Why use gold investments as a hedge?

Gold is looked at as a hedge investment in many different situations. The first and most popular use of gold as a source of protection is as a hedge against the decline of a currency, typically the US dollar. When the dollar slips, the yellow metal not only becomes less expensive to hold, but also tends to rise in value.

“Gold’s relationship with the dollar is determined by US-based gold supply and demand, as well as by the status of the dollar as the reserve currency globally,” states the World Gold Council. “Historically, a weak dollar tends to provide a stronger boost to gold’s performance than the drag created by a strong dollar.”

By holding the precious metal as a diversification tool when the economy negatively affects currencies, investors can incur gains from the metal’s increased value.

The second reason why gold makes a good hedge is that it can act as a defense against inflation. When the cost of living begins to rise, the stock market often falls. In those cases, investors with assets that are negatively affected by a volatile market need something to balance that out — that’s where gold comes in.

Over the past 50 years, investors have seen gold make huge gains when the stock market is crumbling. As Investopedia points out, “This is because, when fiat currency loses its purchasing power to inflation, gold tends to be priced in those currency units and thus tends to arise along with everything else.”

Interestingly, the yellow metal has also been used as a hedge against deflation, which happens when prices drop, the economy is in a downturn and excessive debt looms. This situation has not occurred since the Great Depression of the 1930s, and to a much smaller degree after the 2008 financial crisis.

Market participants may decide to hoard cash in this type of scenario, and the safest place to hold cash is in gold. Again, while this situation is not commonplace, many investors keep the yellow metal in their portfolios on the off chance that another massive period of deflation will take place.

Finally, gold can be used as a general portfolio hedge when market participants hold investments that are not related to one another. Since the precious metal generally has a negative correlation to stocks, bonds and other financial instruments, investors often diversify by creating a portfolio that combines gold with stocks and bonds in order to reduce both volatility and risk.

While it is true that the yellow metal goes through times of volatility, it has always maintained its value over the long term, making it a steady addition to investors’ portfolios.

Those who have decided to add gold to their portfolio as a hedge have a variety of options. Here’s an overview of three of the most popular ways of getting exposure to gold.

1. How to use physical gold as a hedge

Investors can get the most direct exposure to gold by buying physical gold, and holding the physical metal also adds diversification from digital assets. Physical gold can be purchased through government mints, private mints, precious metals dealers and even jewelry stores.

Physical gold investors should generally focus on 0.999 fine items, as these will also be the easiest to sell. The majority of gold bullion products fit this description.

One of the most common choices for investors are gold bullion coins, such as the South African Krugerrand or the Canadian Gold Maple Leaf, which are 0.999 fine. The American Gold Eagle is reputable and popular as well, but has a lower purity at 91.67 percent. Another option is gold rounds, which are similar to coins, but are not legal tender, making them often slightly cheaper.

Gold bars are another popular option, and because they come in a variety of sizes, they can accommodate a range of investors. Large investments may best be made in bars since bigger sizes are available. Further, it is often easier to manage several large products than it is to manage an array of smaller gold items.

When deciding on what to purchase, gold buyers will want to keep their plans for selling in mind. For example, large products may be more difficult and thus slower to sell, meaning it could be harder to take advantage of gold price movements or convert it to cash in an emergency. Individuals making ongoing or significant investments may therefore want to consider purchasing gold in various weights to give them versatility.

Click here to learn more about physical gold as an investment.

Click here to learn what moves the gold price and the highest price for gold is.

2. How to use gold ETFs as a hedge

One of the common ways investors add gold as a hedge is through investing in a gold exchange-traded fund (ETF), which trade on a stock exchange just like equities. There are several kinds of gold ETFs, offering exposure to different aspects of the gold market. Gold ETFs can offer investors access to gold price movements by holding physical gold or the gold futures market through holding futures contracts. There are also gold ETFs focused on gold mining stocks, providing a more stable alternative to investing in individual gold stocks.

It is important to keep in mind that investors who own gold ETFs do not own any physical gold — even gold ETFs that track physical gold generally cannot be redeemed for it, with the exception of the Vaneck Merk Gold ETF (ARCA:OUNZ). Nonetheless, gold ETFs are a good option for getting exposure to the precious metal without personally trading physical gold, gold futures or gold stocks.

Click here for a list of five biggest gold ETFs and more information on gold ETFs.

Click here for a list of top ASX-listed gold ETFs.

3. How to use gold futures as a hedge

A futures contract is an agreement to buy or sell gold on a date in the future for a price determined when the contract is initiated. In a gold futures transaction, two parties agree on a price, the amount of gold being purchased and the future delivery month.

The futures market is often referred to as an arena for paper trading. The bulk of the activity is just that, as metal is not actually exchanged and settlements are made in cash. It allows investors to buy or sell gold as they want without management fees, and taxes are split between short-term and long-term capital gains.

In some cases, the futures market can be an arena for purchasing physical gold. However, obtaining gold through the futures market requires a large investment and involves a list of additional costs. The process can be complicated, cumbersome and lengthy, which is why actually buying physical gold through futures is considered best for highly experienced market participants.

Click here to learn more about gold futures.

What is platinum?

Platinum is a precious metal that belongs to the platinum-group metals category. Platinum has a silverish-white hue and is represented by the symbol Pt and atomic number 78 on the periodic table of elements.

What is platinum used for?

Platinum has several uses, including playing a large role in the auto industry for its ability to reduce emissions. Additionally, platinum is in high demand for jewelry and as an investment metal.

Platinum is also benefiting from growing demand from the hydrogen fuel cell sector. The metal is a key catalyst in the process that converts hydrogen into electricity.

What is palladium metal?

Palladium fits into the precious metals category and is a PGM. It is represented by the symbol Pd and atomic number 46 on the periodic table of elements. Palladium has a silvery-white color and is prized for its rarity.

What is palladium used for?

The automotive sector is the primary end user of palladium. The metal is a key component in the catalytic convertors of internal combustion engine vehicles, where it is used to reduce emissions.

Like platinum, palladium is used in jewelry and valued as an investment. It has other smaller-scale uses, and is consumed in various ways by the medical and dental fields, among others.

What is the best way to invest in palladium?

While there is no single best way to investing in palladium, those interested in gaining exposure to this market have a variety of options. Investors who prefer more tangible assets can add physical palladium to their portfolios, including palladium bullion and coins. Palladium exchange-traded funds such as the Sprott Physical Platinum and Palladium Trust (ARCA:SPPP) and the Aberdeen Standard Physical Palladium Shares (ARCA:PALL) offer another route. Palladium-focused stocks are yet another option, with pure-play palladium miners including Sibanye-Stillwater and Impala Platinum Holdings.

Why are metals like gold, platinum and palladium so expensive?

Precious metal gold has long been valued as a form of currency and a store of wealth, all of which have built up its high intrinsic value. Platinum and palladium are 30 times rarer than gold, much harder to mine and are in high demand due to their important industrial uses.

Why is Neumeyer calling for a US$100 silver price?

Neumeyer believes silver could hit US$100 due to a variety of factors, including its consistent deficit, its industrial demand and how undervalued it is compared to gold.

There’s a significant distance for silver to go before it reaches the success Neumeyer has boldly predicted. In order for the metal to jump to the US$100 mark from US$44, its price would have to increase by around 125 percent. However, silver has already jumped by nearly 160 percent from its price of around US$17 per ounce when he made his US$130 call in November 2017.

Neumeyer has previously said he expects a triple-digit silver price in part because he believed the market cycle could be compared to the year 2000, when investors were sailing high on the dot-com bubble and the mining sector was down. He thinks it’s only a matter of time before the market corrects, like it did in 2001 and 2002, and commodities see a big rebound in pricing. It was during 2000 that Neumeyer himself invested heavily in mining stocks and came out on top.

“I’ve been calling for triple-digit silver for a few years now, and I’m more enthused now,” Neumeyer said at an event in January 2020, noting that there are multiple factors behind his reasoning. “But I’m cautiously enthused because, you know, I thought it would have happened sooner than it currently is happening.”

In an August 2022 with Wall Street Silver, he reiterated his support for triple-digit silver and said he’s not alone in this optimistic view — in fact, he’s been surpassed in that optimism. ‘I actually saw someone the other day call for US$500 silver,’ he said. ‘I’m not quite sure I’m at the level. Give me US$50 first and we’ll see what happens after that.’

Another factor driving Neumeyer’s position is his belief that the silver market is in a deficit. In a May 2021 interview, when presented with supply-side data from the Silver Institute indicating the biggest surplus in silver market history, Neumeyer was blunt in his skepticism. “I think these numbers are made up,” he said. “I wouldn’t trust them at all.”

He pointed out that subtracting net investments in silver exchange-traded products leaves the market in a deficit, and also questioned the methodology behind the institute’s recycling data given that most recycled silver metal comes from privately owned smelters and refineries that typically don’t make those figures public.

‘I’m guessing the mining sector produced something in the order of 800, maybe 825 million ounces in 2022,’ Neumeyer said when giving a Q4 2022 overview for his company. ‘Consumption numbers look like they’re somewhere between 1.2 and 1.4 billion ounces. That’s due to all the great technologies, all the newfangled gadgets that we’re consuming. Electric vehicles, solar panels, windmills, you name it. All these technologies require silver … that’s a pretty big (supply) deficit.’

In a December 2023 interview with Kitco, Neumeyer stressed that silver is more than just a poor man’s gold and he spoke to silver’s important role in electric vehicles and solar cells. In line with this view on silver, First Majestic is a member of a consortium of silver producers that in January 2024 sent a letter to the Canadian government urging that silver be recognized as a critical mineral. Silver’s inclusion on the list would allow silver producers to accelerate the development of strategic projects with financial and administrative assistance from the government.

In this 2024 PDAC interview, Neumeyer once again highlighted this sizable imbalance in the silver’s supply-demand picture. “We’re six years into this deficit. The deficit in 2024 looks like it’s gonna be bigger than 2023, and why is that? Because miners aren’t producing enough silver for the needs of the human race,” he said.

More controversially, Neumeyer is of the opinion that the white metal will eventually become uncoupled from its sister metal gold, and should be seen as a strategic metal due to its necessity in many everyday appliances, from computers to electronics, as well as the technologies mentioned above. He has also stated that silver production has gone down in recent years, meaning that contrary to popular belief, he believes the metal is actually a rare commodity.

Neumeyer’s March 2023 triple-digit silver call was a long-term call, and he explained that while he believed gold would break US$3,000 that year, he thought silver will only reach US$30. However, once the gold-silver ratio is that unbalanced, he believes that silver will begin to take off, and it would just need a catalyst.

‘It could be Elon Musk taking a position in the silver space,’ Neumeyer said. ‘There’s going to be a catalyst at some time, and headlines in the Wall Street Journal might talk about the silver supply deficit … I don’t know what the catalyst will be, but investors and institutions will wake up to the fundamentals of the metal, and that’s when it will start to move.’

In an August 2023 interview with SilverNews, Neumeyer said banks are holding the silver market down. He pointed to the paper market for the metal, which he said the banks have capped at US$30 even in times of high buying.

‘If you want to go and buy 100 billion ounces of (paper) silver, you might not even move the price, because some bank just writes you a contract that says (you own that),’ he noted, saying banks are willing to get short because once buying stops, they push the price down to get the investors out of the market and buy the silver back. ‘… If the miners started pulling their metal out of the current system, then all of a sudden the banks wouldn’t know if they’re going to get the metal or not, so they wouldn’t be taking the same risks they’re taking today in the paper markets.’

The month after the interview, his company First Majestic launched its own minting facility, named First Mint.

In 2024, gold experienced a resurgence in investor attention as the potential for Fed rate cuts came into view. In an interview with Cambone at PDAC 2024, Neumeyer countered that perception, stating, “There’s a rush into gold because of the de-dollarization of the world. It has nothing to do with the interest rates.”

In an April 2025 Money Metals podcast, Neumeyer reiterated his belief that silver is in an extreme supply deficit and that eventually silver prices will have to rise in order to incentivize silver miners to dig up more of the metal.

‘You need triple digit silver just to motivate the mining companies to start investing again because the mining companies aren’t going to make the investment because there’s just so much risk in it,’ he said.

Several market analysts have raised concerns about this silver supply deficit.

Moreover, in April at the Sprott Silver Conference, Maria Smirnova, senior portfolio manager and chief investment officer at Sprott Asset Management, highlighted the deficit as well.

Smirnova explained that silver has been in a supply deficit of 150 million ounces to 200 million ounces annually (or 10 percent to 20 percent of total supply), while production has been stagnant or declining over the past decade. She emphasized that above-ground inventories have declined by nearly 500 million ounces in recent years.

What factors affect the silver price?

In order to glean a better understanding of the precious metal’s chances of trading around the US$100 range, it’s important to examine the elements that could push it to that level or pull it further away.

The strength of the US dollar and US Federal Reserve interest rate changes are factors that will continue to affect the precious metal, as are geopolitical issues and supply and demand dynamics.

Although Neumeyer believes that the ties that bind silver to gold need to be broken, the reality is that most of the same factors that shape the price of gold also move silver.

For that reason, it’s helpful to look at gold price drivers when trying to understand silver’s price action. Silver is, of course, the more volatile of the two precious metals, but nevertheless it often trades in relative tandem with gold.

First, it’s useful to understand that higher interest rates are generally negative for gold and silver, while lower rates tend to be positive. That’s because when rates are higher, investment demand shifts to products that can accrue interest.

When the COVID-19 pandemic hit, the Fed cut rates down to zero from 1 to 1.25 percent. However, rising inflation led the Fed and other central banks to hike rates, which negatively impacted gold and silver. In February 2023, the Fed raised rates by just 25 basis points, the smallest hike since March 2022, as Chair Jerome Powell said the process of disinflation has begun. The Fed continued these small rate hikes over the next year with the last in July 2023.

The Fed’s rate moves are currently playing a key role in pumping up silver prices. In early July 2024, as analysts factored in the rising potential for interest rate cuts in the remainder of 2024, silver prices were once again testing May’s nearly 12 year high, and they topped US$31 in September in the days leading up to the anticipated first rate cut.

Heading into September of this year, the silver price was testing 14 year highs as market watchers expected the first rate cuts on the part of the Fed since it paused its interest rate moves in November 2024. The Fed chose to cut rates at the meeting, and silver and gold have both climbed even further in the week following the decision.

While central bank actions are important for gold, and by extension silver, another key price driver lately has been geopolitical uncertainty. The past few years have been filled with major geopolitical events such as tensions between the US and other countries such as North Korea, China and Iran. The huge economic impact of the COVID-19 pandemic, the banking crisis in early 2023, Russia’s ongoing war with Ukraine, and rising tensions in the Middle East brought about by the Israel-Hamas war have been sources of concern for investors.

Trump’s tariffs have also rattled stock markets and ratcheted up the level of economic uncertainty pervading the landscape in 2025. This has proved price positive for gold, bringing silver along for the ride.

However, silver’s industrial side can not be ignored. In the current environment, the industrial case of silver is weakening in the short term; but longer term still holds some prospects for larger gains.

Higher industrial demand from emerging sectors due to factors like the transition to renewable energy and the emergence of AI technology will be highly supportive for the metal over the next few years. Solar panels are an especially exciting sector as manufacturers have found increasing the silver content increases energy efficiency.

“Even in the US, the policy really is ‘all of the above’ — all forms of energy. So I’m not concerned about solar cells diminishing. Could they go flat? Yeah, that’s fine. Flat at 300 million ounces? That’s great demand for silver,” said former Hecla Mining (NYSE:HL) CEO Phil Baker during a May webinar hosted by Simon Catt of Arlington Group.

“(Prime Minister Narendra) Modi made a policy decision a year ago to grow the solar industry in India. So in India, only about 10 percent of their demand for silver is used for industrial purposes. In China, it’s 90 percent, and so what you’re going to have in India is you’re going to see their solar panel growth skyrocket,” he added.

Could silver hit US$100 per ounce?

While we can’t know if we’ll reach a $100 per ounce silver price in the near future, there is support for Neumeyer’s belief that the metal is undervalued and that “ideal conditions are present for silver prices to rise.”

So, if the silver price does rise further, can it go that high?

Let’s look at silver’s recent history. The highest price for silver was just under US$50 in the 1970s, and it came close to that level again in 2011. The commodity’s price uptick came on the back of very strong silver investment demand. While it has yet to reach these levels again, the silver price has increased significantly in recent years.

After spending the latter half of the 2010s in the teens, the 2020s have seen silver largely hold above US$20.

In August 2020, the price of silver reached nearly US$28.50 before pulling back again, and moved back up near those heights in February 2021. The price of silver saw a 2022 high point of US$26.46 in February, and passed US$26 again in both May and November 2023. Silver rallied in the later part of the first quarter of 2024, and by April 12 was once again flirting with the US$30 mark as it reached an 11 year high of US$29.26. Despite pulling back to the US$26 level soon after, by October 22 the price of silver had a nice run in the lead up to the election, rising up to US$34.80.

However, a stronger dollar and signs that the Fed might not be so quick to cut interest rates as deeply as expected were seen as price negative for silver. It was in a downward slide for much of the remainder of the year.

For much of the first half of 2025, silver has followed gold higher on factors including persistent inflationary pressures brought on by Trump’s aggressive tariff announcements and the ongoing geopolitical risks in the Middle East.

On September 22, 2025, the price of silver had reached a 14 year high of US$44.11, up over 50 percent since the beginning of the year.

What do other experts think about US$100 silver?

As silver’s trajectory continues upwards, some silver market experts are agreeing with Neumeyer’s triple-digit silver hypothesis, or at least that the price of silver still has further room to grow.

‘One day the market will run, and if you’re not in, you won’t win it,’ Middelkoop said.

Substack newsletter writer John Rubino sees the silver supply deficit as not only an issue for the industrial sector, but for the COMEX futures markets as well, which could spark a major rally in the silver price.

Rubino explained that there is real danger in an exchange defaulting on delivering physical metal to futures contract traders and needing to pay cash instead. This scenario is likely to trigger panic buying.

He added that he would be shocked if silver didn’t reach US$100 an ounce “somewhere along the way, and it’s possible that much higher prices could happen when the panic buying starts.”

“It’s hard not to reference Keith, our CEO, and triple digit comes to mind pretty frequently now — more people are talking about it,” Alkhafaji explained at the time. He elaborated, “I’m a believer of economics, you look at the mining ratio and that’s sitting at 7:1, yet the price ratio is sitting at 90:1 right now. We just talked about that gold is comfortable at US$3,000, so that tells us that silver needs to play catch up to collapse that ratio.”

‘Another thing that’s important to note is the price inelasticity,’ he explained. ‘Most commodities, when the price goes up, the supply goes up. But with silver, it’s primarily a by-product from base metal mining. It depends on the nature of the recession we get and how severe it is, but that could impact the demand for base metals, and therefore you may not see an increase in mining supply for silver.’

“I think we’ll see new highs in the next 12 months and I think we will recast the highs in the next six months. Recasting meaning US$50 in the next six, and then breaking out to new highs in the next 12 months,” he said.

Concerning his reasons for laying out this path forward for silver, Costa cited the high volumes of silver purchases occurring after days when prices declined, as well as the clear outperformance of silver even when gold is falling.

Analyst firm InvestingHaven is very bullish on the silver market and is expecting prices to test all-time highs in 2025, moving as high as US$49 before blasting through new records in the next few years. InvestingHaven even sees the precious metal reaching as high as US$77 in 2027 and US$82 by 2030.

Can silver hit $1,000 per ounce?

As things are now, it seems unlikely silver will ever reach highs of US$1,000 per ounce, which Keith Neumeyer predicted in 2016 could happen if gold ever climbed to US$10,000 per ounce.

This is related to the gold to silver production ratio discussed above. At the time of the 2016 prediction, this ratio was around 1 ounce of gold to 9 ounces of silver, or 1:9. In 2024, it was about 1:7.5.

If silver was priced according to production ratio today, when gold is at US$3,000 silver would be around US$400, or US$333 at 1:9. However, the gold to silver pricing ratio has actually sat around 1:80 to 1:90 recently, and when gold moved above US$3,000 in March 2025, silver was around US$34.

Additionally, even if pricing did change drastically to reflect production rates, gold would need to climb by more than 300 percent from its current price to hit the US$10,000 gold price Neumeyer mentioned back in 2016.

Why is silver so cheap?

The primary reason that silver is sold at a significant discount to gold is supply and demand, with more silver being mined annually. While silver does have both investment and industrial demand, the global focus on gold as an investment vehicle, including countries stockpiling gold, can overshadow silver.

Additionally, jewelry alone is a massive force for gold demand.

There is an abundance of silver — according to the US Geological Survey, to date 1,740,000 metric tons (MT) of silver have been discovered, while only 244,000 MT of gold have been found, a ratio of about 1 ounce of gold to 7.1 ounces of silver. In terms of output, 25,000 MT of silver were mined in 2024 compared to 3,300 MT for gold.

Looking at these numbers, that puts gold and silver production at about a 1:7.5 ratio last year, while the price ratio on June 11, 2025, was around 1:92 — a huge disparity.

Is silver really undervalued?

Many experts believe that silver is undervalued compared to fellow currency metal gold. As discussed, their production and price ratios are currently incredibly disparate.

While investment demand is higher for gold, silver has seen increasing time in the limelight in recent years, including a 2021 silver squeeze that saw new entrants to the market join in.

Another factor that lends more intrinsic value to silver is that it’s an industrial metal as well as a precious metal. It has applications in technology and batteries — both growing sectors that will drive demand higher.

Silver’s two sides has been on display in recent years: silver demand hit record highs in 2022, according to the Silver Institute, with physical silver investment rising by 22 percent and industrial by 5 percent over 2021. For 2023, industrial demand was up 11 percent over the previous year, compared to a 28 percent decline in physical silver investment.

Is silver better than gold?

There are merits for both metals, especially as part of a well-balanced portfolio. As many analysts point out, silver has been known to outperform its sister metal gold during times of economic prosperity and expansion.

On the other hand, during economic uncertainty silver values are impacted by declines in fabrication demand.

Silver’s duality as a precious and industrial metal also provides price support. As a report from the CPM Group notes, “it can be seen that silver in fact almost always (but not always) out-performs gold during a gold bull market.”

At what price did Warren Buffet buy silver?

Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A) bought up 37 percent of global silver supply between 1997 and 2006. Silver ranged from US$4 to US$10 during that period.

In fact, between July 1997 and January 1998 alone, the company bought about 129 million ounces of the metal, much of which was for under US$5. Adjusted for inflation, the company’s purchases in that window cost about US$8.50 to US$11.50.

How to invest in silver?

There are a variety of ways to get into the silver market. For example, investors may choose to put their money into silver-focused stocks by buying shares of companies focused on silver mining and exploration. As a by-product metal, investors can also gain exposure to silver through some gold companies.

There are also silver exchange-traded funds that give broad exposure to silver companies and the metal itself, while more experienced traders may be interested in silver futures. And of course, for those who prefer a more tangible investment, purchasing physical bullion in silver bar and silver coin form is also an option.