Since time immemorial, investing in precious metals has been an activity of the noble, affluent, and just about anybody who could afford it. Assets such as silver and gold have been recognized for millennia as highly valuable, and today this statement proves no less true.
Savvy investors still diversify by adding these physical assets to their portfolios. But which precious metal are your surest bet when it comes to investment? And how do you avoid some of the volatility associated with these metals?
Savvy investors still diversify by adding these physical assets to their portfolios from trusted and reliable precious metals companies like Gold Eagle Coins (you can see a golden eagle coins review here). But which precious metals are your surest bet when it comes to investment? And how do you avoid some of the volatility associated with these metals?
Keep reading as we cover everything you need to know about precious metal investing, from investing tips to the best precious metals for your financial needs.
The Best Precious Metals for Investment
What's one of the biggest conundrums investors face when they first start looking at precious metals? They may feel overwhelmed by all of the options. After all, you can invest in gold, silver, platinum, palladium, and a whole host of other hard assets.
But you've likely also heard mixed reviews about the most popular metals, like silver and gold. Nevertheless, we're here to tell you that precious metals can be a hedge against inflation and an excellent portfolio diversifier.
Many investors make the mistake of focusing solely on gold. After all, it's an attractive metal with countless uses. But you'll want to broaden your perspective when it comes to investing.
Other hard assets such as platinum, palladium, and silver also represent commodities worth purchasing. As with gold, each of these metals comes with unique pros and cons. You'll want to understand these advantages and disadvantages thoroughly before plunking money down.
Besides physical ownership of these precious metals, you should also be aware of other investment options. These include the derivatives market, mutual funds, mining company stocks, and metal exchange traded funds (ETFs). But for the intents and purposes of this article, we're going to focus on physical investments.
Precious Metal Investing
We've already mentioned the wide variety of precious metals you may choose to invest in. Among the most popular investments for portfolios are:
Gold
Silver
Platinum
Palladium
Let's briefly hit on the pluses and minuses of owning each of these metals as physical assets. Then, we'll explore other investment types.
Gold
Of the precious metals we're going to discuss, gold is unique due to its incredible durability and malleability. It doesn't corrode or rust, and it can conduct both electricity and heat. As a result, gold enjoys industrial uses in everything from electronics to dentistry.
What does the price of gold depend on? The market.
Gold trades occur 24/7/365, and its value is mainly based on sentiment rather than the laws of supply and demand. After all, the supply of newly mined gold remains minuscule compared to the vast amounts already hoarded above-ground.
As a result, prices drop when hoarders decide to sell. But when they feel like purchasing, new supplies get devoured rapidly, resulting in price escalations.
What are some of the patterns associated with upticks in gold prices? Consumers tend to stock up on this shiny yellow metal during times of inflation, systemic financial concerns, political crises, and war.
Silver
Silver values fluctuate because of perceptions about this metal's store of value and its use in industrial applications. As a result, valuations prove more volatile than what we tend to see from gold.
What's more, silver boasts many innovative industrial uses, including batteries, microcircuit markets, and superconductor applications. From electrical connections to bearings, silver's characteristics continue to make it a valuable commodity.
It remains unclear how continued technological developments will impact silver pricing moving forward. But what we can say is that silver's valuation remains impacted by its applications and not simply its store of value or fashion applications.
Platinum
Platinum tends to fetch higher prices (per troy ounce) than gold, even during times of great political stability. Why? Because far less of the metal gets extracted from the ground each year.
Like silver, platinum also gains value from its role as an industrial metal. For example, the most significant consumer of this precious metal is the automotive industry who uses it in car catalysts. Platinum aids in reducing harmful emissions.
But jewelry still accounts for the highest demand for platinum. Besides these industries, you'll also find this hard asset getting gobbled up by the computer and chemical refining industries.
Because of the auto industry's dependence on this precious metal, clean air legislation can also impact its value. When automakers have to install more catalytic converters, the price for platinum rises.
Palladium
Like silver and platinum, palladium also had many industrial uses. This shiny, silvery metal has many applications in the manufacturing sector, especially with concerning industrial and electronic products.
But palladium also has applications for jewelry, dentistry, chemical applications, and groundwater treatment. Like platinum, the most significant purpose of palladium is in catalytic converters.
The metal serves as a fantastic catalyst enhancing the speed of chemical reactions. Nearly 13 percent harder than platinum, this element is also renowned for its durability. Find out more about investing in American precious metals.
Precious Metals: A Good Investment?
Are precious metals ultimately a good investment? Yes, if you're looking for an adequate protection against inflation. What's more, investing in precious metals has intrinsic value as they carry no credit risk and prove impervious to inflation. (In other words, you can't print extras of them.)
Suppose you're looking at it from an investment theory perspective. In that case, it's worth noting that precious metals also offer a negative or low correlation to other asset classes like bonds and stocks. As a result, a small percentage of these hard assets will decrease your volatility and risk.
All investments come with some risk, which proves no less true when it comes to precious metals. For example, prices for metals may decrease as a result of technical imbalances. But they come with the benefit of shooting up in value during periods of economic uncertainty.
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