Stealthy Silver – Gold’s Volatile Sister MetalJames Cordelaine
Of all the precious metals, gold shines as the most high-profile; a preferred investment for professional traders that acts as an effective hedge against a declining stock market and weakening dollar. Gold’s had a particularly heady run this year, exerting a great deal of monetary muscle as central banks uniformly use it as a hedge against their dollars. But is all that flash overshadowing the stealth asset that is silver?
As Wikipedia aptly puts it, “In econometric and volatility analysis, silver [has] shown effective safe haven and hedging properties against downturns in international equities markets.”
It works similarly as a safe haven and hedge against an uncertain dollar. And, like gold, it can serve as a store of long-term value in your IRA, holding on to buying power that‘s being sapped from your dollars over the decades.
But investing in silver also provides two additional benefits not as easily obtained through a gold investment. If you’re concerned about storing substitute currency in the event our monetary system collapses, or even for short-term disasters that could curtail access to traditional means of accessing cash, like earthquakes and floods, you’re better off using silver coins, as they’re sold in smaller denominations. Imagine if all you have are gold coins and you need a loaf of bread. As the fellow said, “If all you have is hundred dollar bills everything’s going to cost a hundred.” Best to have some smaller denominations available.
Obviously, in the event of such an economic meltdown, you could still make large purchases with gold coins if you had to, but silver gives you options.
Like gold, it’s also widely used in the jewelry market. In fact, the Silver Institute reports silver jewelry sales were measurably stronger in 2015. The average silver growth rate in jewelry sales was fifteen percent. Forty-five percent of retailers reported the gray metal experienced the best turnover rate in 2015, as compared with diamond, gold and platinum jewelry.
But because silver’s pricing is more volatile than that of gold, it also has the potential to offer an investor a greater return. The enhanced volatility of silver stems from its frequent role as an industrial metal. It’s used in consumer electronics, including computers and smart phones; air conditioning and solar panels; and automotive manufacturing. In 2014, almost six hundred thousand ounces of silver were used for industrial applications.
Silver’s array of industrial applications gives the gray metal a special spike in a precious metals bull market. Its price action has the potential to catapult with global manufacturing’s increased demand for commodities in general.
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So, by all means, be sure to invest in gold. Let it be the basis in your nest egg for stored value and a hedge against stock market value. But don’t forget the stealth benefits of silver. Its extra industrial price jolt will serve you well as all precious metals continue to thrive.