Trading Silver and Gold for Long-Term Wealth Building

Building long-term wealth is a goal many of us share. We want to grow our money over time to afford the things that matter most. How we invest and manage our money over decades makes all the difference in achieving those life goals.

In this article, you’ll learn how investing in silver and gold can help you drive long-term wealth building. We’ll review the fundamentals of buying silver and gold, review performance history, and provide long-term investing tips.

The Case for Silver and Gold

Silver and gold have intrinsic value, meaning they hold actual worth all on their own, unlike fiat money, which only carries the full faith of the government behind it. Global stockpiles and demand help determine prices and factors like inflation, current events, and currency fluctuations.

Since ancient history, these precious metals have served humanity as currency and decorative objects of beauty. They connect us to traditions and hard-won lessons from the past.

While volatile in the short term, precious metals markets tend to rise over longer periods. That helps strengthen your purchasing power. Even small allocations to silver and gold in a diversified portfolio can make a difference over years and decades.

How Have Silver and Gold Performed?

Investors often look to gold as a haven during recessions and geopolitical strife. The yellow metal has climbed an average of 10% annually over the past 50 years despite some rocky periods. For example, throughout the high inflation era of the late 1970s, gold prices effectively quintupled.

Silver has outpaced even gold substantially at times. For example, silver jumped fourfold in just the three years between 1979 and 1980 before corrections set in. Past extreme bull runs prove both metals hold explosive potential due to crisis-driven spurts in demand and what experts call “fear trade” - defensive investing due to worrying world headlines.

Still, gold and silver go through lengthy corrections, too. Gold sank over 40% several years after 1980 before mounting its next charge higher through the 2000s. Meanwhile, silver plummeted a whopping 93% peak-to-trough four years after its early 1980 peak.

Precious metals should primarily be bought and held for long-term wealth building. Their stretches of explosive gains far outweigh periodic plunges over decades. Patience wins out.

Find insights in this article: Gold Standard - Historical and Its Modern Implications

Ways to Invest in Silver and Gold

Now that the case has been made for precious metals as an inflation hedge and crisis hedge let’s discuss the most popular ways to gain exposure:

Physical Bullion

Owning coins, bars, and rounds in gold and silver bullion provides direct exposure and a tangible asset. Large dealers like APMEX, JM Bullion, and SD Bullion allow online purchasing.

However, premiums for popular minted coins can run 15-30% or more over the melt value. Bars and rounds trade closer to melt value. Storage and insurance of the physical bullion add cost, too.

Mining Stocks

Shares in gold and silver mining companies can generate tremendous leverage to raise the prices of precious metals. Cost improvements and production volume increases also lift profits substantially at mines when metals rally. Top miners include industry titans Barrick Gold, Newmont, Silver Wheaton, and Pan American Silver.

Find insights in this article: How Gold Mining Stocks Perform During Market Crises

Exchange-traded funds (ETFs)

Commodities ETFs like the SPDR Gold Trust or iShares Silver Trust track near the price levels of gold and silver minus minimal management expenses. Coins and mining stocks can involve numismatic premiums, and company risks that don’t affect these ETF share prices. They offer diversified exposure to the price movements of metals.

Gold and silver bullion coins and bars should make up the core holdings of any precious metals portfolio. Add blue-chip mining stocks and ETFs to profit from new exploration and increased production. That combination provides direct asset exposure plus operational upside.

4 Tips for Investing in Silver and Gold

Consider the following best practices when investing in precious metals for long-term wealth building:

1. Allocate Only What You Can Afford to Lose Like other volatile assets, silver and gold prices can stagnate or lose substantial value for years. Limit exposure to 5-20% of investable assets based on risk tolerance. Never gamble money needed to pay living expenses.
2. Hold a Minimum 5-10 Year Time Frame. Don’t panic during periodic corrections. The longer precious metals are held, the more likely substantial gains become as new bull runs occur. Short-term trading introduces tax burdens and transaction fees that erode profits.
3. Diversify Across Metals and Assets. Accounts Experts suggest spreading precious metal holdings over gold, silver, and platinum. Diversify by location stored too - safe deposit box, home safe, custodian vaults. Consider multiple account types as well - IRAs, trusts, joint accounts, and more.
4. Monitor Macroeconomic Fundamentals. Follow inflation gauges, real interest rates, currency prices, and global turmoil that may impact precious metals markets out of proportion. Understand what moves metals rather than reacting emotionally. Adjust holdings periodically to reflect significant economic shifts.

Gold and silver’s intrinsic value and crisis hedge nature make them powerful for long-term wealth building. Their prolonged bull markets and explosive short-term gains seen repeatedly throughout history can rapidly build wealth.

Patience and disciplined investing provide the keys to unlocking their long-term wealth-building potential over time.

You might also like to read: Types of Commodities and Their Role in a Diversified Portfolio

Closing Thoughts

With sound fundamentals and reasons to be optimistic about future demand, precious metals belong in most long-term investment plans. Their hedging abilities and explosive potential serve investors throughout calm and volatile cycles.

Although it is difficult to provide exact price targets, many experts predict that silver will reach triple-digit figures and gold will reach five-figure figures within the next decade. However, it is essential not solely to focus on short-term gains.

The most significant investment returns are achieved over time by holding shares in this natural independent store of value.

Pace your expectations appropriately, diversity sufficiently, and tune out the noise along the way.

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“When considering “CFDs” for trading and price predictions, remember that trading CFDs involves a significant risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be considered investment advice.”