When investing in precious metals, gold and silver are generally the precious metals investors consider. In this article we will review why investors may choose one over the other. Ultimately, your personal goals and needs will dictate which precious metal, and what percentage in gold or silver is right for you.
How to Determine Value in Gold and Silver
When considering gold or silver percentages, you should consider value by reviewing past performance and future projections. Consider the supply and demand fundamentals of each metal and determine a combined percentage in gold and silver to achieve proper portfolio diversification.
Gold
Over the past 25 years, gold has risen approximately 700% in value. Gold is currently within 7% of its all-time high. The rise in gold’s value is attributed to inflation, geopolitical tensions, and supply and demand fundamentals. Currently, the cost to produce an ounce of gold is approximately $1050. Gold is expected to continue to rise in value moving forward. This trend is expected to continue due to ballooning government deficits, central bank buying, and a concerted effort by other countries to move away from the U.S. dollar in international trade.
Silver
Over the past 25 years, silver has gained approximately 450% in value. Currently, silver would need to increase approximately 70% to reach its all-time high. Silver is currently more undervalued than gold. Silver is expected to continue to rise in value moving forward. This trend is expected to continue due to inflation, industrial and technological uses, supply and demand fundamentals, and geopolitical tensions. With silver at only $29 per ounce, investors should seriously consider diversifying in this precious metal before it moves higher.
A Properly Balanced Portfolio
A properly balanced portfolio should consist of products intended to hedge and investments designed to speculate. A speculative investment is utilized for the possibility of gains while assuming a possible risk of total loss. For example, stock investments are commonly viewed as a speculative investment. A speculative stock investment can go to zero in value. Gold and silver have a comparatively low or negative correlation when compared to stock investments and have never gone to zero in value. When the value of stocks decreases, silver and gold are likely to rise in value and promote portfolio stability. Gold and silver coins are commonly utilized to minimize the risks associated with speculative investments. Properly diversifying your investment portfolio is essential to reduce risk and build long-term wealth. Gold and silver are commonly viewed as an investment portfolio insurance policy.
