Updated on March 30, 2023
The effects of the Covid-19 pandemic, the Russian invasion of Ukraine, and many other global events have increased rumours of a potential recession. With that, questions from newcomers like: what will silver be worth if the economy collapses?
Previous market crashes
The question about silver’s worth in case of an economic collapse can only be answered with a brief look at the historical data. The most historically significant global market crashes were in the years 1978, ’82, ’87, ’90, ’02, ’09, and 2011.
Although the price of silver dropped in almost all the preceding crashes, the situation differed in 1978 and 2009. These conversely registered an increase in value for the metal. Investors expected the high volatility to cause a price decrease. Instead, the market value for the metal gained by 15% in the 1970s and was stable by the end of the 2009 financial crisis.
These incidents gave investors confidence that silver is a potentially great store of value during times of political and economic upheaval.
Uses of silver
Silver is an excellent investment due to its wide range of applications in certain core industries. It is utilized in jewelry, batteries, medical equipment, automobiles, solar technology, and other essential industries. These guarantee demand for the metal for some time to come.
Also important to remember is that seasoned investors don’t necessarily invest in silver for its returns but rather as a hedge against inflation and other potentially catastrophic shifts in the marketplace. This is because it is a physical asset with long-term value in comparison to every other country’s currency.
Investors typically buy silver bullion during times when holding cash reserves or stocks is risky due to various macroeconomic factors. With this background, it stands to reason that in the event of an economic collapse, the value of silver will rise in the marketplace.
However, supposing the American dollar completely collapsed to the point of being worthless. The value of silver would collapse as well. The forces of demand and supply dictate the value of the commodity. Therefore, if there is little to no demand for the commodity, the price would also inevitably drop.
Market Value of Silver
Silver is traded on the New York Mercantile Exchange. It is classified as a publicly traded commodity on the open market. Many investors believe that silver is the most affordable metal on the exchange. This makes it a great addition to one’s portfolio.
During times of recession, sophisticated investors purchase silver as a way to counterbalance their portfolios. Also to hedge against the negative forces at play in the market. Silver must be mined. Since the resource is finite, the assumption is that the mining process will only increase in cost, which will inevitably affect the metal’s price. This will continue to add value to the metal.
We go back to the question regarding silver’s worth in case the economy collapses. In terms of real value, the metal can only guarantee modest returns. This means an investor should not expect to buy low and sell astronomically high when it comes to silver. Investing in silver will likely help investors safeguard their purchasing power or increase it slightly during challenging economic times.
However, if an investor wants to increase the potential returns from silver, they would have to increase their risk exposure. This is by investing directly in silver miners, increasing their risk/ reward potential.
What will silver be worth if the economy collapses?
The best way to gauge silver’s dependence on the US dollar is to analyse global influences on the prices of precious metals. For the longest time, the US dollar has been heralded as a safe asset owing to the economic and political stability of the country.
However, silver would remain a relatively excellent investment even if the US dollar and the global economy collapsed. This is because of its varied industrial applications, liquidity, and scarcity. As discussed above, silver has historically performed well in times of economic uncertainty, granting investors a haven to weather the economic storm.
As investors brace for a potential recession owing to the various geopolitical forces at play, statistics confirm that silver is a good choice for investors. Investors can invest in silver through silver bullion bars, silver IRA, ETFs, and stocks.
Investors often wonder what silver will be worth if the economy collapses. They should rest assured that the metal can hold its own in times of political and economic upheaval. However, novice investors should keep in mind that investments in silver are not made with the expectation of high returns. Instead, they are typically a hedge or protection against the bumpy ride ahead.
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