If you wonder why buy silver today than look no further. This article gives you a brief overview of the reasons for buying silver today.
The reasons for owning silver are much the same as the reasons for why you should own gold. There are historical reasons, such as wealth preservation and protecting purchasing power, and there are more current reasons such as heavy central bank stimulus and currency debasement.
Silver does offer some different characteristics to gold though. More specifically, silver is an industrial metal, it’s historically trading at a “cheap” ratio relative to gold and silver offers more potential for price movement (ie volatility). The latter can work both to your advantage and disadvantage.
Let’s start with some of the general reasons for owning silver today and then look closer at the differences between gold and silver.
Similarly to gold, silver offers you a way of protecting yourself from the consequences of the significant increase in money supply launched by central banks – the monetary carelessness. The consequences of this excess liquidity are increased asset prices and debasement of the purchasing power of your fiat currency. The annual increase of silver production is far less than the fourfold increase in the monetary base we’ve seen in the U.S. in just the last 10 years. Silver is therefore naturally going to be more scarce and preserve it’s value better.
Real interest rates are negative in many countries. This is positive because it lowers the opportunity cost of holding physical silver.
Silver is a crisis hedge. If we see additional turmoil in the markets it’s safe to assume that silver will perform strongly, similar to what it has in the past, such as during the 2008 financial crisis.
End of the debt era. Silver offers a way of preserving wealth and purchasing power at a time when most countries have debt-to-GDP ratios above 90%. A level which usually is seen as a point of no return. For most countries, the only way out of this situation is by means that eventually drives up inflation. Silver works well as a hedge against high inflation.
Apart from the above-mentioned reasons, silver offers some very interesting potential today.
The so-called “gold silver ratio” is part of the explanation. The ratio is defined as the price of gold divided by the price of silver. Since 1687 the ratio has been between 14.4 and 99.76. Over this period the average gold to silver ratio was 27.28. Today the ratio is 61. Given the general fundamentals for precious metals let’s assume that gold isn’t overvalued. That means that silver still have room to rise in relation to the historical gold silver ratio average of 27.28.
Silver is also used for industrial purposes. It has unique properties including strength, malleability and ductility, electrical and thermal conductivity, sensitivity to and high reflectance of light and the ability to endure extreme temperature ranges. Silver is for example used in solar panels, cell phones, water purification, cars etc.
Silver offers more potential than gold. Silver is generally considered as being more volatile than gold. This can be both negative and positive depending on how prices move. In today’s environment, with strong fundamentals for all precious metals, silver is especially interesting.
So should you choose to buy silver or to buy gold? Just like with any sensible investment portfolio you need to ensure that you have proper diversification, so make sure you own a bit of both. For silver specifically, finding the cheapest silver bullion prices has to do with which location you purchase your silver bullion from – Estonia and Singapore being two VAT/tax free locations.
Please click below to access the best bullion distributors
BullionStar.com Singapore – cheapest bullion
Liberty Silver Estonia – cheapest bullion