Silver – A Precious Metal With Potential
For thousands of years, people are taking advantage of the beauty and multi-utilise ability of silver it has kept by these days.
One of the main reasons why silver held its position among precious metals is the fact that since antique civilizations (e.g. Greece), this metal was used as both, currency as well as a store of value in the form of different jewels.
When it comes to popularity these days, silver is still highly demanded not only due to its potential investment use, but also thanks to its extensive exploitation in industries (e.g. photovoltaic industry, production of plasma screens, etc.).
Why do traders invest in silver?
- Diversification of portfolio and risk mitigation
- Trust in the global increase of industrial use of silver
- Expectations that the offer will be dropping in the future
- Assumption that the investment demand will rise
Let’s take a look at each of these in more detail below:
Diversification of portfolio and risk mitigation
- Probably the top reason why investors invest in silver is the purpose of protection of their funds. Portfolio diversification is a tool set for the purpose of risk mitigation, however, in case of investments into precious metals, traders are also trying to avoid risks resulting from economic crises. Since trust in financial markets usually declines during economic crises (stagnation and price drop occurs), investors rather prefer investments in assets that provide them price stability.
Trust in a global increase of the industrial use of silver
- As we mentioned above, silver is an important manufacturing material for many modern technologies, therefore, there’s a real chance that not only the price, but also the opportunities for the use of the precious metal will be rising in time.
Expectations that the offer will be dropping in the future
- Drop in price of silver over the last years along with rising costs for its mining results in a global decrease in the offer of this metal over time. With regard to the fact that silver represents an integral part of certain modern technologies, we may expect that its price is going to rise again on the basis of a decrease in the offer of silver and the rise of costs for its mining.
Assumption that the investment demand will rise
- Although the industrial demand for silver is not relatively consistent, we may expect that in case of investment demand, it’s going to rise. This assumption is supported not only by the reasons stated above, but also by the fact that the price of silver moves relatively by a small margin over a long time.
To invest or not to invest in silver?
Each investment has its pros and cons. Naturally, silver is not an exception. However, if we keep the concept when investment into silver would mean an extension of the portfolio, i.e. its diversification, it could be beneficial for the entire portfolio for a couple of reasons.
A clear reason number one is, naturally, the relative decrease in the risk of the portfolio. However, even the rising potential of silver has something to offer in these days. Its actual low price may mean that e.g. not only during the inflationary period, but also at the same time, during the deflation, this metal may achieve better results compared to any other asset. Investments in silver may also represent a way how to bet on market sentiment in developing countries. As we know about the people in these countries that thanks to economic instabilities, they trust fiat currencies less, so they instead invest into harder assets, as e.g. the silver.
So, the question is: to invest or not to invest in silver? Unfortunately, each of us has to find an answer on their own.
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