Is Silver a Good Investment?

Silver is rising in investment portfolios more than ever before. Rising inflation rates and economic instability are prodding people to seek a safe haven.

There’s no doubt that interest in silver as a portfolio diversifier is nothing new. It does beg the question – is silver truly a good investment?

Let’s dive into that question a bit more deeply.

The Historical Stability of Silver

Silver’s history with humanity stretches back into the BC era. People in Egypt, Turkiyë, and other close areas of the near east made jewelry out of silver thousands of years ago.

The Egyptians themselves created the first well-known silver currency. The shekel became a standard medium of exchange in the region for hundreds of years.

Since then, silver has been a common feature of currencies and jewelry around the globe. It was a particular favorite of Spanish explorers coming to the New World, and the country’s intensive mining of silver was one of the chief drivers of Spain’s influence in the newly-discovered areas between 1500 and 1800.

Silver’s perpetual benefit is its ability to withstand and weather financial downturns, soaring inflation, and other instabilities that might cause the value of fiat currency to dive. As recently as the 1960s, the US government hoarded mass quantities of silver as a means of price control and value retention.

There is no reason to suspect that situation will change. However, let’s talk a bit more about exactly how silver acts as a hedge against inflation.

See more: Silver spot price chart

Silver as a Hedge Against Inflation

In order to understand how this works, you have to understand the source of inflation within an economy. Inflation occurs as governments add more currency to their economies without increasing the productivity and value of that economy.

In other words, it occurs when they print more money without growing the economy to match. The addition of the extra currency dilutes the value of the currency, as it essentially adds to the denominator of the equation, where the value of, say, a dollar is a function of the US gross domestic product.

For a time, the value of a dollar was legally tied to an amount of gold. In turn, the value of gold and the value of silver were set in direct proportion with one another. Thus, inflation really wasn’t such a big concern, as there were tangible connections to the value of gold or silver.

All that changed in the US between 1940 and 1971. The combined efforts of Presidents Roosevelt and Nixon severed the dollar from the gold standard and allowed its value to float as a relative amount against other currencies.

Thus, barring the government recapturing and removing currency from the economy to a great degree, a floating currency will always inflate and lose value. As the Fed or other central banks add more physical currency to the economy, each additional note makes the others less valuable.

Silver is a hedge because silver is a thing of value. In general, its steadfast status tends to make the value of it increase in the face of inflation. Thus, if you’re looking to find a safe harbor when the economy appears to be headed south, silver is often a good choice.

The Growing Demand for Silver

Silver diverges from gold and other precious metals in one aspect: its industrial utility. Although there are several industrial uses for gold, platinum, and palladium, the demand for silver within certain business sectors goes far beyond the other precious metals.

For one thing, silver’s incredible electrical and thermal conductivity make it a must-have for the electronics industry. Electronic contact points, circuit boards, and LED chips all rely on silver heavily to work at their optimal capacity. In addition, silver is often used as a soldering medium to bind parts together, as the conductivity helps that way, too.

Silver is also notably antimicrobial. Therefore, it is of great use to the medical industry. Silver is often used in creams and ointments to dress wounds and to treat skin infections and blemishes. Of course, it’s also a natural fit for many medical devices, as it both resists bacteria and conducts the electrical charges better than any other metal.

However, the demand for silver is growing tremendously now due to the increased focus on green power initiatives. Solar panels – particularly the newer versions – are absolutely dependent on silver to function.

Their photovoltaic cells simply cannot perform at maximum efficiency without the aid of silver. In fact, it is likely that this new demand is one of the primary drivers of the growing silver shortage in the world that has existed since 2021.

Of course, all of that demand is also alongside the demand for jewelry, flatware, and coin-making materials. So, the need for silver is likely to rise moving forward.

Silver’s Affordability Compared to Gold

Despite the growing demand, silver remains a much more affordable and accessible precious metal than gold or any of the others (unless you count copper). Many beginning investors find themselves drawn to silver because they can dabble in precious metals without exposing too much of their net worth.

However, the affordability of silver doesn’t diminish its capacity for long-term growth. Though there have been many zeniths and nadirs, silver has generally trended upwards over the period since the national divorce from the gold standard. The increasing demand for silver from industry is not going to hurt its value for investors.

Conclusion: Why Silver is a Smart Investment

In short, silver is set to be an excellent investment going forward. Like gold, it stands as a bulwark against inflation and poor economic conditions.

It is also a tangible asset that allows you to diversify your portfolio through silver bars and silver coins. Even if you’re not concerned about inflation, it serves as a counterbalance against the general direction of some of your other assets – assets like stocks or other instruments that move up or down directly with the economy.

Needless to say, we urge you to consider adding some (more) silver to your portfolio. If you’re interested, you can get in touch with us whenever you’re ready to make a move.