While gold normally gets all the attention during times of economic crisis, it’s often the under-appreciated silver that could end up being the better investment. Gold has a history of gaining value during tough economic times, but silver can often outgain gold. Investors who understand that, and who buy silver at the right time, could benefit from that silver price growth.
2020 was a strange and unusual year, a type of which many of us hope we’ll never see again. For investors the year was full of ups and downs, with stock markets plummeting 35% due to coronavirus lockdowns, only to finish the year nearly back where they had started. It threw many investors for a loop, and with the future still looking incredibly uncertain, many investors are wondering what the future has in store.
Gold and silver had a great year in 2020, with silver gaining nearly 50% and gold 25%. The average silver price in 2020 was the highest it was since 2013, at over $20 an ounce, and 2021 is expected to be even better, with the average silver price forecast to be over $27 an ounce.
With silver already near those levels, that outlook would mean even more price growth in 2021. Here are three reasons the silver price could continue to grow in 2021 and beyond.
1. Economic Recovery
Economies around the world may still be reeling from the effects of coronavirus lockdowns, but they’re slowly recovering. Roughly half of silver’s annual demand comes from industry, so reduced economic activity can impact that aspect of silver. But even though overall silver demand was lower in 2020 than 2019, the average silver price was far higher.
Increased investment demand was obviously the driver, but it helped that industrial silver demand didn’t decrease nearly as much as it might have. Overall industrial silver demand was down a little over 5% for the year in 2020, hardly the catastrophic decline that you might have expected given the severity of lockdowns and their impact on economic production. That bodes well for the future, as with economies recovering, silver demand should bounce back to its previous levels and could even surpass its previous levels.
Silver demand from the photovoltaic industry for production of solar panels actually increased by a little over 2% in 2020, a bright spot in a year that saw such a severe recession. Does this mean that solar energy, at least right now, is a recession-proof industry? It certainly bodes well for the future price of silver if demand from the photovoltaic industry continues to rise despite economic downturns. As the economy recovers and solar panel demand increases even further, the silver price should continue to rise as a result of increasing demand for solar energy.
2. Investor Demand
Investment demand for silver rose significantly in 2020, with exchange-traded products in particular growing exponentially, by nearly 300%. This increase in investor demand was a major factor behind the growth in the silver price, and it’s expected to continue growing in 2021. Just how much it will influence the silver price and how high the price of silver will get will be the result of a confluence of factors.
The massive amounts of monetary and fiscal stimulus that have been undertaken so far should help drive the silver price higher, especially if inflation picks up. Weak economic growth could also continue to boost demand for silver. If things start to turn south for the economy towards the latter half of the year, the silver price could get a significant boost.
The silver industry is still expecting growth in demand from exchange-traded products, albeit not nearly as significant as in 2020. Instead, the bulk of investor demand growth is expected to come in the silver coin and bar market, where continued growth is forecast in 2021.
3. Overall Demand Increase
Last year was an off year for silver demand, with overall demand down about 10%. That was due in part to significant falls in demand for silver jewelry and for silverware. A significant drop in demand from India was also a factor.
In 2021, silver demand is expected to rise by 15%, to over 1 billion ounces. That would be due both to increased investor demand but also increased demand from industry, the jewelry sector, and silverware manufacturing.
Silver supply is expected to increase too, but only about 8%, which would mean a significant narrowing of the gap between silver supply and demand. In essence, all the signs are pointing to rising silver demand playing a great role in boosting silver prices this year.
How Silver Can Benefit You
Even though silver can often outperform gold, many investors still fail to give the white metal its due. Too many people still don’t realize that during periods of weak economic growth, stagflation, or financial crisis, silver has often outperformed gold. During the 1970s, for instance, gold’s average annualized gains were 31%, while silver’s were 33%. During the 2008 crisis and its aftermath, gold gained around 270% while silver gained over 500%.
These examples demonstrate that even though gold’s performance during troubled times can be fantastic, silver’s performance can still outshine it. If you’re thinking about gold and precious metals to protect your savings and investments, shouldn’t you give silver some thought too?
Investing in silver can be as easy as opening a silver IRA. A silver IRA acts just like any other IRA, offering you a tax-advantaged way for you to save for retirement. The only difference is that a silver IRA holds physical silver coins or bars that you choose to invest in. To fund your silver IRA, you can even roll over or transfer funds from existing tax-advantaged retirement accounts such as a 401(k), IRA, or TSP account into your silver IRA. That gives you the ability to protect your existing retirement savings with an investment in physical silver while still enjoying the same tax advantages you already enjoy.
If you’re looking to protect your hard-earned savings against inflation, a market crash, or just ordinary asset loss, an investment in silver could provide you with some major benefits. Its ability to continue gaining value when other assets are losing value could provide you with the protection you need to sustain you through a rough economy.
Don’t let your retirement savings remain unprotected even one day longer. Talk to the experts at Goldco today to find out how silver can benefit you.
Trevor Gerszt is America's Gold IRA Expert, CEO of Goldco Precious Metals, and holds a position on the Los Angeles board of the Better Business Bureau.
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