Many investors like the idea of owning both gold and silver. We usually describe gold investment as an asset to ‘reduce risk’ as it tends to perform inversely to the general economic markets. Meanwhile we describe silver investing more as ‘taking risk’ as it can also benefit greatly from rising industrial demand and is more volatile. Of course, with higher risk, silver also provides higher potential returns.
So much of the time, the two precious metals will compete for the same customer money. Is an investor seeking to reduce risk with gold or take more long-term risk with silver.
The Covid pandemic, invasion of Ukraine and subsequent high inflation has left many investors to seek safety from 2020 onwards. This has inevitably led to more investment going into gold than silver, increasing the price ratio between the two metals.
However, we’re starting to see that dynamic change going into 2023 and beyond. As the cycle of interest rate tightening eventually recedes, we’re likely to see a higher proportion of investment coming into silver, pushing up silver coin prices. The sequence of silver ‘closing the gap with gold’ after gold has acted as a safe haven is one we’ve seen repeated over many years of economic downturns.
