When you are contemplating adding silver to your portfolio – whether that silver consists of a single tube of 1 ounce coins stashed in the back of a bottom drawer, or a stack of silver bars that fills a good sized wall safe – the first question that occurs to your mind is whether or not this precious metal is a good investment. The answer, as shall be seen in a moment, is a resounding “yes” – this precious metal is one of the best stores of value available today.
There are many reasons why silver is a good investment, better than most others as a hedge against inflation and other types of economic upheaval. Foremost of these is that it is scarce enough to concentrate quite a bit of value in a small package, but not so valuable that it is subject to wildly unrealistic speculative pressures. The price of silver is pretty much which it logically should be – it is affected to human whim in some degree, but not as much as other precious substances.
The toughness and resistance to destruction that silver possesses also makes it a good long term store of value. It will not rust like steel, nor will it rot like stamps if stored in damp conditions. It cannot burn, and insects will not eat it. It is small enough to be transported easily from place to place, but it is in no way fragile like other small objects often are. It is recognized universally as a valuable metal, and it is used for some practical purposes, meaning it will never entirely lose its value.
Comparison of Silver and Gold
Gold possesses many of the positive attributes of silver, but it lacks one very important thing that silver provides – a link to actual prices on the commodity markets. Gold’s price is based purely on speculation, rather than more solid types of supply and demand.
A glance at recent gold price history shows that the its nominal value per ounce has remained the same – or even fallen – when inflation occurred. In short, it is a poor hedge because its price does not change when the value of the dollar changes.
Silver is a stable, affordable, and reliable store of value, and a good investment for buying and resale when it is minted into certain kinds of rare coins. Neither rust nor moth shall devour it, and although the supply is growing steadily each year, there are likely to be no sudden surprises – such as would occur if the De Beers company were to release the vast stocks of diamonds it has hoarded to drive up diamond prices artificially, for example. Silver is a safe investment with a possibility for solid profits if you choose your purchases carefully.
One nagging doubt might remain, however – will silver ever be made illegal like gold was in the United States during the years of the Great Depression?
Why Silver will Probably Never be Declared Illegal
Lurking in the back of every precious metal collector’s mind is the memory of 1933, when Franklin Delano Roosevelt, president of the United States, made the possession of gold currency illegal in that nation. Although long time collectors probably all know the full story of this period of American history, those new to the field or simply dabbling a bit are not likely to possess this obscure knowledge.
Once you understand why the decision was made, however, it will become evident why the events surrounding Roosevelt’s decision (which was a wise one at the time) mean that silver is a mostly safe investment from this viewpoint, and is definitely safer than gold.
The reason why gold was declared illegal is simple – the Gold Standard was killing the American economy. As long as the supply of money remained shackled to gold – which is produced at such a low rate that its worldwide supply has remained effectively unchanged for around two hundred years – there was no way for the money supply to expand when the economy did. In an era of advancing technology and expanding production, this was a recipe for disaster – and the disaster occurred.
With a fixed money supply imposed by the fixed supply of gold, the economy literally ran out of money whenever expansion – or just recovery – began. The supply of money dried up almost immediately whenever things started to look positive. The situation can be likened to a fully grown athlete trying to survive on the amount of food meant for a newborn infant. It may give him enough energy to run a few paces, but he will soon collapse, and if he is kept on this diet too long, he will die.
The Gold Standard kept the money supply at an infantile level, so every natural, market-driven expansion collapsed violently, resulting in closed factories, lost jobs, and economic turmoil. The Great Depression sprang directly out of the Gold Standard. Roosevelt recognized this – as so many have failed to do since – and took drastic measures to rescue his nation, making gold illegal and loosing the country from the deadly straitjacket of the Gold Standard.
Those nations which stubbornly held onto the Gold Standard stayed in a state of poverty, misery, and feebleness far longer than the United States, while those which also cast off the Gold Standard recovered swiftly and robustly.
From this, it can be seen that silver will never be made illegal as gold once was. There is less pressure to adopt the Silver Standard than there is to revive the Gold Standard by people who have a hazy, mistaken idea that it would be beneficial, rather than actually leading to the total collapse of the economy (and being made illegal again). Additionally, the silver supply is far, far greater than the gold supply, as can be seen by glancing at their spot prices.
Therefore, if the Silver Standard were reintroduced, the supply would be high enough to keep the economy afloat for some time, and there is less likelihood of a catastrophic crash if an economy is based on silver (though a Silver Standard would provide no actual benefits and would only serve to add one more destabilizing factor to the economy). Thus, silver is extremely unlikely to be made illegal (since it will not cause the economic problems of gold), and you can invest in it with the confidence it will remain legal throughout your lifetime.
Some More About Silver as an Investment
At the current time, silver is a good investment as well because it can be bought in very small, affordable amounts by practically anyone who has an income, and can be hoarded until a series of small investments become a large nest egg. Its liquidity is high, both because of its relatively low price per ounce and because of the high demand which has continued strong for nearly twenty years. You can quickly and easily convert silver into cash, and vice versa.
Furthermore, silver does not attract as much unwanted attention as gold. Gold rouses a wild state of greed in many humans, making it a rather dangerous possession, but silver is less noticed and thus less apt to cause trouble for you. It is safe enough to keep in your own home, rather than relying on a bank to store it for you (and thus placing yourself at the mercy of the bankers’ honesty). In short, silver is a solid investment because it is reliable, flexible, extremely durable, easy to obtain and transport, and easy to liquidate – the ideal commodity for both hedging and investment.