Silver is one of the oldest precious metals known to man and has been used for jewelry, coins, and other decorative items for centuries. The precious metal silver has long been overshadowed by its counterparts gold and platinum. But in recent years, silver has begun to gain more popularity as an investment option and is now seen as a viable alternative to these other metals. Many investors view silver as a “safe haven” asset, similar to gold, which can provide protection against inflation and economic uncertainty. Whereas gold prices have increased at a relatively steady pace in recent years, silver prices have skyrocketed.
In 2020 alone, the price of silver more than doubled from around $16 per ounce to over $37 per ounce. While some observers believe that silver’s rally is simply a case of “catch-up” after lagging behind gold for many years, others think that there are specific reasons why silver is currently outperforming its yellow counterpart.
Here are some key factors that could be driving silver’s surge:
Increased Industrial Demand: Unlike gold, which is mostly used for jewelry and investment purposes, silver has a variety of industrial applications. It is used in everything from solar panels and electrical wiring to water filtration and medicine. As global economic activity picks up steam (especially in China), demand for silver is expected to increase accordingly. This means that demand for silver is not only driven by investor interest but also by real-world needs.
Safe haven asset: One key reason why investors are flocking to silver is because it is seen as a “safe haven” asset – similar to gold. That means it can provide protection against inflationary pressures or economic uncertainty. This becomes especially important when stock markets are volatile (as they have been over the past year). Many analysts believe we are currently witnessing a “flight to safety” away from riskier assets like stocks into steadier ones like bonds and precious metals.
Scarce supply: Silver is also viewed as being scarce relative to other precious metals. There are only so many above-ground ounces of silver in existence (estimates hover around 1 billion), compared with over 190 billion ounces of gold. That makes it rarer than gold and thus theoretically potentially more valuable (all else being equal).
Hedge against currency debasement: Lastly, investors see buying physical precious metals as a way to protect themselves against what might happen if central banks continue printing large amounts of money (a process known as quantitative easing or QE). This could eventually lead to inflation, eroding the purchasing power of paper currencies. Unlike some other investment options, there is no central authority controlling the supply of silver. This means that it cannot be manipulated in the same way as fiat currencies or even gold (which is often controlled by central banks). This makes it a secure investment option in volatile economic times.
Silver is the new precious metal. While there are many reasons to invest in silver, it’s important to remember that all investments come with risk. Prices can go up or down, so it’s important to do your research and make sure you understand the market before investing any money.
