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You want to invest your money, but you worry about the constant fluctuation of the stock market and the housing market.
So where do you put your money? Precious metals!
If you’ve ever wondered about the benefits and details of investing in precious metals, you’re in the right place.
In this post, I go over everything you need to know about investing in the behemoths of precious metals: gold and silver.
And you’ll find out why they are a more stable investment than stocks and other volatile commodities. So you’ll be able to rest easy, knowing your money is invested wisely!
Sound interesting? Keep reading to find out more!
All That Glitters
We’ll start with the most well known precious metal: gold.
Before the advent of paper or electronic currency, gold was the standard for coins of currency for civilizations throughout the world. Coins that had gold in them go back as far as 800 B.C. And it’s inherent beauty has kept it in demand!
Gold is famous for holding its value over time. Unlike other types of currency, gold has always been seen as a way to maintain stability, and to pass on wealth through generations.
Gold Vs. The Economy
Even the mighty U.S. dollar, which is one of the most stable and important reserve currencies in the world, goes through periods where its value falls.
When that happens, there is always a surge towards buying gold. Gold’s stability and security are appealing in times of economic downturn, and when that happens, its price goes up.
For example, between 1998 and 2008, the price of gold almost tripled, while the U.S. dollar was struggling.
Gold price tends to move alongside the cost of living. So that means it’s an excellent hedge against inflation. When the dollar goes through periods of inflation, the price of gold has tended to rise.
A World of Gold
There’s no prediction when geopolitical crises will arise. Which, in turn, leads to a general sense of financial uncertainty that we live with as a global economy.
Gold is referred to as a “crisis commodity” for exactly that reason. In times of geopolitical and financial turmoil, investors most commonly rush to gold as a way to keep their investments stable.
In tumultuous times, gold usually outperforms other currencies and investments.
And the worldwide supply of gold has decreased of late. For example, output of gold-mining was at an annual total of 2,573 metric tons in 2000. But by 2007, that number had dropped to 2,444 metric tons.
And since a new mine takes roughly 5-10 years to come into production, there aren’t quick ways to suddenly flood the market with new gold. This relative scarcity also keeps the value of gold stable and rising.
Finally, the rise of new market economies worldwide like India and China have put gold in more demand than ever before, making it a wise investment moving forward.
Next to gold, silver is the most important and sought after precious metal. For starters, the notion of diversification in investing means that we should be looking beyond only gold.
But there are also inherent values of silver.
Cost of Silver
Silver is a much less expensive metal than gold. Now, keep in mind that doesn’t mean it has less value. It means that the average price by weight of silver is less than gold.
You can generally buy silver for a fraction of the price of gold. So it’s easier to get started investing in silver without having to commit to large amounts of money.
With silver, you can ease into the precious metals market and then slowly increase your portfolio as you start earning more off your investment.
The low price also means it’s great for gift giving!
It’s a Currency
Not only is it a metal, but silver is also a currency itself. If you have a silver coin with the value and price printed on the front of it, then you can theoretically make purchases or trades for the value of the coin.
Now, most of us aren’t out there bartering for our meals with silver coins, but it would actually be a viable form of currency trade.
More importantly, it serves as a longer term hedge, since it will hold its value if the value of paper money ever declines suddenly.
Silver will never be at risk, never default and never devalue, since it’s real money. Its value is based on what it is, not what it represents.
Amount of Silver
Silver is in an interesting position globally, in that it is used by so many people in so many ways, but at the same time is becoming more rare.
We use silver in things ranging from jewelry, to big industrial equipment, to batteries. Plus, it’s both electrically and thermally conductive. This versatility means there’s a ton of demand for it in general.
But at the same time, the amount of silver has dwindled over the last 20 years. It’s been mined for ages, but the amount left to mine is decreasing every year.
So when you combine these two factors, it means that it’s a metal we all need but have decreasing amounts of. The basic supply and demand nature of economics dictates that it’s, therefore, a great investment!
Silver vs. Gold
There’s a general sense that gold is the more reliable precious metal in terms of the market. And often that’s the case. But not always.
In a bull market, silver often does better than gold. Its lower price point means that when the market is focused on buying, people often gravitate towards silver more. Simply put, they can buy more of it for the same amount of money!
Investing in Precious Metals
Hopefully, it’s become clear from this post why both gold and silver have inherent value and should be seriously considered as a part of your investing portfolio.
Investing in precious metals is a great way to put your money towards a stable investment that will only increase in value as the metals become more rare.
If you want to learn more on precious metals and other things financial, check out this blog on weird facts about money!