If you’ve been reading these pages for a while, you already know there are lots of worrying signs about the world economy out there.
Germany is most likely in recession… China’s growth has slowed enough to behave like a recession in the fast-developing country… Britain is caught in an awful limbo with Brexit hanging over everything — and likely to hit the U.K. worse than the Great Recession did… The U.S. and Europe are already cutting rates deep, trying to avoid a slowdown…
And plenty of countries already have negative interest rates — with nowhere left to go.
It’s a mess.
Add in the inverted yield curve on U.S. bonds and the various trade wars still simmering and it shouldn’t be a surprise that most economists are raising the odds on a recession over the next year. Some are going as high as a 75% chance of a downturn in the next 12 months (the median guess is a 35% chance).
Now, economists are notoriously poor at predicting recessions. But there’s no doubt we’ve got a lot of warning signs — from manufacturing contracting for the first time in three years to a record amount of pork spoiling in American warehouses, with China still not buying.
At the very least, you should be setting your portfolio up to survive a slump. Even if there were no worrying signs, the age of the current bull market (currently the longest ever) is enough to counsel caution.
And the best way to shore up your positions is to back them with gold.
The Other Precious Metal
Of course, gold gets most of the attention when things go sideways.
That’s because gold has been used as a store of wealth for millennia. It is one of the most valuable metals in the world and has been back to the beginning of time — even as other contenders rise and fade.
It’s a concentrated form of wealth — a 400-ounce ingot is more than enough to purchase most houses outright, with plenty of change left over. (As I write this, 400 ounces of gold is worth around $588,000 at the current spot price.)
But at a moment like right now, I prefer silver.
For a couple reasons…
1. Silver Is More Volatile
Partially because it’s a smaller market… partially because it’s cheaper than gold… and partially because silver has so many industrial uses… it moves faster than gold does.
They almost always move in the same direction. But silver tends to hit higher highs and lower lows.
That means it’s a horrible investment when things are rosy and economies are humming. Silver will crater much harder than gold.
But it’s a great investment when economies are on the cusp of a downturn. Like they are today.
2. The Ratio Demands It
Gold and silver tend to stay in a relatively narrow ratio band. Whenever one gets too expensive, or the other too cheap, either gold or silver will snap up or down to equalize.
Right now, gold is near a historical high, measured by its price versus the price of silver. Which means either silver has to rise or gold has to fall… but one of them has to budge.
You could actually make pretty decent money selling gold and buying silver when the ratio gets too high — and doing the opposite when the ratio dips too low — regardless of outside economic conditions.
But when the world economy is teetering and silver is this cheap, you get twice as much of a price push upward.
It’s my bet that any silver you invest in now will outperform gold over the next few months, in addition to providing portfolio protection outside the markets. That’s a win-win.
3. The Price Is Right
Finally — because an ounce of silver is so much cheaper than an ounce of gold — it’s easier to take a large, meaningful position.
Which is accentuated by the fact that, believe it or not, there’s more pure gold in the world than there is pure silver (defined as 0.999 pure or better).
Indeed, considering silver’s many uses in industry — especially in the tech and solar worlds — there are folks who think that someday the price of silver could pass the price of gold.
I’m not ready to go there… But I do think silver is going to rise much faster than gold over the next few years.
That’s why you should grab some right now — before prices really start to move.
Because even if we don’t get a recession in the coming months, we are still going to have a lot of people afraid of one. It’s only a matter of time before we see a run on precious metals.
And silver will lead the way.
Editor-in-chief, Unconventional Wealth
P.S. The best way to buy silver I know of is through our partners at Hard Assets Alliance. We partnered with them specifically because they provide such a great value — offering metals closer to the spot price than anywhere else I’ve seen, with insurance and storage included in most purchases. See how they can help you grab the real physical stuff right here.
Ryan Cole is the editor-in-chief of Unconventional Wealth. He’s been covering the alternative investment space for nearly a decade and writing about finance and investment for almost 20 years.
Ryan has walked the walk for years, living a very unconventional life. He’s led snowmobile tours through the mountains of Colorado, settled in Japan for five...