'10 Olympic Silver Maple Leaf

Last week, I talked about the value (no pun intended) of having gold in your portfolio and why I like it so much. I want to share with you the other commodity that inhabits my portfolio: Silver.

Silver is a bit of an odd one since it shares the same purpose as gold in a portfolio, but the monetary value of the metal is only just being realized. I won’t be going over why it’s handy to have, since it’s basically the same reason as gold, but I will tell you why you might want to buy some now, rather than later.

Just A Quick Overview

Back in the day, silver was favored as money, just like gold, because of its malleable, shiny qualities. During the 1900s, it fell out of favor when huge deposits of the metal were found in America. Because of this, the world feared a huge drop in the value of silver and switched to the gold standard. Despite this, silver has held on to be an economic anchor in the world even though its value is minuscule compared to gold.

Why You Might Want To Buy It

Unlike gold, the ultimate value of silver has yet to be realized. The value of our dollar relative to a silver coin remains to be seen. Silver, like gold, has been mined for much more than currency. It’s used heavily in jewellery, cutlery and technology. The future value of silver is so speculative for a few reasons.

First, silver has been mined to the point where we’re now left with only 5% of above ground deposits. At the same time, the demand for silver has only skyrocketed. There isn’t a technological device that doesn’t have silver in it, whether it be your laptop, your cell phone, or your television. On top of that, new applications are being discovered every day, putting that much more strain on the current supply of above ground silver.

People have known this for a long time. In 2010, silver traded at $20 an oz. People saw the ratio of supply and demand shifting in the favor of investors and bought. As with any investing, the idea is to buy low and sell high. This is called hedging. And those who bought silver in 2010 because they thought it was going to go up were right and they saw a 76% return as silver shot up in value to $32 an oz.

Only One Direction to Go

Consider that a gold coin has shot up in value to be worth $1700. Silver is only at $32. Being in the situation we’re now, if you had bet which way the value of silver would go, what would you say? Knowing that, what reasons would you have to buy or not to buy?