Since the beginning of time, humans have desired to own precious metals. They are symbols of wealth, status or power. Precious metals are now used to diversify an individual’s portfolio, but they still have risks. Read through the following paragraphs to find out why you should invest in precious metals.
What Are Precious Metals?
Precious metals are rare. They occur naturally and are highly valued. These metals were even used as currency. The group consists of gold, platinum, silver and palladium. They are now thought of as investments and industrial commodities.
Why Invest in Precious Metals?
There are a number of reasons why individuals should invest in these rare commodities.
- Precious metals maintain value even when investors lose faith in paper currencies. They are a form of wealth in unstable political or economic times.
- During periods of government turmoil, precious metals are assets people use to escape a dangerous area. Throughout time people have bartered their rare metals to escape wars, government upheaval or economic uncertainty.
- Paper currencies have only been around for a short period of time. Precious metals have been used for years as currency. They have lasting value and are the oldest form of money in the world.
- Currently, industrial applications use these metals. Industry is constantly evolving and finding new uses for precious metals.
- Precious metals diversify your investment portfolio and protect it against inflation.
- Investing gives you direct ownership of the commodity.
- Precious metals give an investor an extra layer of security against the ups and downs of a stock market.
The following paragraphs give more information on investing in precious metals.
Why You Should Invest in Gold
Gold is extracted from the earth’s crust. It is a very popular precious metal. Industrial applications and fine jewelry use the metal. Gold is durable and does not rust. It is also heat resistant and conducts electricity. According to www.thebalance.com, industrial purposes account for 10% of the world’s gold supply. Ornamental metal and jewelry use makes up 50% of the world’s gold supply. Investor and government stockpiles and holdings account for 40%. The price of gold rises when investment demand is high. The market sets gold prices 24 hours a day, 7 days a week. Individuals hoard gold in times of war, inflation or economic/political upheaval. It is used in those circumstances to trade for food, shelter or safe passage to a less dangerous situation.
Why You Should Invest in Silver
Silver’s uses include stored value and a variety of industrial applications. The price of silver fluctuates more than gold. Silver’s price is based heavily on its supply/demand for industry use. Batteries, electrical appliances, medical products and superconductor applications utilize silver. The fashion industry uses it as well. Many store it for value. Just like gold, individuals horde silver for poor economic and political times.
Why You Should Invest in Platinum
Platinum is trades on global commodities markets. It often trades for a higher price than gold during times of political stability because it is rarer. The world has less of it. Industrial purposes primarily account for platinum’s use. Automotive, petroleum and chemical refining catalysts are made with platinum. Only South Africa and Russia have platinum mines. This makes it likely for cartel-like action to potentially raise its price.
Why You Should Invest in Palladium
Palladium is a shiny, silver-colored metal. Palladium becomes stronger when someone works with it at room temperature. It is harder and more durable than platinum. When palladium mixes with yellow gold, the alloy is stronger than white gold. Solar energy and fuel cells utilize palladium sheets. Dentistry, medicine, electronics, jewelry, groundwater treatment and chemical applications also use the metal. The United States, Russia, South Africa and Canada mine palladium.
How to Invest in Precious Metals
There are a few ways to invest in precious metals. Work with a financial advisor or do research to decide which option is best for you.
Commodity Exchange Traded Funds (ETFs)
Exchange-traded funds exist for gold, silver and platinum. If you invest in ETFs you will not have the actual physical commodity.
Common Stocks and Mutual Funds
You need to understand the precious metals market or find a fund with a manager to invest this way. Shares of these metals are leveraged to estimate movements in the market.
Futures and Options
The futures and options markets are for people who want to bet on the metals. You will either make big profits or have major losses.
Coins or bars are for individuals who want to store them in a safe place. If you want to save it for an unstable time, this is the option for you.
Certificates give investors the benefits of owning the physical gold product. Investors will not have the problem of where to physically store gold with this option. However, if there ever is a disastrous event, this piece of paper cannot be bartered.
Risks of Investing in Precious Metals
Every investment has risks. Precious metal prices drop during poor economic times. It may be hard to sell these metals during meager economic times since prices rise.
There can be supply issues with precious metals. If demand for them raises, supply might go down. That means their prices will rise as well.
Precious metals diversify your portfolio. You do need to do research before investing or have a financial analyst advise you. Sound investing in precious metals will make you money. However, if you do not understand how to invest in them, you may lose a lot of money.