The investment outlook for gold and silver is quite positive for 2016. An increasingly unstable stock market, both at home and abroad, could propel both precious metals into new price territory.
While gold and silver have been in a several-year slump, many analysts think current conditions are ripe for a turnaround.
Here are some of the reasons that individual investors might want to add silver and gold to their portfolios soon:
- Gold and silver are at extremely low prices now, compared to the past decade. What is the evidence that insiders think metal prices are bargains? Central banks are buying gold (especially the Chinese central bank), and many others are following suit. This activity usually signals a rise in prices in the near term.
- Currency wars are ongoing and will end with metals stronger and paper money weaker. China and Russia have been attempting to manipulate the value of their currencies on a large scale; and the global economy, particularly in Europe, is in one of its most uncertain periods in a century. Uncertainty is the only common characteristic in China, Europe, the U.S., and the Mideast, which means that the prices of gold and silver have plenty of room to move up, not down.
- The precious metals are always a wise hedge against financial chaos even in quite stable times. With terrorism striking in more frequent waves, the giant Chinese economy finally starting to stall, and the U.S. still unable to enter recovery mode, metals are set to rebound.
Silver or Gold?
Apart from the obvious fact that you can buy about 70 times as much silver for the same price, there are other advantages for owning a mixture of silver and gold, especially for investors who are new to metals.
- Silver’s price is much more volatile and suited to short-term investors who want to get in and out of the market for a fast profit. For long-term investors, either silver or gold works, but there are questions of storage, insurance, and liquidity.
- Both physical gold and silver can be purchased and sold in one-ounce increments, easily stored in a safe deposit box, and sold to a dealer for cash when the time comes. Of course there is a transaction cost for buying and selling, so don’t expect to pay spot price when buying.
- For investors who want to have at least 10 percent of their portfolio in metals, a common mix is 2-3 percent in silver and 7-8 percent in gold. Storage space is a concern, and gold has the clear advantage over silver in this category.
- For liquidity, silver is slightly easier to deal with because it can be sold off in tiny increments at a time. Unless one owns fractional gold bullion coins, of one-tenth of an ounce or more, then selling gold means cashing out about $1,000 at a time. If you need less cash, silver is the ideal vehicle since it can be sold by the ounce for much lesser amounts.
The climate for precious metals’ investing is the best it’s been in a long time. In addition to global economic uncertainty, there is a U.S. presidential election coming up which will see an 8-year incumbent leave office. Whichever party wins, there will be a new resident of the oval office, new policies and lots of changes in store. Combined with an unsettled Europe and China, a bottomed-out petroleum market, industrial stagnation almost everywhere, and a major political change at home, millions of investors will be opting for precious metals.
The balance of 2016, and most of 2017, should be an ideal time to increase the amount of silver and gold in personal portfolios. Paper stocks in gold mines and ETFs of precious metals are as risky as any other traditional security in times of crisis; which is why it is best to hold physical metals in times of uncertainty. Overall volatility in global financial markets makes precious metals one of the best investment vehicles this year.