NAFEP Self Directed IRA Blog

The trend is that when the value of the dollar goes up, the value of precious metals goes down. The opposite is also true, when the dollar value goes down, the value of precious metals goes up. While this trend is not a certainty, the price of gold and silver is over 70% correlated to the U.S. dollar.

As industrial uses for silver continue to rise, demand for silver will continue. Roughly 45% of all silver mined is now used for industrial purposes. As more countries become modernized around the world, demand for silver will increase.

Silver has medical uses as well. Silver is used as a bactericide, and nearly every hospital uses silver sulfadiazine for preventing infections. Medical devices such as catheters and stethoscopes also use silver.

The bottom line is that silver is scarcer than gold, and is more widely used. Gold is hoarded, which means supplies continue to increase. Silver is used, which means supplies will continue in high demand.

In 1900 the estimate was that there was 12 billion ounces of silver worldwide. By 1990 that dropped to 2.2 billion ounces. In 2007 the supply was down to 300 million ounces. Some expect us to run out of silver in 10 years, which would have a huge impact on the world’s economy. Do you think it would be wise to invest in silver?

Diversify, diversify, diversify. This can be true not only as it applies to types of investments, but can be true when investing in precious metals as well. If you own more than one type of precious metal, you will be better able to ride out the normal ups and downs of the financial market.

Lorimer Wilson, Editor of FinancialArticleSummariesToday.com and munKnee.com listed 29 reasons for owning silver over gold, and he said his list is still growing. While we won’t go into all 29 of his reasons, we’ll mention a few of them here to whet your appetite. (Read his complete list here.) Top of the list was that the silver battle is much easier to win due to its smaller market size.

Central banks have no physical silver to use to manipulate the market. Most silver mined is consumed in industrial uses while the amount of above ground gold grows each year. Silver is in higher demand for day to day life due to its many industrial uses.

Due to the lower cost of silver, the average person is better able to afford it in greater quantities as a means of investment than he could gold. Silver has also been in a supply deficit for over 50 years, making the demand higher. Few investors have physical silver in their possession.

Due to the value of gold, there have been more counterfeiting issues relating to gold than there have been for silver coinage. Gold confiscation laws are still on the books in the US, but there are currently no silver confiscation laws. If any of these reasons appeal to you, then you may want to consider adding silver to your portfolio to help diversify and protect your assets.