So far this year, gold has delivered impressive performance, surging over 21%. With rising global trade uncertainties and the potential further weakening of the U.S. dollar due to tariff wars, gold’s rally may not be over yet. However, if trade tensions ease, gold’s volatility could increase. In the current environment, gold’s low correlation with equities—even showing a negative correlation during Trump’s tariff wars—makes it an excellent hedging tool in investment portfolios.
But does this mean investors should hold more gold (or silver) instead of stocks? The answer is no. Despite gold’s recent strong performance, there is no guarantee this upward trend will persist. As a non-yielding asset, gold’s performance depends entirely on the evolution of trade wars, and it has historically experienced significant pullbacks, such as between 2012 and 2015. Therefore, investors are advised to keep gold allocations within a moderate range of 3%-5% while exploring other more attractively valued precious metals.
Silver and copper have significantly underperformed gold recently. While silver and copper, due to their industrial nature, lack gold’s safe-haven appeal, their low valuations may present better investment opportunities. Silver, in particular, has seen its price ratio to gold widen to historically high levels, indicating that silver is severely undervalued.
For investors seeking diversification without chasing gold at elevated prices, the Sprott Physical Silver Trust (TSX: PSLV) is an ideal choice. This closed-end fund (CEF) charges a management fee of just 0.58% and trades at a 3.1% discount to net asset value, with shares priced below $15. Silver’s “low-volatility nature” makes it a stable diversifier in portfolios.
While gold remains a crucial safe-haven asset, silver currently offers a more attractive “value opportunity.” By allocating to the Sprott Physical Silver Trust, investors can hedge risks while avoiding over-reliance on a single asset. In a market still fraught with uncertainty, this balanced strategy is particularly important.
