Guide to Investing In Precious Metals – A Smart Investment OptionFebruary 27, 2022
Investments are like our tickets to a better life in the future. To invest, you will need to set out some of your funds to purchase an asset, product, or anything that will provide you with profit. However, investments require money and involve taking risks. Hence, you will need to make a wise decision.
Talking about a smart investment option, let us consider precious metals. A precious metal is a general term for valuable metals like gold, silver, platinum, and palladium. These metals have several applications in many industries and are in high demand. Therefore, investing in any one of them is a good idea.
Top investors have a portion of their portfolio in gold and silver assets. These shiny metals are quite valuable and a good investment option. The best part is that they are not subject to inflation like some paper assets. Hence, they are a better way to hedge your investments.
Investing in physical gold is risky and expensive. Thus, you have to take some steps to invest in the right company. The steps might include reading reviews, researching, or visiting the company site. You can read the Westminister Mint review to know more about this investment option.
Besides purchasing the physical bullion, there are other less expensive ways to invest in metals. We are talking about securities. This article will guide you through investing in a smart investment option – precious metals.
Investing In Precious Metals
There are several precious metals you can add to your portfolio. Gold is on top of the chart and the most expensive option.
The truth is, when we talk about precious metals, gold is the first thing that may come to your mind. However, other metals might interest you. So, in this section, we will talk about the best three precious metals you can add to your treasure chest.
It is not surprising that we are starting with gold – the leading goose. The shiny metal has several properties that have made it earn its spot at the top. You can click on https://www.amnh.org/ to read more about the properties of gold. Furthermore, its wide application in industries contributes to its demand and increases its value.
The value or worth of the metal fluctuates during the market trading period. However, the rules of demand and supply do not affect its prices. It means that the value of the metal is the function of sentimental trading.
Gold hoarders are the reason for this uncertainty in its prices. The amount of gold hoarded outweighs the new amounts supplied by mines. So, there is a price drop when the hoarders sell and a hike in price when they buy due to the quickly absorbed supply. Hence, they create a significant amount of volatility in the market.
There are several factors responsible for the increased need to hoard gold. However, fear is the leading factor in all of them. Below are some of the factors responsible:
Hoarding happens when investors notice instability in the banking or political sector. They tend to convert their portfolio to a gold asset that retains its value.
Inflation is a major cause of gold hoarding. There are some signs of inflation in an economy, and investors watch out for these signs. For instance, when the rates of bonds or equity are negative, fear leads investors to transfer their funds to gold assets. You can click here to read more about inflation.
Crises or war affects the economy of a nation. Furthermore, this can lead to a crash in stocks, bonds, and other investments. Investors tend to hide their savings in gold assets to preserve value.
Due to its wide industrial application, the laws of demand and supply influence the prices of silver. It fluctuates between its position as a metal and an asset for storing value. Thus, this causes more volatility in its market.
Some industrial uses of silver include:
- It is used in making photographic films
- It is used in making superconductor applications, microcircuits, and batteries
- It is used in the production of several medical and electrical appliances
- It is used in the production of bearings and electrical connections
Like the other two members of its family, platinum trades 24 hours daily on the commodity market. And, due to its rareness, it has more value than gold in times of political stability.
Platinum has several industrial applications. However, it has more demand from the automotive industry. Its uses include the production of automotive catalysis that helps decrease the effects of emissions. Also, it finds application in the production of jewelry. Finally, it finds application in the chemical and petroleum industry for producing refining catalysts.
There are two major locations for platinum mines – Russia and South Africa. Hence this creates a monopolistic potential that may artificially raise its price.
Other Precious Metals Investment Options
Apart from trading the physical metal, there are a few options you can choose to add. These options are less expensive, and trading is with a broker. Some of them include:
ETFs (Exchange Traded Funds)
These days, there are ETFs for all the top metals – platinum, gold, and silver. ETFs provide a convenient means of selling and purchasing silver, platinum, or gold. However, investing in it does not provide you with the commodity. Therefore, you are only investing in a paper asset.
Another option for you is investing in mining shares. You can trade the shares of mining companies on the financial markets. However, ensure that you know how the valuation works or you can stick with fund managers with good performance records.
Options and Futures
The options and futures market offer investors with leverage and high liquidity. Thus, you can make huge bets and profits on the metals. However, there is also a huge potential for losses.
Benefits of Investing In Precious Metals
They offer inflationary protection, meaning that they have an intrinsic value. And, you cannot print it. Therefore, it creates stronger insurance against political or financial upheavals.
In addition, they have negative correlations to other paper assets like bonds and stocks. Hence, having them in your portfolio can help to reduce both risk and volatility.
Precious metals are an effective means to diversify your portfolio and, understanding your risk and goals before investing can help you achieve success. The volatility in its markets can help you accumulate wealth. However, it can likewise cause serious losses.