Wading through Quora discussions recently, one concern stood out: Will silver be a good investment this year? The matter is valid, amidst speculations of a dollar crash. Investors are exploring their options in this pandemic. Let’s look at the potential of this precious metal.
How does silver perform historically?
Just for context, here’s a brief comparison of gold and silver. Both precious metals have their use in investment and industry. Gold, however, tends to be hoarded more than silver—typically for jewelry and currency reserves. Its value rises and falls with the actions of the hoarders (or investors), instead of the straightforward laws of supply and demand.
In contrast, silver is also perceived as something to store or invest in, but its high demand as an industrial material (which is about 56%) balances out the investment value. An additional 25% may go to jewelry. As such, silver often succumbs to supply and demand dynamics, and its prices can be unpredictable.
It’s not just an investment instrument or a fashion accessory. Its use in electronics, appliances, medical products, semiconductors, and microcircuits has raised the demand for it. The more silver used in a variety of industries, the more likely its prices will fall. But the higher the need for it for investment, the more likely prices will rise. Such volatility is not comforting for owners of silver rounds, coins, or bullion, who are looking to profit from it.
Should you hold on to your silver?
According to investment site Benzinga.com, investors tend to hold on to silver during a financial crisis, such as this coronavirus pandemic, because this is when its demand goes up and its value is steady. They hold on to their silver bars, coins, and bullion so that they could sell at a profit when the market improves.
However, it’s also during bullish times that the price of silver is most volatile. This is because investors are selling, and the industrial demand is up. Price fluctuations from global demand, inflation, a surplus of supply, and changes in government policies are four of the known silver investment risk factors.
Is today a good time to invest in silver?
Today, due to the financial turmoil worldwide, the industry is seeing a rise in investment demand for silver. The demand has been increasing for the past two years and spiked in 2019 at 1.13 billion ounces. Silver prices, however, didn’t go up that much, as expected. It fell with the stock market crash recently, but also not that much, which experts say is a significant piece of information. It usually plunges with the stock market, but it held its ground.
Toward the last week of May, silver was inching up to $17.50, the highest after pre-crisis levels, but news of a possible vaccine triggered a sell-off in precious metals, lowering silver to $17. The same upward trend happened to gold, but unlike silver, it remained high despite the vaccine news. The gold-silver price ratio now is higher than 2008 levels and inching toward 1991 levels, which is the all-time high. It means that gold continues to climb, while silver is just hopping around, ready to go in any direction.
Having said all that, experts believe that we’re at a crossroads today, but it’s not time to make a big choice—yet. While monitoring stocks, currencies, and the vaccine, hold on to your silver or buy at current rates. But be mindful of its price patterns and the movement of the global economy.