Precious metals include gold, silver, and platinum.
They are considered safe haven assets - an investment that’s expected to hold their value during market turbulence.
This makes them a good choice for investors during political and economic upheavals because they have intrinsic value, carry no credit risk, and cannot be inflated.
Owning just a small percentage of precious metals diversifies your portfolio, and therefore reduces volatility and risks. It can also protect your future buying power.
Is Silver a Good Investment for the Future?
Investing in silver has a few advantages: you can own the physical commodity, it is more liquid than gold, is scarce, and has many practical uses. For example, there is demand for silver in solar panel production, electronics, and medical devices. There is even an IRA backed by silver!
Because the silver price tends to decrease and become stable during times of economic prosperity and growth, it’s not a recommended buy.
However, when the market is declining, it’s a good investment option because it is expected to hold its value during that rough time and you can expect a higher ROI afterwards, as seen in Table 1.
Different ways to invest in silver include:
Silver bullion bars - these bars of silver give investors physical ownership of the precious metal.
ETFs - the investor owns shares of the fund, but is not entitled to access the actual physical commodity.
Stocks in companies that mine silver - invest in silver indirectly. The potential downside here is that you are also investing in the potential risks of their facilities.
Stocks in companies that finance silver mining companies - the companies pay a dividend because as a financial institution, they want to increase cash flow.
Silver IRA - an IRA that is tax-deferred and allows you to hold silver coins and bars in your account. It’s similar to your regular IRA, but it is funded with physical assets instead of paper assets (stocks and funds).
When will Silver Hit $30?
The last time silver was $30 per oz was in 2011 and 2012 (Table 1), following the 2008 market crash. If you bought silver in 2008, your return doubled in 2 years time!
Keith Neumeyer, CEO of First Majestic Silver, predicts silver will hit an astounding $130 per oz in 2020! (Keith Neumeyer’s predictions and investments in silver rewarded him handsomely after the dot com bubble busted in the early 2000s.)
Meanwhile, other investors have more conservative estimates, between $16-25 per oz for 2020.
So when will silver hit $30 per oz?
Historically, the Federal Reserve hasn’t lowered interest rates down to near zero since 2008. If current stock market trends follow the 2008 crash, it’s possible that silver could hit $30 per oz in the next few years. And the best time to buy would be now.
But if you don’t buy now, it’s still a good choice to watch the price of silver this year - and perhaps for the next decades to come.
What to Own When the Dollar Collapses?
Zooming out of individual stocks and assets, and focusing on a global scale and a longer time horizon, there is another issue - the ability of the US Dollar to continue dominating the global market.
Let’s back up for some historical context first.
For almost a century, the US Dollar has served as the de facto world currency and is seen as a safe haven asset.
This is because the US has proven to be economically and politically stable, and has an extremely efficient banking system. It is the largest world economy, accounting for almost 90% of global foreign exchanges. And the USD makes up 60% of the central bank foreign exchange reserve, followed by the Euro (21%) and then the Japanese Yen (6%).
Most commodities like metal, energy, and agriculture are globally traded in USD.
But more recently, opponents have raised concern and voiced their disagreements, claiming that the US has an unfair advantage because its national currency serves as the major global reserve currency.
For example, Ned Goodman, Canadian billionaire, predicted in 2013 that the end of the USD reigning as the global exchange reserve is near, and the global economy will transition out of the USD. And it won’t be pretty. Yikes!
Additionally, China has been public about the Chinese Yuan replacing the USD as a leading global currency. China is slowly and steadily working towards this end. In 2015, the yuan officially became a reserve currency. And we can expect more reforms from China in the coming years.
The US government’s national debt is owned mostly by Japan and China. Of the $22T debt that the US has, Japan owns $1.27T and China owns $1.09T. If enough investors including China and Japan are willing to drop the USD, that would definitely lead to a dollar collapse and the end of the US Dollar as the strongest global currency.
To recap, the key factors that lead to a dollar collapse are:
A strong, viable alternative currency, and
Enough investors pulling out of the USD.
Considering its possibility, what’s worth owning during a financial collapse? Will precious metals rise again as the safer way to store the value of money? If so, how much will silver be worth if the dollar collapses? Below we’ve listed some investments to consider.
In times of economic uncertainty, investors typically flock to safe haven assets. These include gold and silver (mentioned earlier in this article), other foreign exchange currencies, and defensive stocks.
- We’ve seen how silver doubled after the 2008 market crash. And if the dollar collapses, Keith Neumeyer’s predictions $130 per oz don’t seem too far-fetched.
Another investment to buffer against a declining dollar and protect your future buying power is buying businesses. This supports the American economy and the dollar value.
Additionally, Bitcoin could serve a market function similar to that of a safe-haven commodity, rather than an equity, due to its inherent scarcity and decentralism. Here’s a free bitcoin investing kit to get started.
Although a gradual decline in the dollar, rather than a dollar collapse, is more likely to happen, these investments are still viable.
And we recommend watching the change in value of the dollar and international monetary and trade policies. These changes can affect the value of the dollar, and ultimately your returns.
Key takeaways from this article:
USD declines over time as other countries develop and establish their economic independence and trustworthiness.
If enough investors pull out of the USD, the system will collapse.
During a recession and a declining/collapsing dollar, silver is a great investment due to its liquidity, scarcity, and industrial applications.
Historical trends show that investing in silver during a recession paid off well in the years coming out of it (Table 1).
Different ways to invest in silver including silver bullion bars, Silver IRAs, and stocks in the mining sector.
The truth is, no one knows what will happen in the future with complete certainty. And equally true is - the numbers don’t lie.
So, if you’re not getting the best returns on your investments, it might be in your best interest to reevaluate your strategy and portfolio.
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