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Aug 03

3 Ways Silver Protects Against Inflation

Reading Time: 3 mins

Lately, it’s difficult to go shopping without noticing at least a few higher prices. Rising inflation continues to make the news as statistics confirm that many products and services cost significantly more than they did last year. If you have any excess cash that you don’t plan on spending in the near future, it’s vital to realize that this money is losing value. Most savings accounts and certificates of deposit currently pay well below 1 percent interest, so they do little to protect you against inflation. Some individuals have turned to silver as a more effective way to safeguard their wealth. Although any investment involves some degree of risk, this precious metal appears to help counteract inflation in three important ways:

 

1. Silver Outperforms Most Investments

Financial experts have calculated how much value different assets gain when inflation increases by 1 percent. The price of silver typically rises substantially more than that of gold or the average S&P 500 stock, according to U.S. News. Inflation causes both silver and gold to gain value far more rapidly than corporate shares. Why doesn’t it produce considerably higher stock prices? Inflation can both help or harm businesses; companies may face higher expenses when they order supplies or pay employees. Customers pay more for goods and services but might cut back on the quantities that they buy.

The versatility of silver helps safeguard its value. Manufacturers need this metal to produce most cellphones, appliances, solar panels and cars, according to CNBC. Certain medical devices and batteries also contain silver. Its price doesn’t depend on jewelry sales as much as other precious metals. Inflation often coincides with an increase in consumer demand for various merchandise. Unlike commodities that only have one or two purposes, silver benefits from a high probability that people and businesses will keep buying at least some of the above-mentioned products. Its value rises further as investors around the world look for ways to prevent inflation from eroding their savings. At the same time, the metal’s practicality makes it a safer investment than many stocks.

 

2. Silver Possesses Lasting Inherent Value

Times of inflation frequently bring about political or economic upheaval. Although paper securities may be indirectly linked to physical assets, history reveals that unforeseen events can render stocks, bonds and currencies worthless. Governments have defaulted on their debt, and once-formidable corporations declare bankruptcy from time to time. Unfortunately, it’s often impossible for equities issued by a defunct company or government to regain any value. Unlike these investments, silver and gold are useful materials with intrinsic value. Always remember supply and demand when evaluating an asset; it’s much easier to print more paper money than to mine additional silver. Finite physical assets represent the most reliable way to protect your wealth from inflation in the long run.

 

3. Silver Remains Comparatively Affordable

Today’s higher living expenses may not leave you with many thousands of dollars to invest. If you try to save up for a costly investment in art, antiques or real estate, your money will lose value in the meantime. Silver’s affordable per-ounce price makes it easier to purchase this metal incrementally, thus maximizing your potential gains. While you’d need more than $1,800 to buy one ounce of gold or a single share of Amazon stock, you could get started with silver for less than $50. You can order bars weighing as little as one or 10 ounces. If you have more funds available, it’s possible to reduce the per-ounce cost by investing in a 100 oz silver bar. Buyers qualify for further discounts when they purchase multiple bars at a time.

It’s always wise to diversify your holdings. The above-mentioned benefits reveal why it makes sense to establish silver as part of your investment portfolio, especially when inflation becomes a serious concern. At the same time, remember not to overinvest; keep some extra cash available so that you can pay any sudden unforeseen bills. It’s also crucial to safeguard your silver against theft and natural disasters. Be sure to keep any valuable metals in a well-protected location, such as a sturdy home safe or bank safe-deposit box. Consider buying insurance if you own a significant amount of silver.

 

Sources

https://www.wsj.com/articles/us-inflation-consumer-price-index-may-2021-11623288303

https://www.bankrate.com/banking/cds/current-cd-interest-rates/

https://money.usnews.com/investing/articles/is-silver-a-better-bet-over-sky-high-gold-prices

https://sprott.com/insights/demand-for-precious-metals-jewelry-runs-deep/

https://www.cnbc.com/2021/05/13/silver-price-rockets-as-investment-and-industrial-demand-continues.html

https://www.investopedia.com/ask/answers/111314/what-causes-inflation-and-does-anyone-gain-it.asp

https://www.businessinsider.com/is-silver-a-good-investment

https://www.forbes.com/sites/investor/2020/06/29/inflation-protection-bitcoin-gold-and-silver/

 

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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