Rudolph, the Red Nosed Reindeer was a popular television show in the 1970’s. The show was a story that brought to life the popular Christmas song. It mixed music within the story and was narrated by a snowman.
A popular song in the show was titled “Silver and Gold”, which was about the importance of silver and gold decorating trees for the holiday. The song is a very good and catchy tune, but silver and gold are more useful than just decorations on a tree. Silver and gold have been seen as a good investment for a long time; but which one could be considered the better investment right now?
Silver has always been valued at a lower price than gold. On the surface, the investor would choose gold, just based on price and the positive news that is usually wrapped around gold, and the investor could be rewarded in the long term by investing in gold. However, investing in silver can possibly be the better short-term investment, but why could this be the case?
Price
Normally, gold and silver prices rise and drop in valuation, with gold pricing in an approximate range of twenty to fifty times higher than silver. Currently, gold is trading at a price of sixty-six times that of silver. Since the size of the ratio is so large, the price of silver may start to surge in the near future to reach traditional trading ratios OR it may be that price decline in silver will be less than that of gold.
Of course, we all speculate in regards to future prices which is a risky business to begin with.
Silver’s current price can be considered to be very reasonable, and an investor can purchase more silver, in terms of ounces, than gold. Many analysts believe that in percentage terms, the upside potential for silver is greater than that of gold, but again, this is their opinion and opinion only.
Economic Conditions
When prices stay relatively stable, spending usually will stay the same as well. Alternatively, when prices rise, then people will not be able to buy as many products. Whenever the economy stagnates, people tend to look for something that is stable, such as silver and gold. Precious metals are usually priced at a premium. However, when times are uncertain, they become more valuable and prices can rise substantially during those times of economic crisis, and especially with the fear of inflation.
Most people agree that the government will continue to spend money. The U.S. government’s deficit is projected to get bigger and bigger, and possibly make the dollar worthless in the long run, which has been the case with countless fiat currencies in history.
Legal Tender
More and more countries are using silver coins as a form of currency as paper money continues to lose value in many countries. In many different countries, they are using silver coins as a form of legal tender and the holder of those coins can pay their debts using those coins. As more countries continue to use silver as a form legal tender, many believe that this will create a strain on the amount of the commodity that is available.
World Situations
No one can control a terrorist attack or that a country’s economy may possibly collapse. However, if you are aware of them, you can profit from those situations. Different negative events can put pressure on precious metals, causing the prices of those metals to rise. The more you own, the more you can possibly benefit.
Industrial Uses
Silver has so many uses in the world today. The precious metal is electro conductive. It also is a reflective metal. With the increased usage of the metal, it is becoming rarer. There will always be a need for silver as long as technology becomes more and more important for the world’s economy.
“Silver and Gold” was a nice song in a popular children’s television show, but it is more than just a song about wonderful decorations. The metals can be good diversification for anyone’s portfolio.
Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
About the Author
Ilan Levy-Mayer has been a commodities broker for over 16 years, and holds an MBA in Finance and Marketing from Hebrew University in Jerusalem. Ilan is currently the Vice President and a Senior Futures Broker overseeing online future trading platforms and Commodity Futures Trading systems at Cannon Trading Company.
Nice article Ilan… I smiled when I got to the bottom and saw your name as the author… Hope all is well Buddy!
I recently read something that said that silver is a better investment than gold because in a SHTF scenario, it’s much more spendable than gold due to the fact that it’s so much cheaper. I actually thought that was a pretty decent argument for silver and I’m not even one of those “prepper” guys. You can even get 1 oz silver bars with lines on them like chocolate bars so you can snap them into half oz and quarter oz pieces. Pretty neat stuff, I thought.
Thanks for your thoughts, Blake 🙂