Silver had reportedly drifted lower since the start of 2019. However, the uncertainty gripping the financial markets which propped up precious metals in the latter half of 2018 and into 2019 has reportedly reduced.
Silver has an increasingly positive development, which agrees well for the global economy and industry. Analysts highlight the trade war between the U.S. and China, the world’s two largest economies has been averted, which contributes to the improved outlook for silver. The precious metal is also an industrial metal and the dual characteristic is said to be responsible for the closely correlated relationship between gold and silver diverging in recent years. Meanwhile, the white precious metal will also be supported by the Fed’s stance on monetary policy, which would see the U.S. dollar ease and this would reduce the opportunity cost of holding an asset like silver. This would make the metal more popular with investors seeking to hedge against geopolitical and economic uncertainty.
1. Mitigating Portfolio risk: The white precious metal is an effective asset to deal with global political unrest, and it can mitigate investment portfolio risk be securing against hyperinflation and periods of extreme deflation. This is attributed to the metal rarely fluctuating in value.
2. Shields from Economic Crisis: Silver can offer protection during periods of economic downturn or crisis. Apart from which, during an economic crisis, central banks respond by lowering interest rates and raise the total money supply. As silver isn’t an asset that can be created on paper, the supply is said to be pretty limited and thus the value remains relatively non-volatile during economic fluctuations.
3. Invest in the Industrial Strength: The strength of silver in the world market is synonymous with higher prices. So as the demand for silver is high in developing countries like India for jewellery designing, the value in the economy will rise.
4. Invest due to its Diminishing Supply: The recent scenario of the white precious metal’s supply makes it an interesting asset to invest in. The diminished rates of silver together with the exorbitant mining activities reportedly means that production output has significantly fallen in the past years, so the mining projects would be likely kept on hold until the rates of silver elevate.
5. Demand Could Increase: The relation between demand and supply governs market trends and so there could also be a significant increase in the level of demand for silver, which could lead to a substantial increase in its rates. This could occur when the supply level is reportedly limited, as it is currently. Investors often bet on the increasing prices of the metal so as to spot a change in the current gold-silver ratio.