TMCnet Feature
October 13, 2021

Gold, Silver and Bitcoin, or how to hedge a portfolio

Gold and silver are must-haves for any portfolio that looks to hedge volatility and be recession-proof. That's been the case ever since there is a market for Gold and Silver. The reason for it is considerably simple.

Precious metals are scarce and valuable. And unlike the diamond and oil industry which are artificially inflated through cartel power, Gold and Silver are in short supply on earth. Therefore, their value rarely decreases. That happens regardless of how many producers or suppliers are around the globe at any given moment.

Over time, however, there have been shifting feelings about the best way to hedge a portfolio. Ever since crypto broke into the market, analysts have been split on the best way to diversify a portfolio and when the Gold price, the Silver price, and Bitcoin price are a buy, sell, or hold. That's why up next are different experts sharing their thoughts about each one.

Gold Rush? Not always when it comes to the gold price

Overall, people will be hard-pressed to find a financial expert that will advise their clients against buying gold.

The Gold price is stable and everlasting. As explained by Sylvia Carrasco, CEO of Goldex, "gold has long been considered the safe-haven asset of choice. It [gold] has a significant advantage over fiat because it can't be diluted or debase. Gold has retained its value through centuries and will continue to do so regardless of the market environment."

David Rosenberg corroborated that sentiment by stating, "gold has thousands of years of historical records as a store of value. I would never advise anyone against acquiring gold or gold futures.  The day I'll do that will be the day she trades in her golden crown for something else. Until then, gold is still king."

However, not everyone sees it that way.

Michael Reynolds, the Investment Strategy Officer at Glenmede, sees gold as something worth trading depending on the price. "People think of the gold price as an eternal bull. But that's not the case. In theory, gold could become unlimited over time, be it by space mining or efficiencies in gold recovery. The best way to treat gold is as value storage in bad times and a tradable commodity in good times. Anything else is wasting air."

The case for silver

Rober Minter, Director of Investment Strategy at Aberdeen (News - Alert) Standard Investments, corroborated what Michael Reynolds said and presented the case for silver. "Gold has a passionate investor base, and for a good reason. Gold was the building block of the global economy for the past 5,000 years. It's true and tested. But we aren't in ancient times. Silver became valuable once we reached the modern era. Its thermal and electrical conductivity guarantees its values for generations to come. And while gold is also used, the silver price is worth tracking for the long run.”

"Silver is the present and future. The silver price shows how investors are more and more eager to move there whenever the market has a downturn. Why? Because silver is in everything. From cheap switches found at a hardware store to plasma high-res televisions. Everything contains silver, and that makes silver price recession-proof. Gold's historical run is valuable when calculating current prices, but silver only has one way to go, and that is up." - Phil Baker, President and CEO of Hecla Mining Company.

What about Bitcoin?

Here is where things get interesting. While experts debate about the value of tracking the price of Gold or Silver, the truth is that there is a third player in town.

Bitcoin came into existence nearly a decade ago. However, its price came to dwarf that of gold and silver. And it did it for the same reason the two precious metals became so desirable. In the end, BTC is excellent at storing value.

Unfortunately, none of the experts interviewed had a strong or weak opinion about this cryptocurrency. They all saw it as another commodity that should be treated as such. That's why there aren't any declarations from the experts. However, there was a valuable lesson that they decided to impart to those seeking to understand the gold price or the silver price concerning crypto or the stock market.

At the well-known cfd broker Plus500, they notice that in addition to Bitcoin, gold and silver are still very popular among investors for trading. The popularity of these assets fluctuates with the price action. When the price rises, investor interest increases.

As explained by David Rosenberg of Rosenberg Research, former Chief Economist and Strategist for Merrill Lynch Canada and Merrill Lynch in New York, "the gold price is stable. You don't get gold to make money. You get gold to store money. The silver price is rising. Through silver, investors can hedge any mini crashes in gold. And they can guarantee a bigger return in the long run. Bitcoin is like a mixture of the two. Through BTC, you get the stability of gold with the rising power of silver. However, never choose one of the others. Gold is only as strong as silver is. Likewise, these two commodities perform better whenever the market is downturned. And the same goes for Bitcoin."

Different points of view that all agree on a single topic, a portfolio is only as strong as its diversification. And the best way to diversify it is by relying on the stability of the gold price, the upshot of the silver price, and the rising value of the bitcoin price.

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