Precious metals are an important asset with unique characteristics: along with being a commodity in constant demand for industry and jewelry production, they are an anchor in times of crisis and help balance the investment portfolio. Here are 6 reasons why you should add gold and silver to your portfolio.

 

1. Decentralization - an alternative to stocks, bonds and real estate

Every sophisticated and experienced investor strives to create diversity in his assets, in order to protect himself from different and unexpected scenarios throughout the life of the investment. The big question is how to do it.

Precious metals provide an excellent and proven answer to this question. Gold and silver are characterized by unique features compared to stocks, bonds or real estate - and therefore constitute an important and complementary component in any asset allocation. Over the years, they have proven themselves as an investment that yields high and stable returns, and we will expand on this later in the article.

2. Shelter property - protection in times of crisis

Markets regularly move between highs and lows. In many crises, experienced investors turn to gold and silver as a protective investment - and accordingly their value climbs sharply as the rest of the assets collapse. This was the case in the dot.com crisis in the early 2000’s, in the great financial crisis of 2008 - and also in the corona crisis which has raised the price of gold to an all-time high.

A spike in gold usually supports a sharp rise in the price of silver as well, as occurred during the corona crisis. Investors in precious metals who want to spread their personal capital well transfer some of it to the silver metal as well.

Change in the value of an ounce of gold

Change in the value of an ounce of gold, in dollars, between the years 1990-2020.

 

3. Demand increases even in times of prosperity

The surge in demand for gold and silver characterizes periods of crisis, but a lesser known fact is that the value of precious metals maintains stability even in times of prosperity. Precious metals are performing well in situations where economic activity is increasing because they are in demand for raw materials, including in the jewelry and high-tech industry. In this respect silver metal even enjoys greater demand than gold. At the same time, sophisticated investors are taking advantage of periods of relative well-being to prepare for the next crisis, and do so, of course, by stocking up on precious metals.

The unusual combination of a shelter asset in times of crisis and a commodity whose value rises even in times of abundance is one of the most important strengths of gold and silver, supporting them as an alternative investment compared to other assets, such as stocks or bonds.

4. Protection from inflation

In recent decades gold has yielded an average annual return of 8% -10%. This figure illustrates another important feature of the shiny metal: it provides particularly good protection in times of hyperinflation, such as in the 1970’s and 1980’s, and ensures the preservation of the capital of those who invested in them.

We live in an age of zero inflation and are accustomed to relatively fixed prices, but the risk of inflation always exists and it can be estimated that precious metals will provide investors with good protection against price rampage in the future as well.

5. Global, liquid and mobile goods

Every investment has its advantages and disadvantages, but many investments suffer from a significant disadvantage: they are anchored in the legal and economic system of a particular country and it is difficult, or even impossible, to move them elsewhere. Think, for example, of stocks traded on a particular stock exchange or houses which cannot be moved.

Uniquely different from almost all other investments, precious metals are a global commodity that can be easily transported from country to country. The demand for them is also quite rigid and their price is the same everywhere. This tremendous advantage allows you to make dynamic and flexible decisions about the appropriate date for the realization of the investment - in all possible scenarios, including acute political or economic crises.

Dove of Peace Gold

Dove of Peace Gold Ingots and Silver Round.

 

6. Safe and stable investment

For thousands of years, humanity has given precious metals a unique status. Accordingly, the demand for gold and silver is expected to remain stable in the future as well. This phenomenon has reasoned explanations, anchored in the natural properties of the metals that contribute to their financial strength.

Gold is characterized by rarity, which contributes to the stability of supply; Along with very high durability, more than almost any other metal, which protects the material from abrasion. The reddish-yellow color also contributes to the beautiful and attractive image of the shiny metal. While the world's central banks have printed trillions during the financial crises and raised concerns about a loss of confidence in countries' money that could lose its value - the amount of gold added each year to the market is limited and constant, ensuring that demand increases immediately translates into price increases. All of these features also make gold a great way to transfer wealth between generations.

Although silver metal is much less rare than gold, it enjoys being a sought-after commodity and raw material - for electrical products, mobile phones, solar panels and medical accessories. It is important to know that the demand for silver only expands over the years.

In conclusion, gold and silver have unique and significant characteristics that give great value to investors. The obvious conclusion is that precious metals are an important, and even necessary, asset class in any portfolio. In a previous article we explained how to buy gold and silver, and in the next article we will also discuss the question of how much it is worth investing in precious metals.

 

 

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The information contained in this website should not be construed as investment advice or as a substitute for investment advice suited to your own individual financial needs for purchase or investment, investment activities or transactions, or as recommendations or opinions as to the benefits of investing in gold or in any other specific products. The information contained in this website does not constitute an alternative for investment advice and you should not act upon it, before seeking advice adapted to your own personal situation and needs.