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Investing in Precious Metals

Updated: Sep 1, 2018

As part of my investment portfolio I have been buy precious metals, specifically silver. There are several reasons why I have been investing in silver instead of gold. I believe that in the long run silver will offer better returns than gold.

As an example take a look at the historical ratio between the gold price and the silver price. Historically one ounce of gold has been worth sixteen times that of one ounce of silver, today the ratio is 62 to 1. When the gold/silver ratio gets far from sixteen you would expect at some point a return to the mean. This would indicate that either the price of gold is going to drop significantly compared to silver or the price of silver will increase significantly compared to gold, or maybe a little of both. 

 A secondary reason is that I believe the industrial demand for silver over the long term is going to increase significantly. More and more uses for silver are being discovered all the time. Besides the jewelry industry silver is also used in these other industries: automotive, electrical, plastics, medical, photography and the space industry. Many more uses for silver are being found in industries all the time. For example, new high tech new clothing with silver nano-particles is being produced which reduces odor and bacterial and fungal infection. Who knows what breakthroughs might be coming for silver in the next decade which can only make your silver investments more valuable?

I am of the opinion that in the long run silver will be the better investment. My advice would be to do as I am doing, buy small amounts over a long period. When there are dips in the price of silver as we have seen lately I take advantage and buy a larger quantity. I will be limiting my total investment to about 5% of my total investment portfolio. At some point I may also purchase gold especially if there was a significant drop in the price.

As you can see from this chart the gold to silver ratio suggests that silver at today's price is fairly inexpensive.

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