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Why Invest in Gold & Silver

People see gold and silver as investment options mainly because they possess the function of "currency", as Karl Marx’s once said: "Although gold and silver are not by Nature money, money is by Nature gold and silver." To interpret this statement, we need to explore the historical evolution of money.In the course of the development of human civilization, the invention of money marked a significant milestone no less than the discovery of fire, and subsequently streamlined the entire process of economic exchange, enhancing efficiency. This paved the way for the emergence of price discovery mechanism, allowing traders to distinguish high-demand goods from others. Afterwards, markets were formed, laying the foundation for capitalism taking shape.

In various historical contexts, humans have used a wide variety of items as currency, ranging from livestock, crops, shells, and stones, and yet, gold and silver emerged as universally preferred currencies across different nationalities, races, and cultures.This preference arises from the six key characteristics inherent in gold and silver that make them ideal for the role of currency.

Portability

Taking the increased trading volume into account, as the market reaches maturity, less portable currencies will be phased out.

Durability

Currencies of superior quality remain resilient against deterioration or decay over time.

Divisibility

For the purpose of making change easily.

Homogeneity

Gold or silver produced anywhere on the Earth's surface possesses identical qualities and value.

Unit of Account

Meeting the demands of calculation and record-keeping.

Inherent Value

Cannot be easily replicated in large quantities, maintaining its value unaffected by wars, natural disasters, or the rise and fall of nations.

Functions

Gold and silver are not only perceived as a more superior type of currency but likewise serve three additional functions:

    Insurance

    Gold and silver provide investors with protections on three respects：
  • Inflation：Gold and silver safeguard against the erosion of purchasing power due to inflation, given their inherent value.
  • Counterparty Risk：Unlike other investments, gold and silver do not represent obligations or debts of any particular entity, minimizing exposure to counterparty risk.
  • Portfolio Hedging：The increasing prices of gold and silver act as a hedge for investors against the declining prices of investment assets such as stocks, real estate, high-yield bonds, etc.

Investment

Gold and silver are also widely applied in various sectors, including jewelry, medical applications, industrial purposes, and more. Compared to gold, silver performs well with its value per unit steadily increasing because of ongoing consumption.

High Quality Collateral

As the value of other collaterals like real estate or automobiles decreases, gold and silver emerge as the premier choices for securing assets. Benjamin Graham once remarked: "An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative." This principle is applicable to investing in gold and silver as well. In the current environment, where developed countries are implementing negative interest rates, monetary policies are failing, global corporate profits are declining, and the banking system is extremely unstable, allocating a certain proportion of gold and silver in an investment portfolio is believed to be a wise choice.