What Is A Silver IRA?
A silver IRA is an individual retirement account that includes, but isn’t necessarily limited to, silver assets such as physical bullion or paper-backed silver (i.e., silver stocks or ETFs). Like any IRA, the account is tax-deferred, which means you do not pay capital gains on the assets held within the account until you withdraw funds. Depending on your financial situation, you may be eligible to deduct your contributions from your income on your tax return.
Silver IRAs are an excellent diversifier for investors with fixed-income and stock-heavy portfolios. Because silver isn’t correlated to stock market performance, holding some of your wealth in silver helps spread risk across a diversity of asset classes and lowers your susceptibility to a market-wide downturn.
It’s uncertain how well silver will perform over the next 12 months. Although the metal shows no signs of slowing down, its generally negative track record during recessions leads me to believe that silver prices could deflate quickly if the U.S. equities market suffers another prolonged downturn similar to what we saw in March 2020.
Silver is used widely in industrial manufacturing. This is particularly true of photovoltaic solar panels, jewelry, electronics and cutlery, where over 800 million ounces of silver are utilized every year. When manufacturing declines, which is a hallmark of recessions, the price of silver will almost certainly decline.
During the 2007-09 recession, the manufacturing sector output crashed by over 22% in Europe and 14.8%, on average, elsewhere. It’s no surprise, then, that the price of silver fell during this time, from about $17 an ounce to under $16 at the end of the bear market.