Unconvinced that silver and gold bullion should have a place in your portfolio? Here are 9 valid reasons why every investor should own silver and gold bullion:
Gold doesn't tarnish, corrode, or rust. It doesn't dissolve. It doesn't rot or mildew. Gold bullion cannot be cracked, crumbled, broken, or shattered.
3. A Good Hedge Against Inflation
Record food and oil prices are fueling global inflation. Investors will begin to seek out assets which are perceived to be anti-inflationary. And silver and gold bullion has historically been perceived to be a good hedge against inflation.
Investors who are concerned about the downside risk to their portfolios will naturally look to invest in gold or silver. The returns on bullion have very little correlation to assets such as bonds and equities. Thus, silver and gold bullion can be expected to perform well during unusual market conditions.
When the U.S. dollar falls, gold or silver is often purchased as an alternative investment vehicle. A cheaper dollar also makes dollar-denominated commodities such as gold less expensive for investors holding other currencies. Therefore, as the fall in the dollar continues, investor demand for silver and gold bullion will rise.
Currently, interest rates stand at close to 0%, while the official annual inflation rate is around 2.4%. The Federal Reserve's top priority at the moment is supporting the financial sector. Interest rates must remain low in order to keep the housing sector and credit markets stable. Negative interest rates destroy the value of money kept in bank accounts and other non-speculative investments.
7. Inexpensive Compared To Oil
The historical gold to oil ratio is one ounce of gold to fifteen barrels of oil. Gold bullion is currently trading at a ratio of around 14, (based on the current price of gold at $1122 divided by the current price of oil at $80). For the ratio to return to its historical mean, gold would have to trade at over $1200 an ounce, assuming oil stays at the current price.
8. A Highly Liquid Asset
Gold and silver are universally accepted around the world and can easily be bought and sold. As an investor, you therefore have the alternative to trade your bullion for different currencies if the need should arise.
9. Demand Will Remain Strong
Higher inflation, rising oil prices, a declining dollar, a weakening U.S. economy, geopolitical tension abroad, and a slowdown in world economies will all play a part in the continued increase in the price of silver and gold bullion.