Precious metals have long held value since ancient times. Even today, the market value of precious metals can rival those of other commodities. Experienced investors look into these commodities to diversify their portfolios for leverage. Knowing which ones to invest in and when to buy them can successfully yield good returns in the long run. If you’re new to precious metals, below is some key information that will help you understand the fundamentals.
Why Invest In Precious Metals
Precious metals are attractive for their luster, malleability, and industrial uses. You can own precious metals conditionally and treat them as insurance in your investment portfolio for good reasons. For one, they’re hedges against inflation and what major institutions turn to in times of economic turmoil. Gold, in particular, is money itself with high liquidity—so much so that you can buy precious metals, wait for the price to rise, and sell it to the same depository.
Likewise, there are also various ways that you can invest in precious metals. These options allow individuals with different risk levels and investing knowledge to experience precious metals’ benefits to their portfolios. Sources like the Learn About Gold website will help you plan for your retirement using gold IRAs (individual retirement accounts) to secure your financial future.
How To Invest In Precious Metals
- Bullion Investments
Precious metals come in different physical forms: bars, coins, and rounds. Coins hold a collector value. Rounds are typically in copper and silver, with collectors having high regard for their designs. Miniature bars have different weights and sizes that make them easy to own. The higher the weight, the higher the value.
- Commodity Exchange Traded Funds (ETFs)
ETFs are created to make it possible for investors to trade precious metals. Unlike bullion investments, though, you cannot physically claim the precious metals. ETFs are more convenient as there are no delivery charges.
You can invest in gold through certificates. It states the value of the gold you own and relieves you of storage and transportation, which means you’re not going to pay for such services. Keep in mind that the certificates themselves are just pieces of documents without value. You cannot trade them for money.
- Futures And Options
Futures and options also mean you cannot own physical forms of precious metals. But you can sign a legally binding contract that states your right to receive the agreed-upon value in the future. Only investors with a high tolerance to risk may invest in futures because of the price variability.
Which Precious Metal Is Worth Investing In?
This part of the guide presents the four most popular precious metals. There are different types of precious metals that have various uses which determine their value. Knowing the background of each will help you make the right decisions on which to buy.
A longstanding favorite among savvy investors, gold is firm against inflation with a value that moves against the current economy. It’s a store of value that governments and financial systems can turn to during states of economic calamities. Gold is also a significant component of jewelry, with 80% of the mining production allocated to create these valuables. It’s also an effective conductor that makes it in-demand in the electronics industry.
Silver ranks second to gold. It has an affordable price that allows beginners to start precious metals investment. It has similarities with gold in terms of conductivity (heat and electricity), malleability (jewelry), and the laws of supply and demand determine its value. Silver’s affordability makes it a great addition to any investment portfolio—more so today because of the pandemic. The current pandemic drives global banks to seek alternative investment options, which lead to the silver bullion taking a fraction of the spotlight during the third quarter of 2020. It finished at USD$29.14, nearly 60% from its previous market price, leading many investors to believe that it’s entering the bull market in the direction it’s heading.
It’s the one precious metal that holds the most value over any other precious metal because of its rarity. It has a higher market value than gold and is not as vulnerable as gold and silver in terms of volatility. The majority of platinum’s uses is reserved for creating converters, as well as dentistry and laboratory equipment.
The value and components of palladium are similar to that of platinum’s. It’s also a valuable component in the electronic, medical, chemical, and dental industries. Palladium is used in the production of fuel cells and solar energy applications. The precious metal can be combined with yellow gold, with the resulting alloy stronger than white gold.
Investment in precious metals requires you to know the market itself and how you can fully utilize that knowledge to make the right investment decisions. The market is volatile because of supply and demand. Nevertheless, it has the potential to be lucrative. You only need to weigh your options so you can still experience gains.