Precious metals have been coveted since the dawn of time when ancient civilizations first saw their value. While investment options have diversified over the years with more choice in terms of assets and commodities, there is definitely still a place for precious metals in a well-rounded investment portfolio. There are a number of routes that you can take when it comes to investing in precious metals like gold, silver, platinum or palladium. Thankfully, getting started is easier than you might think, so keep reading to learn more.

The Metals

Types of precious metals

As mentioned above, there are several options when it comes to investing in precious metals. For the most part, your options will be as follows: platinum, gold, silver and palladium. Firstly, platinum can be traded globally, around the clock, on a multitude of commodity markets. It is usually seen as more valuable than gold, and so it does have a higher price. This is simply because it is rarer. It is not mined in as high quantities as other precious metals. Platinum also has its industrial uses, which is, in part, why it always sees a consistently high demand from the automotive industry. The price also tends to be affected by the geopolitical state of the countries of origin, which tend to overwhelmingly be either Russia or South Africa, both of which have seen frequent periods of unrest which can affect the market dramatically.

Next up, gold, which, while usually slightly lower in value than platinum, does definitely have a longer history. In that respect, gold really was the precious metal that started it all. Prized for its durability, finish and, frankly, how easy it is to work with, being incredibly malleable and a great conductor. It is mainly used in jewelry and currency; there are also a few industrial applications for gold as well. Gold mines themselves are less affected by supply and demand because there is already so much of it above ground being hoarded. This does mean that when those with gold decide to sell, thatโ€™s when the price drops. Luckily, businesses like Trading View offer insights into the history of commodities, including gold which you can see on their XAUUSD page.

Silver, on the other hand, has its price dictated by the value of silver in and of itself and its use in industrial settings. This aligns it more closely to platinum than gold; it also means that it is more volatile. However, like gold, it is still hoarded thanks mostly to its uses in jewelry. Silver was instrumental in the development of the film industry, having been used literally in film, although it has since been replaced by digital cameras. The use of silver is pretty widespread, which is why it continues to be a desirable commodity. Silver is a great metal to invest in because it really represents a marriage between fashion and function. Finally, there is palladium which is the definitely the lesser-known of the precious metals. It used predominantly in industrial settings, and it is integral to a lot of manufacturing processes. Palladium is popular in the electronic industry as well as dentistry, medicine, jewelry and some chemical processes too. Palladium is actually the metal used with gold to create the alloy white gold. Palladium is also often used in solar energy and the creation of fuel cells.

Your Investment Options

All That Glitters is Gold: Why You Should Consider Investing in Precious Metals

When it comes to investing in precious metals, you have several options. Firstly, you can invest in commodity exchange-traded funds or ETFs. These are one of the more convenient options for investors because they are more liquid and, therefore, easily bought and sold. They are applicable to all of the metals mentioned above. Utilizing ETFs does mean that you never have access to the metals physically; you do not receive a delivery of the metals. Similarly, you can also choose to invest in common stocks and mutual funds. The shares of the precious metal mines are leveraged against the price movements of the metals themselves. This option can be a little trickier because, as an investor, you need to be aware of how the mining stocks are valued and the extraneous factors that affect the value. That being said, you can always choose a fund with a great performance record and a savvy manager.

You could also invest in futures and options. This is again similar to the above options in that it also offers liquidity. The futures and options markets also allow investors to leverage big bets. A savvy investor really can see huge profits when investing via this. However, there is also a higher loss potential too, especially when investing in derivative products, which is something that you will need to bear in mind. The final two options involve owning the precious metals physically as opposed to owning it in an abstract way which is what the above options provide. You can invest in bullion, which is just to say that you can purchase the metals physically and keep them yourself until you want to sell them. Obviously, you will need somewhere to keep the metals secure, like a safe or aย  safety deposit box. However, bullion can be difficult to sell because it is not liquid. Finally, you can also choose to invest in certificates. Now, these provide investors with all of the benefits of physical ownership without the onerous of transporting and storing their gold. However, certificates really are just pieces of paper, so if you want to purchase them as an insurance policy, it is not necessarily the best idea.

Are Precious Metals a Worthwhile Investment?

Gold-Silver-Prices

This is a difficult question to definitively answer. Precious metals do provide investors with protection against inflation because they have an intrinsic value. They are also great for people who are concerned about political or military upheavals because they offer some insurance. They can be difficult to sell, though. For the most part, they are not affected by other markets like stocks and bonds can be. This means that investing in precious metals is usually a good idea as long as you donโ€™t go all in. Precious metals tend to be a great way to diversify your portfolio, but they probably should not make up the majority of your portfolio.

However, while low, they are not without risk. Every investment does have its own risks. Precious metals might be more stable and offer more security, there are still a few things that you should be aware of. Prices of the metals can experience dips and fluctuations because of technical imbalances, the disparity in the supply and demand and geopolitical issues affecting the mines. However, precious metals do usually see price increases in line with economic uncertainty and increases in the cost of living.

The Bottom Line

Investing in precious metals does have a number of benefits, especially when in comparison to other forms of investments like stocks. They have an intrinsic value, higher levels of liquidity, and they are also a great option when it comes to diversifying your investment portfolio. You can either purchase the metals outright or choose to buy them via ETFs. That being said, they have no cash flow, which means that there is no passive income from holding them; you only make money when you sell the metals. Remember that if you purchase physical forms of the precious metal, you will need to store them too. You need to know what your goals are and the risks before you dive in.

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