Don’t Buy Gold Before the Election, Buy This Instead

Everyone is talking about gold.

We’ve heard the scenarios.  Buy Gold as an inflation hedge.  Buy gold to hedge the dollar.  Buy gold ahead of the election as a “safe store of value”.

There’s another store of value investment that also doubles duty as one of the hardest working precious metals in the economy.

Silver

Year-to-date, the iShares Gold Trust is trading higher by 15%.  Compare that to the 30% return for the iShares Silver Trust and its clear that silver has been the better horse in the race.  We'll get into "why" in a moment.

GLD Versus SLV Price Chart

Before you lean in on me too hard, buying gold is considered one of the best ways to protect your portfolio from volatility and inflation.  It really has been the go-to, but there’s something that silver has that gold doesn’t.

Industrial Demand

Most gold is used in jewelry making and as an investment against inflation and volatility.

Large central banks have been hoarding gold over the last two years, creating historic demand.  But silver is seeing the same demand and more.

Demand for silver has been increasing in recent years, with 2023 seeing the second-highest annual demand on record at 1.27 billion ounces.

The Silver Institute, a nonprofit association representing the silver industry, predicts that demand will continue to rise through 2024, reaching 1.2 billion ounces and becoming the second-highest level ever.

This increase is largely due to stronger industrial demand.

Following that thought, approximately 50% to 60% of silver produced globally is used for industrial applications.

When you compare the two, approximately 10% of gold is used for industrial applications compared to silver’s 50-60%.

Silver's unique properties, such as high electrical conductivity, thermal conductivity, and resistance to corrosion, make it invaluable in various industries, including electronics, solar panels, and automotive sectors.

This significant portion highlights silver's crucial role beyond its traditional uses in jewelry and currency.

Here’s why that should matter to you.

Investors are still looking for a safety trade ahead of this year’s election in November.

We’ll also see demand for inflation fighting investments like silver and gold remain constant when the Fed starts lowering interest rates due to weakness in the dollar.  But silver is likely to have a kicker.

By most measures, the economy is treading through that “soft landing” that the Fed has been engineering for the last two years.

Just on the other side of that “soft patch” should be a new era of expansion for the United States and other large, developed economies.  That expansion will drive already high demand for Silver even higher as industrial demand increases.

The easiest way to benefit from this long-term bullish outlook is to buy and hold the iShares Silver Trust (SLV).

SLV Price chart

The Silver Trust’s price chart supports the bullish outlook as both the intermediate- and long-term trendlines are locked in strong bullish trends.

SLV shares recently completed a healthy correction of 11% from recent highs to find support at their bullish 50-day moving average.  Shares are now heading back to their highs with a 3–4-month target price of $35.

While the trend will include several corrections, the long-term trend suggests a price target of $40 over the next 6-12-months.