The question of whether silver in 2013 is a good asset to rely on for a retirement portfolio really depends on what a person wants from their retirement savings and investment plan. No asset, including silver, should make up the totality of a portfolio ever. The risk of loss with everything placed in one asset is just too great. That said all precious metals, even silver, have done well versus the regular investment market, often producing annual returns greater than the stock market has produced year to year. So the metals area can definitely be attractive.
To understand what silver offers now as a long-term investment, a person needs to see what’s been going on for the last 5 to 10 years with the precious metal. Like other metals considered investment territory, silver has definitely been on the rise in terms of valuation. Part of this has been driven by market speculation, but a good portion has also been driven by industrial demand, particularly technology areas that require raw metals for fine electronics production.
At the turn of the 2000s, the metal was parked below $5 an ounce. Today, in 2013 and according to CNN Money, silver is in the low $20/ounce range, having reached as high as low $30s only a year or two ago. And a large part of this growth has been due to market speculation, especially via exchange-traded funds. While this is not the kind of growth that makes people millionaires, it’s far better than many people’s IRAs have performed in the same time period on the regular stock market.
Again, no one should be putting all their eggs into one basket with silver alone. A good portfolio should be a mix of bank savings, bonds, stocks, precious metals and other assets, so that the different categories work as hedges against each other and market changes over time. As for silver’s prospects specifically, we can fully expect industrial demand for the metal to continue if not increase, according to Forbes Magazine. Many emerging markets are dramatically increasing global consumption for production purposes, particularly China and India.
Further, the issues that have driven up precious metals in general, that being the weaknesses in government economies, have not gone away. As of mid-September 2013 the Federal Reserve signaled it will continue to support monthly financing of quantitative easing, in essence stating the economy and markets are still week. This in turn boosted the values of precious metals across the board as a hedge against weak financial markets tied to currency.
Finally, the U.S. has not identified new sectors of industry that will fundamentally boost the country. The boom in the 1950s with manufacturing, in the 1980s and 1990s with computers, and in the 2000s with the Internet has not produced another big industry yet. Until that happens, the source of jobs and economic growth in the U.S. will continue to sputter with a weak recovery.
All three issues above point to a continued support of silver and other precious metals at a higher valuation position than previous years. As for the long-term prospective, one would expect silver to retrench further as economies recover. However, the U.S. will be saddles with a debt that now makes up 75 percent of its gross domestic product and growing, and again no new industry is on the horizons, just more government spending and service-oriented businesses. That doesn’t bode well for economic expansion. It signals further staleness instead. So silver, especially physical metal, may very well still be a good hedge going forward.
About the author: Kathem Martin manages precious metals investments for clients at Scottsdale Bullion & Coin. Kathem Martin has years of experience and knowledge in protecting retirement accounts with precious metals like silver & gold. Connect with Kathem Martin on Google+