There are several reasons why investors will look at purchasing precious metals when the economy is weak. The primary reason is that it will help support a weak portfolio and will provide protection for the investor’s assets during troubling economic times. Since the purchase of bullion allows investors to have a solid backbone for their portfolios, it is the investment of choice for smart investors.
According to an article released in the Orlando News Sentinel on December 17th, the number of investors using bullion has increased dramatically over the past four years. This is because, even if the market fails during economic troubles, the investors will still have the initial value of the precious metal to help them recover when the economy recovers. Many banks also purchase bullion, in the form of coins minted by the United States government, to help protect their investors from financial collapse.
This increase in the purchase of bullion has helped the price rise higher than forecasters originally predicted. The price of gold is at an all time high and the price of silver has increased at a higher rate that previously seen in the market. This is primarily due to the purchase of bullion by banks. By purchasing large quantities of bullion, banks have limited the supplies to other investors.
Using the simple formula of the law of supply and demand, the increase in the demand for the precious metal has led to a decrease in the supply. When the supply of any material is low but the demand still exists, then the value of the commodity will rise accordingly. This increase in price is why many new investors looking at entering the market will purchase silver instead of gold.
When deciding which of the two metals to use for an investment, the smart investor will look at a couple of factors. The first is the amount of money they wish to invest. This is important because per ounce silver is cheaper than gold. The other factor is the length of time that they are willing to invest in letting the market mature.
If they are looking at a period of less than twenty years, the wiser investment is gold, because it will increase faster, based on historical data. If the period of investment is greater than twenty years, then it may be smarter to invest in silver. Silver has out-performed gold ,in terms of percentage, in the last ten years. It is also easier to liquidate the investment, because of the higher demand from manufacturing.