With so much going on in the world these days, it's easy to overlook the developments in the precious metal markets. Even as governments continue to devalue currencies, central banks across the globe have been accumulating gold. Should investors start considering a small allocation in precious metals as well?
This probably doesn't sit well with many, who regard gold and silver as nothing more than shiny metal that sits in a vault, collecting dust and earning no interest or dividends.
But investors, in general, need to protect themselves from these currency devaluations, which will likely lead to inflation in the future. Even if we are currently in a deflationary environment, central banks continue to pursue inflation. And they might, at some point be successful in achieving this goal. As such, a small allocation to precious metals could protect the purchasing power of your savings and insure your overall wealth.
How much you should invest in precious metals, of course, depends on your portfolio and other factors.
In the current global economic environment, precious metals look like a good short term-investment. Simply put, precious metals may be a good hedge for investors facing the myriad of problems associated with the present economic environment, especially currency devaluation.
A diversified portfolio of tangible assets such as gold or silver could equal about 5% (and sometimes more) of an investor's portfolio. That could be considered a prudent asset-diversification strategy at any time. And in today's uncertain political and economic environment, there are many (and very sound) reasons to consider investing in precious metals to diversify your holdings.
Keep in mind, precious metals are not like other asset allocations. For example, putting money in precious metals is very different than investing in the stock market. Even the word "investment" seems a bit out of place here. Gold doesn't pay dividends; gold doesn't pay interest. It's a metal that has historically been used as money. Throughout the world, gold continues to be recognized as money. As such, it offers long-term protection as currency is devalued for investors looking to be able to maintain their lifestyles 10 to 15 years down the road.
Some might suggest that silver is an even better option than gold for investors looking to diversify. Right now, the gold-to-silver ratio is fairly high. During the 20th century, that ratio has been about 47:1 and over the past 20 years, it’s been 60-to-1; meaning 60 ounces of silver are valued the same as 1 ounce of gold. Right now, the ratio is much higher: 85 ounces of silver have the same dollar value as every ounce of gold. That’s nearly 60% above the 20-year average.
Allocating a portion of your assets in silver, at current prices, could offer investors and retirees a good long-term investment. Along with gold, it is recognized as a store of value.
Precious metals have been a safe haven in times of war, political strife and uncertainty. With the potential for rising inflation and the continued devaluation of paper currency as likely possibilities, it might be a good time to consider precious metals for your retirement portfolio.
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Precious metal investing involves greater fluctuation and potential for losses. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. This article was distributed by Financial Media Exchange.
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