If you were to consider investing in precious metal, we’d wager that gold would arguably be your first port of call of a trader. This is especially true when you consider the precarious nature of the global economy, which endured a torrid 2020 against the backdrop of the coronavirus pandemic.
However, the IMF is predicting an increasingly positive outlook for 2021, with the world’s economy expected to grow by 5.5% during this year.
This is likely to continue to the recent depreciation in the value of gold, but could silver provide a viable alternative as economic growth returns? Let’s find out.
What Does Silver Offer as an Investment?
Interestingly, silver prices hit an eight-year high on Monday, with the precious metal reaching $30 for the first time since 2013 after a whopping 10% hike in early afternoon trading.
This was the latest asset to be influenced by Reddit posts and YouTube videos, which actively encouraged online communities to heavily back silver and drive increased prices to undermine institutional investors who had speculated that it would depreciate.
We’ll have a little more on this later, but this activity shouldn’t deter from silver’s overall appeal to investors during times of economic growth. To begin with, physical silver is considered to be a hard asset that provides a secure store of wealth, and one that has widespread industrial use across the globe.
It’s also widely used in the production of battery units (particularly for smartphones) and medical devices, which represent particularly large markets in the current climate. This is only driving increased demand for silver across the globe, which is also sending prices higher as worldwide growth starts to return.
Silver is also considered to be cheaper than gold, while its price prospects during times of relative prosperity are far more impressive than its more illustrious alternative.
Should You Invest in Silver in 2021?
With these points in mind, silver would seem like a more than sensible investment as 2021 progresses, even though its recent price hike preceded a slight depreciation to $28.82.
However, question marks have been raised by the influence of Internet trading groups, which recently drove huge increases in the value of the ailing GameStop brand before an estimated $11 billion was lost in a huge market correction.
Not only this, but it’s thought that investors who had speculated that GameStop’s value would fall lost at least $15.3 billion as a result of the community’s actions, creating huge volatility and fluctuation in the marketplace.
There’s a danger that silver could experience a similar fate in the near-term, although it’s undoubtedly a less risky option from a longer-term perspective.
Another option facing traders is to invest in silver without assuming ownership of the underlying instrument, by utilising CFDs offered by your preferred forex broker.
This enables you to mitigate your initial risk and trade on margin while allowing you to hedge against silver as an asset as you monitor its performance throughout the year.
Ultimately, it cannot be denied that silver offers considerable value at the moment, while this trend will continue if economic growth continues to return across the globe. However, you’ll need to be wary when making your move, especially with regards to the real-time valuation and the factors that may be driving this.