In these times of economic turmoil, investors are looking for safe haven commodities to balance the instability of the market.
We’re well into the second half of 2020 and this year has certainly been one for the books, however it has taught us valuable lessons that we can implement to finish the year strong.
As investors are looking for assets to diversify their portfolios with, certain requirements come to mind as a way to hedge against inflation. Among them are a tangible way to measure real value and the ability to scale. If they’re able to create income – even better.
Overall, a strong asset to hedge against inflation would possess the following:
- Purchasing Power – Does this asset retain and/or increase its value over time?
- Liquidity – Can the asset be monetized into a transactional currency?
- Trustworthiness – How is it perceived throughout time and universally in value?
- Portability – Can you physically and logistically move this asset if you had to for an unforeseen reason?
Precious metals in particular possess the qualities above and have shown an extraordinary surge in these unprecedented times. Gold is still advancing for the tenth consecutive week, with the biggest pops occurring over the past three, passing the $2000 and now poised to top $3000 within a year or two.
Silver, meanwhile, has not only been on the same trend, but more than doubled its value. In March 2020, the metal dove to $11.63 and has since increased by over 250%, trading today (August 2020) at over $29, and gearing up to triple its price point.
The Silver Lining of the Economic Turmoil
Many analysts believe silver will soon surpass the $50 benchmark, with some even predicting triple digits for the white-hot metal. With other white metals such as platinum and palladium hitting price milestones, the move to precious metals is contributed to a number of factors creating the perfect storm.
At the forefront of this movement, one major catalyst is the Federal Reserve’s move towards unprecedented currency creation, monetizing the national debt and raising the inflation rate, making the dollar value drop as both international and domestic investors are seeking alternatives. The dramatic surge of the precious metals markets further signifies a potential longer-term decline for the dollar.
Since the gold and silver markets are also significantly smaller compared to global currency and bond markets, these metals can easily scale even with a small proportion of investors and asset managers allocating new capital to physical purchase or rolling over a retirement account. In fact, many investors are finding now to be the perfect time to roll over their IRA or 401K to include precious metals as their value has grown over exponentially and is showing no signs of stopping.
Essentially, investors looking to hedge their portfolio with gold to see long term gains, are now also considering diversifying with other precious metals, particularly silver as it’s been skyrocketing and poised to break unprecedented record highs.
No longer the poor man’s gold, silver’s price may still be more attainable to some investors. Given its incredible growth, it provides an opportunity for significant returns and increased profit margins.