Often when talking about investments, people think of property, stocks, or shares. But, it is worth not overlooking investing in precious metals. They are a constant when it comes to investments and are often viewed as a safe or low-risk investment.
In this article, we will discuss precious metals and their properties in the investment market. We will also give you some handy tips and investment strategies for precious metal investments, as well as discussing portfolios of investments as a whole. Read on to find out all the important details you should know when investing in precious metals.
What Are Precious Metals?
As defined by dictionaries, precious metals are rare and naturally occurring metallic elements that are found naturally in the earth. They are often mined and have been in existence as long as the planet has been here.
Due to their rarity, they hold a high economic value. There are multiple metallic elements now classed as precious metals. Andreas, a precious metal investment specialist from over at theentrustgroup.com/ explained to us that “The most commonly thought of - and most commonly traded - are gold and silver. Platinum and palladium are also now thought of as precious metals.” All four of these are regularly traded on the open markets.
Breaking Down the Metals
Let’s take a closer look at each of the precious metals, starting with possibly the most known substance in the world: gold.
Gold could be viewed as the original, the old school, the first-ever. It has incredible properties that make it a precious metal. For instance, it doesn’t rust, corrode, or biodegrade over time. It is also extremely malleable and conducts heat and electricity. All of these properties make it perfect for use in high-end electrical goods, but it is most often viewed as a precious metal for jewelry or currency.
Silver, often viewed as gold’s baby brother, is very similar in many of its properties. It is also strong, malleable, and a great conductor. It was previously used mostly in silver film for photography, now having uses in both currency and battery and circuit production. Again, silver is often used in jewelry.
Platinum & Palladium
Platinum and palladium are both now traded, as well. They are both considered industrial metals, having uses in construction, energy, automobile manufacture, and now jewelry. The key difference is that these metals are used far more often for these production purposes, while they have never been traded as currency.
Why Invest in Them?
When it comes to gold and silver, many people view these as stable or safe investments. They are affected less by current market conditions and more by their sentimental value and rarity. This means that, in theory, they are a sound investment as a hedge bet against inflation or market fluctuation.
While this is also true for palladium and platinum, their more regular use in the manufacture of tangible goods makes them a more risky investment. For example, palladium is used in the creation of solar energy cells, making it more and more desirable, whereas platinum is used in automobile catalytic converters, meaning that its value is often tied to the sales within and state of the automobile manufacturing industry.
Much like stocks, shares, bonds, and currencies, precious metals can be traded in different ways. Sometimes, they are part of ETFs (exchange-traded funds,) a collection of various commodities bundled into one tradeable asset. This spreads the risk amongst multiple funds and assets, often making for a sound investment with good returns. ETFs, though, do not give you an actual share or tangible item, meaning you won’t receive a piece of gold or silver in return for your investment
Another option is to buy bullion or certificates. In the case of bullion, you are purchasing a set amount of the precious metal of your choosing. You then have to deal with storing it somewhere safe, while monitoring its value over time. If you opt for a certificate, you will receive a certificate of ownership of an amount of bullion or metal store, but in this case, you won’t have to transport or store the metal.
Instead, part of your purchase price will include the fee for a company to store the metal on your behalf. Either way, you own that metal and can sell it for increased or decreased value at any time.
So, though often viewed as risk-free, there are factors involved that make different precious metals values fluctuate. Whichever you choose, make sure to do your research and ensure you understand the risk and reward factors of each precious metal. We certainly believe they can make up a good portion of any savvy investment portfolio.