Silver has always been known as a great store of value and an insurance policy against a weakening global economy (Just look at how silver prices soared with the news of chinas interest rate cut) . With the increasing uncertainty in markets, such as the ongoing Euro crisis and Japan entering a recession, now would be a good time to diversify your portfolio to buy physical silver. Anybody that’s been wondering is silver a good investment should know that now may be the best time of all to invest in the material. The price of silver is at the lowest it has been for several years and this is a great time to buy silver. In this post, I will give you a number of reason as to why now is the best time to but silver.
1) Inflationary Pressure – With central banks around the world freely practicing Quantitative Easing, they are essentially flooding the market with new currency. The rule is that when the money supply increases, it is bound to be followed by a period of (high) inflation. The global economy is now getting to that point where inflationary pressures will start to kick in. Thus, buying silver now is a good bet as it acts as a hedge against inflation as it will store value better than cash. In the instance that inflation does kick in, the value of any currency(cash) you have today in your bank account will decrease but the value of any silver you have will soar to new heights.
2) The increasing usage of silver – Aside from the store of value silver has been known for throughout history, the practical applications associated with this precious metal are rising by the day especially with the exponential growth of technology. Silver now is a fundamental material in the making of electronic products so as demand for products like mobile phones and computers go up, so will the price of silver.
3) The time of the year – commodity prices tend to stagnate over the summer months and then increase in the autumn and winter months. Buying silver now, even if you want to hold it for a short while, would see prices increase by September.
4) Supply of silver could fall in 2015 – As mining firms who extract pure silver are currently struggling to make a profit at today’s low prices, these mines may be shut down temporarily till the prices go up. In addition, new investments in exploration of silver mines has diminished greatly over the last 10 years and also silver production as a by product of zinc and lead has decreased. This only means shortages of silver lie ahead and with this the price will increase in 2015.
5) Gold Silver ratio – The gold-silver ratio is currently at about 70 which means that the gold price is currently 70 times the silver price. The ‘normal’ ratio for this should be around 60 according to London based consultancy firm Capital Economics. Capital Economics say that the price of silver will have to increase in the near future for it to bring back the balance of the gold-silver ratio (read more at Financial Times.