Many factors can influence the value of precious metals including silver.
When civil protests, inflation, or anything else erodes public faith in the ability of government to maintain economic and political stability, it tends to drive up the prices of precious metals. Gold and silver investing are seen as forms of portfolio insurance — investors include these metals in their investment plans as security against volatility.
As an example, when Lehman Brothers went under in 2008, faith in large institutions fell. It caused the price of gold to rise by 15 percent over a short period of time.
In 2011, when the European Union was caught up in a debt crisis, and the obligations of Greece, Ireland, and Italy were categorized as junk bonds, people began to store their wealth in gold and silver. Increased demand caused gold to double in price, and caused silver to quadruple in value.
Investors no longer see a financial collapse in their futures. For this reason, there is less demand for precious metals, and their prices have dropped.
Gold sells affordably at about $1,300, and silver sells at $15. At these competitive prices, these metals, silver, especially, are a good idea to buy now.
Why is it a good idea to invest in silver now?
Most people don’t worry about inflation in today’s economy. Unemployment is at under 5 percent, and inflation is under control.
It would seem unnecessary to many to put money into precious metals now as an insurance policy against economic upheaval. It’s important to remember, however, that recessions and economic slowdowns can be hard to predict with any accuracy.
The trigger for the next monetary crisis may be default by a large corporation that has excessive debt, or it may be an increase in inflation when no one expects it.
Economists have so far not been able to predict when financial crises strike. In these circumstances, it makes sense to think of precious metals as an insurance policy — you don’t need them at the moment because the country is in good financial health, but you don’t know when disaster will strike.
You can buy silver when prices are low, as a form of protection against potential disaster. It may not be the best investment for now, but it could turn out to be excellent protection one day.
When you have security in mind, silver is often a better idea than gold. It is cheaper to buy, and when economic or financial instability strikes, it tends to rise more quickly in value than gold.
Silver being less valuable than the yellow metal, it is more easily divisible into small coins, as well. It can turn out to be an excellent store of value in case inflation or political instability leads to loss of confidence in paper currency.
The price of silver, now, has declined more steeply than the price of gold. You’re likely to get better value for your money investing in silver, than investing in gold. Portfolio insurance with silver investing is far more affordable than insurance with gold.
Be careful when buying silver
In the 70s many investors allocated large parts of their financial portfolio to silver. One notable billionaire investor named Nelson Bunker Hunt, however, became obsessed with cornering the market in silver and bought up most of the world’s output. The government caught up with him and charged him with trying to manipulate the market. Before long, he was forced to file for bankruptcy.
Silver can be a great form of portfolio insurance. But it’s important to see it as only a way to hedge your bets. Silver shouldn’t be your exclusive investment plan. When you treat it as only a way to buy some stability and security in the event of a financial crisis, it can be very useful, indeed.
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