Why Silver?

What are the Advantages of Owning Silver?

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Silver’s intrinsic value comes from it being an essential element in the manufacturing of many products. In addition, it can act as a portfolio hedge in times of financial crises and political uncertainty. These benefits mean that silver can reward portfolios under both favorable and unfavorable economic conditions.

Since mining the first silver in Anatolia (modern-day Turkey) around 5,000 years ago, we’ve favored this precious metal as currency. The Greeks and the Romans minted silver coins and used them across their empires, as did subsequent civilizations. It was only at the end of the 18th century that pure silver coins were withdrawn from circulation and replaced with issues that contained only traces of the precious metal.

Silver has a long history as a store of value and as one of the world’s greatest currencies, but for retirement portfolios, the unique precious metal offers many other advantages.

Below are three other important reasons to own silver:

1. During high demand for precious metals, silver has outperformed gold.

The price of silver is more volatile than gold due to the factors that drive its price changes. This is a reason why silver is often viewed by investors as inferior to gold in its value to their portfolio. But this volatility is key during periods of economic turmoil, which cause the price of precious metals to enter a bull market phase. If you as an investor think we are heading into a precious market bull market, then know that in all previous bull markets, silver has historically outperformed gold significantly.

The 1970s—a decade that saw double-digit unemployment, soaring inflation, and immense geopolitical turmoil—are a great example of the performance of silver over gold. Within 10 years, as stock markets were failing, gold soared by 1,754%, but silver climbed an astonishing 2,490%.

The 2000s will always be remembered for the onset of the global war on terror and, at the end of the decade, the Great Recession. From 2000 to 2011, gold increased by a remarkable 542% but was beaten by silver, which soared by 908%.

While the financial media and investors mostly focus on gold when discussing the performance of precious metals, silver, in reality, could deliver even better returns than gold when precious metals prices are rising fast.

Graph of the value of gold and silver after 2008.

2. Growing demand for silver and its limited supply.

Silver is an optimal conductor of heat and electricity, so it is a key component in a wide range of products, with continuously growing demand. For instance, silver is incorporated in solar panels, cellphones, computers, appliances, and motor vehicles.

Today, industrial demand for silver accounts for around half of its global market, and nearly half of all mined silver has been either consumed by industrial use, destroyed, or discarded. Another 47% is believed to exist as jewelry. That leaves a supply for investment purposes of only 3% of the silver that has ever been mined—or $46 billion worth of silver for the entire investment world. This relatively small supply of available silver makes its price rise significantly, even when demand is only small.

3. Silver is undervalued.

One way to see if silver is under- or overvalued is to compare its price to the price of gold. Historically, the ratio of the price of gold to the price of silver has been 16:1 (one ounce of gold is 16 times more expensive than one ounce of silver). The current ratio stands at over 100:1. Many precious-metals experts forecast the gold-to-silver ratio to narrow with silver bridging the gap. This will leave a significant amount of space for the precious metal to appreciate, and silver will need to increase by more than 4.5 times its current value just to get back to the ratio to gold it has been enjoying for a century.

In other words, silver could currently be very undervalued with a healthy margin for potential growth. We see a great opportunity to acquire silver at a price that could very well be substantially below its true value.

This is in addition to silver’s spectacular historical rates of return—exceeding gold’s—during financial crises, and that makes it, in our opinion, a highly important portfolio asset.

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