For investors interested in metals as investment vehicles, the choice between investing in precious metals such as gold and platinum or industrial metals such as aluminum and copper can be a difficult one. While precious metals can act as a store of value and prevent asset depreciation, the metals do not provide investors with monthly interest and are less attractive when interest rates are high.
On the other hand, industrial metals enjoy constant demand from industrial sectors and can be incredibly lucrative over the long-term but can be subject to disruptive market forces such as recession. Silver presents the perfect metal to bridge the gap between precious and industrial metals because it is technically a precious metal but it also has industrial applications.
Investing in gold essentially allows investors to tap into the relatively depreciation-proof, precious-metals market while also enjoying stability and long-term earnings offered by the low-risk industrial metals market.
Like gold, silver has been used in numerous cultures as a store of value and currency for hundreds of years. Its lower prices compared to gold make it more accessible to less affluent investors while its abundance within the earth’s crust makes it much more accessible than gold. Furthermore, silver’s abundance may reduce its susceptibility to supply shocks and the accompanying volatility.
Silver’s status as a precious metal can allow investors to hedge their holdings against economic uncertainty, and the metal can also function as a tool for predicting future inflation and interest rate hikes by the U.S. Federal Reserve.
The metal also has a myriad of industrial applications that make it a critical component in many industries. Silver is used as an important ingredient in electronic products, filtration systems, mirrors, solar panel production and even medicine. Demand from several critical industries has significantly propped up silver’s value and supported its prices, making it an attractive investment option for investors struggling to choose between gold and silver.
With the renewables market predicted to grow exponentially over the next couple of decades, we can expect demand for silver to explode as well, potentially resulting in an overall increase in silver prices.
The U.S. economy has been gripped by poor economic conditions for the past couple of years, forcing the U.S. Federal Reserve to raise benchmark interest rates in an attempt to stop inflation. While precious metals such as gold would have attracted plenty of attention during such times due to their value-storing capabilities, rising interest rates often draw investors to assets such as industrial metals, which can earn interest.
Silver can bridge this gap by providing investors with a relatively stable precious metal to hedge against inflation while taking advantage of rising interest rates. And, silver-extraction entities such as Hecla Mining Company (NYSE: HL) that serve both industrial users of silver and those looking to leverage the metal’s attributes as a precious metal are somewhat insulated from some of the market vagaries that many precious metals face.
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