Generally speaking, most numismatists already buying gold and silver don’t need more reasons to continue investing in precious metals. Those who favor precious metals for the ability to protect a portion of their wealth against the unpredictability of stock markets aren’t easily swayed away from that approach. For those who are on the fence however, investing in gold, silver, platinum, and palladium seems daunting. Here’s 5 reasons you can contemplate as you look into buying precious metals in 2018.
Stability
At the moment, investors and currency watchers are focused on cryptocurrencies such as bitcoin. The last quarter of 2017 was dominated by talk of bitcoin and its skyrocketing value. In December alone, bitcoin soared to a record high in the $19,000 to 1 USD range, but spent the rest of the month wildly jumping up and down. Eventually, bitcoin prices finished the year down further. At the moment, bitcoin is sitting around $15,210.08.
Silver and gold, by comparison, remained extremely stable throughout 2017. While stable trading ranges often deter some investors, gold and silver went on a run at the end of 2017 to surpass $1,300 and $17.00 respectively to close the year out. So far in the opening days of 2018, both metals continue to move forward. While unremarkable to some, that stability makes gold and silver a more attractive option for some compared to other investment options like popular cryptocurrencies.
Markets are Booming, but on the back of Debt
Investors have excitedly watched as the Dow Jones Industrial skyrocketed throughout 2017. The Dow Jones in particular was an exciting watch. It shot its way to 87 record-high closes dating back to the 2016 presidential election. In fact, the Dow passed 1,000-point milestones four times in 2017, the first time in the market’s history. The market surged across the 20,000, 21,000, 22,000, and 23,000-point marks and is currently above 24,000. However, that surge isn’t as bright and shiny as it might seem.
The stock market enters 2018 at record levels of margin debt. Adjusted for valuation, the stock market has its highest levels of margin debt since the 2000 bubble. Gold and silver, on the other hand, enter the New Year with open interest on futures, relatively low levels, and retail bullion demand low, but rising.
Industrial Uses Soaring
The industrial uses of precious metals are rising. Silver, in particular, is found in a wide array of products consumers are using on a daily basis. Electronics, medical applications, batteries, and solar panels are just some of the everyday uses of silver. In fact, industrial uses represent the largest source of silver demand. While investments in coins and bars represent 11% of silver demand right now, industrial uses such as those mentioned above represent 56% of silver demand. Here’s just two examples of growing demand for silver:
- The average smartphone has roughly 1/3 gram of silver. Estimates suggest that 5.75 billion mobile phones will be manufactured and sold between 2017 and 2019, resulting in the demand for 1.916 billion grams of silver (or 57.49 million ounces).
- Photovoltaic cells, predominantly used in solar panels, are surging as well. Demand for silver in 2018 to build photovoltaic cells is expected to rise 75%.
Diversity – Copper
Often overlooked, copper is classified as a commodity metal rather than a precious metal, but it is popularly used in copper rounds and bars for investors. Industrial uses for copper have long been a source of demand for this base metal, but 2018 could push that higher as well. Global economic growth and housing booms are stretching copper supplies. China is the #1 source of demand for copper, with the United States at #2. The long-term demand for copper isn’t going to lighten up either, with electric vehicles continuing to penetrate the automotive marketplace domestically and globally.
Moreover, copper offers buyers a diverse option. The ebb and flow of copper prices differs from that of precious metals. As an industrial metal, copper’s value is driven almost entirely by economic demand and marches to the beat of its own drum. This diversity is beneficial to investment portfolios.
Supplies are Stretched – Rising Prices Possible
Last but not least, precious metal supplies are stretched at the moment on a number of fronts. At JM Bullion, we previously posted on the challenges facing silver in particular. Mine supplies are falling around the globe. As research and exploration spending dips, firms are mining less and the result is pushing the precious metals market toward a future of falling supply. Of equal concern, the secondary supply of silver is also falling. Scrap silver sources have been in decline since 2013, dropping each year.
In a potential perfect storm for the market, we noted above the demand for silver (and to a lesser extent, gold). As any student of economics knows, supply and demand drive prices in any marketplace. With supplies facing downfalls and demand on the rise, the resulting impact could deliver higher prices.
Focus on Annual Releases to Start
With all this information in mind, precious metal investors and collectors have a lot of options in front of them. At JM Bullion, we have gold and silver bars, coins, rounds, and even statues. If you aren’t sure where to start, look to the annual releases from government mints, such as the American Eagle Series, Canadian Maple Leaf Series, British Britannia coins, and the Chinese Panda Series.
