Inevitably, gold is the first asset that most investors look to, as it grabs attention like no other. But many investors might be better served by silver, which all too often basks in gold’s shadow. If investors were to pay more attention to silver, they might find that it serves their investment needs just as well as gold does.
Gold’s performance during times of crisis is legendary, but silver is no slouch either. Now that both gold and silver are no longer monetary metals whose price and exchange value governments are actively attempting to control, their prices are determined by market forces of supply and demand. In the case of silver, both a growing supply deficit and rising demand could mean rising prices, and in particular prices that grow faster than gold.
During the aftermath of the last financial crisis, silver actually outperformed gold. Gold nearly tripled in price from its 2008 lows, while silver nearly quadrupled. During the next financial crisis, silver could easily repeat that performance, which would result in the white metal reaching all-time highs.
Right now the gold to silver price ratio is over 110 to 1, a historically high ratio. In other words, silver is ridiculously cheap when compared to gold. Normally that ratio has hovered between 45:1 and 75:1, such as during the aftermath of the 2008 crisis. And normally that ratio is relatively stable over time. But right now, with industrial demand for silver having fallen as a result of the worldwide economic slowdown, industrial demand for silver is falling, leading to a temporary stagnation of the silver price.
That’s just the opportunity that many investors have been looking for in order to accumulate silver at bargain prices. With a severe recession ahead of us, there’s a high likelihood that gold could very easily top its all-time highs, breaking the $2,000 mark by next year at the latest. If the silver to gold ratio were to fall to a level more in line with historical averages, say 60:1, then we would expect to see silver prices over $33, more than double today’s price. And two or three years down the road, silver could continue to gain.
That’s just a reminder that all that glitters isn’t just gold. There are plenty of other precious metals investment options out there. So if you’re looking to protect your tax-advantaged retirement savings with something other than gold, think about investing in silver.