Is It The Right Time To Invest In Gold And Silver?

Disruption in world affairs, rising inflation, low equity returns and fear of a looming recession are leading many investors to assess alternative forms of investment. Not surprisingly, many are turning to precious metals like gold and silver to act as a safe haven. But is it the right time? Vardan Pandhare helps you answer the question

- Vardan Pandhare

Precious metals have a somewhat soft spot in the investing community. And why not? These finite resources, notably gold, have served as a safety net whenever the world has spiralled into a new catastrophe. India's 1991 economic crisis - probably its worst ever - was resolved thanks to the yellow metal. These metals prevented the financial systems from collapsing in 2008 when the Lehman crisis struck the world. Today, the global economy is experiencing a gridlock brought on by the pandemic and then the unstable geopolitical scenario. This has resulted in many participants returning to precious metals.

Stabilising the Volatility

Silver has been historically more erratic than gold. Despite the huge demand, there are now about a billion ounces available, according to statistics. In addition, industries are the main source of demand. This implies that depending on how the business is run, the demand for silver changes, and is primarily cyclical in character. As a result of this constant tugging on the demand-supply rope, small differences have a big impact on silver prices. It might be surprising to learn that silver, which currently trades at approximately Rs 57,000 reached an all-time high of Rs 74,000 per kg in 2011.

This further demonstrates the highly volatile nature of silver. Again, this may make silver both a wonderful commodity for producing profits as well as a risky investment. When we contrast it with gold, we discover that gold has retained significantly more stability than silver. Some of the factors to consider when investing in gold and silver include: