Silver, not gold, is the portfolio insurance to buy now

Silver, not gold, is the portfolio insurance to buy now By WILLIAM L. SILBER for Market Watch

Silver prices are low right now

Fear drives up precious metal prices. Fear of war, defaults, inflation, civil unrest and anything that undermines trust in government. A week after the Lehman Brothers bankruptcy in 2008, gold and silver jumped by 15%. Three years later, during the height of the European government debt crisis, when the obligations of Italy, Ireland, and Greece resembled junk bonds, silver more than quadrupled in value, while gold increased 250%.

Today, fear of a financial collapse has receded, and so have the prices of both precious metals. Gold GCJ9, -0.13%  sits at about $1,300 and silver SIK9, -0.46%   languishes a little above $15. Is it time to buy at these bargain prices? The answer is yes, especially silver, but not for the reasons you think.

Few worry about inflation in today’s U.S. economy, but right after the Great Recession, when the Federal Reserve embarked on its program of quantitative easing to jump-start the economy, many were concerned that inflation would emerge. With unemployment reaching 10% in 2009, the Fed expanded money and credit, drove down short-term interest rates to zero, and bought longer-term government bonds and mortgages in unprecedented amounts. According to basic economic analysis, too much money chasing too few goods leads to inflation. But the last nine years have upended that conventional wisdom. Unemployment is now under 4% and inflation remains in check. Buying precious metals to protect against inflation today seems foolish.

But no one knows when the next monetary upheaval will hit. The trigger might be an unanticipated default by a big company that has taken on too much debt — and there are many of those owned by private-equity investors. Or inflation may spurt when we least expect it. Economists can forecast the next financial earthquake about as well as seismologists can predict a tsunami. They know it only after they see it, but then it’s too late to take cover.

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Rory Hall, The Daily Coin and Gospel News Network. Beginning in 1987 Rory has written over 1,400 articles and produced more than 500 videos on topics ranging from the precious metals market, economic and monetary policies, preparedness as well as geopolitical events. His articles have been published by Zerohedge, SHTFPlan, Sprott Money, GoldSilver, Gold Seek, SGTReport, and a great many more. Rory was a producer and daily contributor at SGTReport between 2012 and 2014. He has interviewed experts such as Dr. Paul Craig Roberts, Dr. Marc Faber, Eric Sprott, Dr. Warren Coates and Peter Schiff, to name but a few. Don't forget to visit The Daily Coin and Gospel News Network to enjoy some of the best economic, precious metals, geopolitical and preparedness news from around the world.