Silver Insures Your Savings Against the Worst

Learn how to protect your portfolio using silver. A lot of investors will tell you that gold is the safest way to insure your savings against a crisis, but could silver be the real answer? First, consider the nature of silver, then look at its potential as insurance.

Is Silver a Risk Asset?

Does silver fit the profile of a true safe haven? The problem is its volatility. The metal can move extremely quickly, which always makes it a risk when prices are heating up. While it can pick up momentum at an incredible pace, it can also drop quickly. The asset has also had an extremely rough few years, and volatility has not been kind to long-term investors.

All that could be about to change though. Right now, prices are incredibly low. That limits how much risk factor you’re actually taking on. Analysts say there is very little downside to silver – its current price is not that much higher than the actual production costs of mining it.

How to Insure Your Portfolio

You can’t take insurance out on your portfolio, so you need to invest in assets that will perform well when the rest of your savings aren’t doing hot. Today, there are growing concerns that another global slowdown is coming, and that the cuts made by the Great Recession left scars in the global economic system that are ready to burst open again. Those concerns are pushing investors into precious metals.

Here’s how gold and silver work as an insurance policy for your portfolio:

  • Equity markets start to tumble
  • Investors sell quickly and start buying alternatives like gold and silver, driving prices up

You can’t buy flood insurance when there’s already water in your basement. Though you have to keep up with storage costs, if you own silver now, you see the highest returns when the crisis hits.

Growth in the Gold-Silver Ratio

For years analysts have been talking about a thing called the gold-silver ratio, i.e., how many ounces of the white metal you would need to buy a single ounce of its pricier cousin. It’s a quick way to look at how they are valued against each other, and it’s been fascinating to see how this relationship has changed so dramatically over the decades.

For most of history, it was set at around 15:1. The 20th century changed things, and the average was around 47. Today, it’s more likely to be in the 80s. That could mean one of two things:

  1. a) Silver’s days as a store of wealth are over and it is becoming much more of a risk asset like other commodities where you have to look first and foremost at supply and demand.
  2. b) There’s going to be a correction on the horizon and when it happens, silver owners are going to make a killing.

Setting aside the long-term implications, both scenarios are promising, as the metal enters a looming supply crunch. In the second scenario, historically the gold-silver ratio has closed during bull markets and widened during bear markets, and both metals now seem poised to start moving swiftly upward.

If you’re convinced, here are some tips for investing in silver you should read before you buy. They explain why supply is shrinking, what’s behind growing industrial demand, as well as how to buy silver at affordable prices and store it.

Get ready for the inevitable. When the next recession hits, fear-driven investors will head for precious metals.