Silver is real money that much is certain. It can’t just be created out of thin air. After all, silver is only available in limited quantities. More precisely, 0.0000079% is contained in the earth’s crust1. To buy silver as we know it, it must first be extracted from the earth and go through many processes before we can purchase it as coins or bars.
Already in the last year silver could indicate which potential for value increase it has. With a gain of 45.74%, silver outperformed other asset classes such as gold, S&P 500, DJI, and the USD. See the chart below:
Despite the great performance in 2020, a high like that of 2011 is still far away. However, this could be seen as an opportunity to enter the silver market.
3 reasons to buy physical silver now
#1 Sense of security
It gives you a sense of security when you can see the wealth you have in physical form and not in data form on a computer or smartphone. Especially in today’s times of uncertainty in the form of COVID-19 and politicians piling us with mountains of debt, it seems more than important to keep some of your wealth outside the system.
With physical silver, you are always highly liquid and can exchange it for currency anywhere. If push comes to shove, this option may well help us. In addition, we can decide for ourselves what to do with our silver, independent of any system.
#2 Silver is a safe haven asset
At a time when people are losing confidence in the fiat currency system, they are looking for safety. Since the outbreak of the COVID-19 pandemic, the governments of the world have been struggling to restore stability. Often with highly questionable means and decisions. Incredibly large amounts of liquidity have been pumped into the economy to kick-start recovery. This has added more debt to the already high federal debt. In addition, many mechanisms are currently intact that devalue currencies. Quantitative easing, negative real interest rates, and the aforementioned high debt and deficits are all mechanisms that devalue a currency. Not to mention the high inflation figures that continue to erode our purchasing power. Even if the Fed says that inflation is only transitory, it is likely that inflation will continue to rise.
It is in times like these that safe-haven assets can help us maintain our prosperity. Silver has shown in times of crisis that it is a safe haven. Just look at the last financial crisis that started in 2008. Silver was able to gain 488% at the peak. Gold, on the other hand, only gained about 160%. This means that silver prices could soon be much higher than they are now.
#3 Silver is cheap
In the meantime, the silver price was able to crack the $24 mark and is currently at $24.77 (Friday, September 3). As mentioned above, measures are currently in place that devalues the currency and causes high inflation figures. All these are arguments that we could soon see much higher silver prices. Whether these go to the high from 2011 remains to be seen, but it would not be unrealistic if the silver price could soon be significantly higher and possibly push to a new all-time high. Should that be the case, a silver price of $24 seems ridiculously cheap.
Another factor arguing for higher silver prices in the future is the numerous industrial applications. Silver has one property that makes it an important industrial metal and that is it is the metal with the highest conductivity. As the whole world races towards electrification and decarbonization, the demand for silver will inevitably increase. Silver is used in solar cells and electric vehicles, for example. There is about 20-50g of silver in an electric vehicle. Not to forget, silver is also used in our smartphones.
On the one hand, demand is increasing, but the supply side has been decreasing since 2016. Significant new silver sources have hardly been found or searched for in recent years. And even if there is a significant discovery, it takes at least a decade to get it into production. So if nothing changes here, we could soon see a silver shortage, which in turn will cause the price of silver to rise.
Certainly, some of the available silver comes from recycling. But most of the time it is not economical to recycle the silver and it ends up in landfills.
- Gray Theodore (2018), Touch Press Inc.
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