Silver and Gold are the only forms of currency that have survived the test of time. Government issued paper currencies have come and gone over the years. Here are six supporting facts for diversifying your portfolio with SLV and GLD.
1. High Demand
Demand for the precious metals has gone through the roof as of late. For starters, the United States Mint sold a record breaking 47,000,000 Silver Eagles in 2015. In just the first day of sales, the Mint already sold half of what it did in the whole month of January 2015. This sales surge totals approximately 2,760,000 ounces of silver. If Silver Eagle sales continue on this path, overall demand for the 2016 Silver Eagle will be higher than ever. Gold is also a hot commodity at the United States Mint. 60,000 ounces of gold eagles were sold on the first day they were available. This is just over 74% of all sales in January 2015. Demand for gold and silver at the U.S. Mint is higher than ever. If demand continues on this path, the Mint will likely temporarily sell out of Silver and Gold Eagles like they have a few times before. When the Mint falls behind on its orders, the premiums for its products skyrocket. This premium surge was seen for Silver Eagles in September 2015.
2. Low Prices
Low prices are an understatement. Silver and gold have hit multi-year lows of approximately $14 and $1,100 respectively. These low prices have correlated with increased demand, as seen with the recent numbers from the U.S. Mint. Since 2011, the prices of the precious metals have been hit hard from their highs of approximately $49 and $1,950. This is an opportunity of a lifetime to get the most silver and gold holdings for your buck.
3. World Powers are Stockpiling
In 2015, Russia added more precious metals to their stockpile. After its recent additions, Russia is believed to have the seventh largest gold reserve in the world. In November 2015, the eastern country added 700,000 ounces or 22 tons of gold to its stockpile. Russia's yearly purchases increased about 11.7% in just one year's time. China is no exception to this behavior. In November 2015, China's gold reserves increased by a total of 6.3%, which totals just about 21 tons of the shiny yellow metal.
4. Global Stock Market Weakness
Last week the DOW was down almost 1,000 points. The DOW's 50 point gain on Monday did not bring much relief to investors. Oil futures alone hit a 12 year low of $31.25 a barrel. The Nasdaq finished down on Tuesday, and the S&P 500 took a 2.5% hit the following day. In short, the Stock Market is not doing so well. On a better note, gold and silver seem to be benefitting as a result of this selloff. Some investors are leaving their paper assets behind to invest in the precious metals. These investors are finding security in these investments, as the fundamentals are quite strong.
5. China's Stock Market in Trouble
China is not faring much better as of late either. First off, China is one of the major producers of consumer goods, and the consumer market is shrinking as demand from European countries and the U.S. decreases. This has been seen in the China PMI numbers last month that came in below 50 at 49.7, which indicates contraction in factory activity. This was the 5th consecutive month of contraction. Major indices are down over 7% as a result of the new data that has just come out. The Chinese government is now switching over to stockpiling more gold. This past November, China increased its physical holdings of the metal by around 6%.
Let's take a look at what happened in Argentina and Greece. Argentina's currency became worthless leading citizens to lose their life savings because of rampant inflation. Additionally, if a country losses its ability to borrow in the capital markets, banks could face extreme capital restraints which occurred in Greece. Greek banks only allowed minimal withdrawals of 60 euros a day until they received assistance from the European Union. Silver expert David Morgan believes this could happen in the United States. If a tragedy like this were to occur, physical assets would be the most desired, rather than other securities. Since SLV and GLD are backed by physical silver and gold, one could imagine that investors will flock to invest.
The fundamentals for the precious metals are strong. Demand is higher than ever, prices are the lowest they have been in years and world powers are even getting in on the buying opportunity. With SLV and GLD directly correlated with physical gold and silver, any positive effects on the precious metals due to these factors will directly impact holdings in these ETFs. Purchasing SLV and GLD seems to be a very wise method of diversification. With prices at these levels, many prudent investors are taking advantage of this buying opportunity. Holdings of physical gold and silver or GLD and SLV will bring diversification to a wise investor's portfolio.
*These are solely the opinions of Bullion Shark, LLC and are not intended to be used as investment advice. Please consult your investment advisor before investing.*
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.