Silver Parachute, Fiscal Cliff
Wesley is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The fragile US economy is slowly chugging along the tracks heading straight for an economic calamity of our own creation. If you’ve been hiding in your bunker waiting for the world to end on December 21st, you may have missed the news. The fiscal cliff is the impending tax increases and spending cuts that will activate on Jan. 1, 2013, unless Congress and the White House change or at least delay these actions coming into effect.
This being an election year, and both Republicans and Democrats are digging in their respective heals, there is a real possibility that nothing will be resolved until after the election, cutting any possible solution extremely short.
Expert opinions vary widely on how much of a negative effect the fiscal cliff would cause, but they all agree on it being a negative one. As an investor, we are looking for ways to shelter our portfolio from such uncertainties. As anyone who’s taken at least one economic class knows, gold is one of the best “value holders” we can invest in. Gold is a safe haven, hedging against inflation and market instability, holding the intrinsic value of our investments. Many investors have invested in gold ETFs such as SPDR Gold Trust (NYSEMKT: GLD). However, many believe gold’s high price smells like a bubble. This potential bubble has been caused by a textbook example of a positive-feedback-loop: fear about the economy, let’s buy gold, gold goes up in price, must be a good investment, let’s buy more gold, price goes up, let’s buy more... and on and on, until pop!
We as investors feel the uncertainty of the fiscal cliff; we look at the crisis in the EU, the slowdown and possible real-estate bubble in Asia, and we are searching for a safe haven to ride out the ominous storm brewing overhead. Gold has historically been our metal of choice for holding value, but what about Gold’s somewhat overlooked cousin, silver?
Silver has many uses other than jewelry and cutlery; solar power for instance is one of silver’s most significant uses. Silver is used as a reflector in solar power cells and there is currently no alternative. BHP Billiton plc (NYSE: BHP) was the world’s number one silver producing mine in 2011 with over 32 million ouncesor if you’re looking for an ETF, iShares Silver Trust (NYSEMKT: SLV) is another option.
The world we’re investing in today has a lot of uncertainty, and if you’re looking to invest in something other than an expansion on your bunker, silver is an attractive alternative to the potentially bloated gold bubble. Silver is currently at $30.69 an ounce off from it’s high of more than $43 an ounce in August 2011.
wesleyhaze has long positions in iShares Silver Trust. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.