Due to a confluence of geopolitical concerns and economic pressures, gold and silver prices hit all-time highs in December.
On Monday, gold (GC=F) surged to a record high of $4,480.60 per ounce, up more than 71% from the previous year. Silver futures, on the other hand, have outperformed gold prices so far this year.
On Tuesday, the price of silver (SI=F) increased by more than 1% to a record $69.38, marking an all-time high for the precious metal and a 138% increase since the start of the year. This may be related to the special bond between the two metals, according to experts.
According to Steven Orrell, vice president and portfolio manager of Orrell Capital Management and the OCM Gold Fund, "historically during precious metal bull markets, silver lags gold and will then experience huge lifts, as we're seeing."
Up until this past month, silver's performance had lagged behind gold's over the previous five years, but it has since sharply increased. Given that gold has experienced a record-breaking year, its connection to the precious metal is undoubtedly a motivator.
Both metals are seeing price increases, but silver is surpassing gold by a wide margin. The difference has significantly decreased when examining the gold-silver ratio, which measures how many ounces of silver are needed to purchase one ounce of gold. That ratio was 104 to 1 in April of this year.
That margin is much lower now, at 64 to 1. There are a number of possible reasons why silver prices are higher than gold, according to experts.
In terms of investments, more people might purchase silver in addition to gold if inflation forecasts rise. Despite the sharp price and scarcity gap, silver is also referred to as "poor man's gold" since it's a less expensive way to access more physical metal and be exposed to precious metals, according to Orrell.
"Investors may view silver as a way to play the industrial angle as interest rates are being lowered because they anticipate that businesses will be able to finance more projects that would require silver's conductive properties."
As a "hedge" against inflation and other economic instability, investors usually go to alternative investments like gold, silver, and palladium.
Because they respond differently to economic situations than stocks and bonds, these "safe haven" assets can aid in portfolio diversification during volatile markets.
Silver is slightly different from gold in that it may be used for both industrial and investment purposes, such as in solar panels and electronics, which can cause silver prices to fluctuate more than gold prices.
Additionally, gold is easier to sell for cash than silver since silver is less liquid. Investing in precious metals can be done in a few different ways. This involves making digital investments in mining stocks, futures contracts, ETFs, and precious metal basket funds.
Of course, you can also invest in tangible assets like jewels, bars, and coins, but doing so requires you to consider safe storage. In the end, think about your investment objectives before choosing to purchase any new asset.
It can be worthwhile if your goal is to diversify your holdings or profit from the current highs. But it's important to thoroughly consider your alternatives, be aware of the hazards associated with short-term gains, and only spend as much as you can afford to lose.
